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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-K



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|x | Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ------------------------------------------------------------------------------------



For the fiscal year ended October 31, 2003



or



| ̈ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number 0-24026



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MAXWELL SHOE COMPANY INC.

(Exact name of registrant as specified in its charter)



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



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



|Title of Each Class: |  | Name of Each Exchange 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)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



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



Indicate by check mark whether
the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No ̈



The aggregate market value of the Class A Common Stock of the registrant held by non-affiliates of the registrant on January 15, 2004 based on the closing price of the Class A Common Stock on the NASDAQ National Market System on such date
was $261,982,674.



The number of shares of the
registrants Class A Common Stock outstanding at January 15, 2004, was 14,837,806 shares.



DOCUMENTS INCORPORATED BY REFERENCE



Portions of the proxy statement for the registrants 2004 Annual Stockholders Meeting are incorporated by reference into Part III herein.



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##### Table of Contents

MAXWELL SHOE COMPANY INC.

INDEX TO ANNUAL REPORT ON FORM 10-K



For The Fiscal Year Ended October 31, 2003



|Caption  |  |                                                                                       |  | Page
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I   |  |                                                                                      
|         |  |                                                                                      
|Item 1.  |  | Business                                                                              |  | 2   
|         |  |                                                                                      
|Item 2.  |  | Properties                                                                            |  | 13  
|         |  |                                                                                      
|Item 3.  |  | Legal Proceedings                                                                     |  | 13  
|         |  |                                                                                      
|Item 4.  |  | Submission of Matters to a Vote of Security Holders                                   |  | 13  
|         | 
|PART II  |  |                                                                                      
|         |  |                                                                                      
|Item 5.  |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 14  
|         |  |                                                                                      
|Item 6.  |  | Selected Financial Data                                                               |  | 15  
|         |  |                                                                                      
|Item 7.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 16  
|         |  |                                                                                      
|Item 7a. |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 21  
|         |  |                                                                                      
|Item 8.  |  | Consolidated Financial Statements and Supplementary Data                              |  | 21  
|         |  |                                                                                      
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 37  
|         |  |                                                                                      
|Item 9a. |  | Controls and Procedures                                                               |  | 38  
|         | 
|PART III |  |                                                                                      
|         |  |                                                                                      
|Item 10. |  | Directors and Executive Officers of the Registrant                                    |  | 39  
|         |  |                                                                                      
|Item 11. |  | Executive Compensation                                                                |  | 39  
|         |  |                                                                                      
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 39  
|         |  |                                                                                      
|Item 13. |  | Certain Relationships and Related Transactions                                        |  | 39  
|         |  |                                                                                      
|Item 14. |  | Principal Accounting Fees and Services                                                |  | 39  
|         | 
|PART IV  |  |                                                                                      
|         |  |                                                                                      
|Item 15. |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 40  



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##### Table of Contents

PART I



|Item I. |  | Business
|------- |  | --------



General



All references herein to the Registrant or 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 theMootsies Tootsies® brand name, in the upper moderately priced
market segment under theSam & Libby® and Dockers® Footwear For Women brand names and in the better market segment under the AK Anne Klein brand name. 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. In 1997, the Company licensed theJ. 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®) and now sells contemporary footwear for women in the bridge segment under the Joan and David brand name. In 2002, the Company introduced and shipped the
Circa Joan & David brand. This
footwear is sold in the better market segment.



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 theMootsies Tootsies®, Dockers® Footwear For Women andSam & Libby® brand offerings, from $45 to $95 for theAK Anne Kleinproduct lines, from $90 to $150 for the Circa Joan &
David and $180 and higher for Joan
& David® footwear. The Company began shipping Joan & David® footwear in the fourth quarter of fiscal 2001. In the first fiscal quarter of 2002, the Company opened the Joan & David® Outlet store, an
approximately 2,200 square foot store located in Wrentham, Massachusetts in the Wrentham Premium Outlet Mall. 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.



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 in 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.



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 theSam & Libby® brand from its prior focus on
the junior womens market segment to the updated, career-oriented women market segment. In late 1998, the Company licensed the Dockers® 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



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womens footwear segment at retail, the Company licensed the AK Anne Kleinfootwear 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 shipped the first Joan & David® footwear for the Fall 2001 footwear
season and Circa Joan & David for the Fall 2002 footwear season. The Company believes that there is a growing demand among retailers for footwear to market on a first cost basis with brand names.



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. TheSam & Libby® brand is directed to appeal to the fashion forward
customers in the upper moderate price range. The Companys Dockers® 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 AK Anne Kleinand 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 in 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:



| |  | Portfolio of Established Brands. Through advertising and promotion, the Company has built consumer and retail recognition for its Mootsies Tootsies®andMootsies 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 the better priced
segments. This license was sold in July 1999 to Jones. Effective July 1999, the Company licensed the AK Anne Klein brand for womens footwear to compete in the better retail segment. The Company licensed the Dockers® 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 allowed the Company to compete in the bridge retail segment. In 2002, the Company introduced Circa Joan & David, footwear offered in the better price segment. The Company continues to seek
licensing or acquisition opportunities in order to expand its current portfolio of brands.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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 uses a dedicated manufacturing facility that recently opened a 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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:



| |  | 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, (iv) increasing the use of advertising to strengthen brand awareness among retailers and consumers and (v) opening retail outlet stores for some of the Companys brands.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 AK Anne Kleinand Dockers® 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.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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:



|                             |  |              |  |                       |  | General Retail Price Range
|---------------------------- |  | ------------ |  | --------------------- |  | --------------------------
|                             |  | Style        |  | Industry Segment      |  | Shoes                     
|Mootsies Tootsies®           |  | Contemporary |  | Moderate              |  | $25-$40                   
|Mootsies Kids®               |  | Contemporary |  | Moderate              |  | $20-$25                   
|Sam & Libby® and Just Libby® |  | Updated      |  | Upper Moderate        |  | $35-$50                   
|Sam & Libby® Kids            |  | Updated      |  | Upper Moderate        |  | $25-$45                   
|Dockers® Footwear For Women  |  | Casual       |  | Upper Moderate-Better |  | $40-$65                   
|AK Anne Klein                |  | Contemporary |  | Better                |  | $45-$79                   
|Circa Joan & David          |  | Contemporary |  | Better                |  | $90-$110                  
|Joan & David®                |  | Contemporary |  | Bridge                |  | $180 +                    
|J. G. Hook® Private Label    |  | All          |  | Budget-Moderate       |  | $12-$20                   



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, 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.



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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® Footwear For Women



The Dockers®
Footwear For Womenline 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
complement the Dockers® apparel products and
is specifically designed to be worn with khakis, complimenting a wide variety of versatile looks.



AK Anne Klein



The AK Anne Kleinfootwear line focuses on contemporary, quality footwear targeted at career-oriented women 30 years and older. The line
capitalizes 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 Kleinapparel. The Companys AK Anne
Klein footwear line consists of approximately 25 styles per season with all leather uppers and soles.



Joan & David® and Circa Joan & David



Prior to the Companys ownership, 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 focuses on the much larger bridge market, one that the Company believes is significantly larger than the designer market. The line attempts to capitalize on the esteem,
recognition and reputation of the brand developed over the past 25 years. The product line targets young women (median age in upper 30s) with high family income well above the national median. The line consists 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 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 (See also Consolidated Financial Statements):



|           |  | Year Ended October 31 |  
|---------- |  | --------------------- | -
|Category   |  | 2001                  |  
|Womens    |  | 92.5                  | %
|Childrens |  | 7.5                   |  
|           |  |                       |  
|Total      |  | 100.0                 | %
|           |  |                       |  



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.



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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 AK Anne Klein footwear line also meet regularly with The Anne Klein Company to exchange product and fashion
concepts. The designer for Dockers® Footwear For Womenline meets regularly with the Dockers Company to exchange product and fashion concepts. See License Agreements. 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.



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 and employee 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. Substantially all of the Companys sales are
transacted with customers in the United States.



In fiscal
2003, the Company sold products to approximately 1,000 accounts with over 7,000 retail locations. The Mootsies Tootsies® retailers, which market moderately priced apparel merchandise, include J. C. Penney Company, Inc., Kohls and
DSW Shoe Warehouse. The AK Anne Kleinfootwear is distributed to those retailers who typically market merchandise at higher retail price points, including Federated Department Stores, Inc. (Macys), The May Department Stores Company
(Lord & Taylor) and Saks Inc. (Parisian). The Sam & Libby®footwear lines are distributed to retailers such as Federated Department Stores, Inc., The May Department Stores Company, Bon Ton and Nordstrom. Dockers® Footwear For Womendistributes footwear to Mervyns
and specialty stores like Kohls. Joan & David® distributes footwear to Nordstrom, Macys, Bloomingdales and Lord & Taylor. The Company also markets its branded products through national catalog retailers such as
Nordstrom and Chadwicks of Boston.



The Companys
largest customer, The TJX Companies, Inc., accounted for 13.3% and 10.2% of the Companys net sales in fiscal 2003 and fiscal 2002, respectively. In fiscal 2003 the top three customers (The TJX Companies, Inc., DSW Shoe Warehouse and The May
Department Stores Company) accounted for 35.0% of net sales. The Companys top three customers in fiscal 2002 were DSW Shoe Warehouse, The May Department Stores Company, and The TJX Companies, Inc., which collectively accounted for 32.4% of net
sales. 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.



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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.



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 asLucky, Glamour,andInstyle. 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 AK 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® Footwear For Womenare 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,Luckyand InStyle.



The print advertising program for the Joan & David® collection
is appearing in national advertisements and will consist of consumer advertisements focused on upscale publications (such as The New Yorker, Vogue and Town & Country).



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 Chadwicks. 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. The Company has also initiated concept shops for its Joan & David and AK Anne Klein brands at Macys. Management believes these efforts stimulate impulse sales and repeat purchases.



Manufacturing



The Company manufactures none of its products and does not own any manufacturing facilities. Mootsies
Tootsies®,Mootsies Kids®, Sam & Libby®and Dockers® Footwear For
Womenare manufactured by unaffiliated third parties primarily in China and Brazil because of the ability of the suppliers in these countries to



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manufacture quality products at affordable prices. The AK Anne Klein and Circa Joan & David footwear brands are 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 brands image. The Joan & David® collection is primarily
manufactured in Italy where fine craftsmanship and innovative footwear can be 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 shipped to the Company.



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 and Italy, the Company generally buys forward exchange contracts for Euro dollars 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 EDI 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.



9



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##### Table of Contents

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.



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 2003, approximately 89.4% of the Companys footwear was imported from China. As a result of a previous dispute with China over the protection of the intellectual property rights, the United States Trade Representative
(USTR) is currently monitoring Chinas adherence to a bilateral agreement with the United States to enforce intellectual property protections within China. In addition, recent concerns with Chinas alleged failure to protect
intellectual property rights and to comply with other commitments made as part of its accession to the World Trade Organization (WTO), have caused the U.S. government to indicate that it would consider filing a case against China in the
WTO if China does not more readily fulfill its obligations. If the U.S. government takes action against China, the result of that action could, among other things, include the imposition of trade sanctions that could affect the ability of the
Company to continue to import from China.



Backlog



At October 31, 2001, 2002 and 2003, the Company had unfilled customer orders
of $78.6 million, $84.9 million and $92.7 million, respectively. The backlog as of October 31, 2003 represents an increase of 9.2% over fiscal year end 2002. 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, 2003 will be filled during the first six months of fiscal 2004.



Compliance With Environmental Regulations



Compliance with federal, state and local provisions enacted or adopted for protection of the environment has had no material effect upon the
Companys operations.



10



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##### Table of Contents

License Agreements



AK Anne Klein



Effective in July 1999, the Company entered into a license agreement (the Anne KleinAgreement), as amended, 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 AK Anne Klein, Kasper and Albert Niponnames in connection with the manufacture, advertising, promotion, distribution and sale of footwear for
women. The Anne KleinAgreement, which was amended in March 2002, covers the United States, Canada and Puerto Rico. The Company extended the term of the Anne Klein Agreement for an additional five (5) year term ending December 31, 2007, with
an option to extend the agreement, subject to certain conditions, through December 2012. 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 Anne Klein Agreement and bankruptcy of the licensee.



Dockers® Footwear For Women



In November 1998, the Company entered into a license agreement (the
Dockers® Footwear For WomenAgreement) with Levi Strauss Co. under which the Company has the exclusive right to use the Dockers® Footwear For Womenname in connection with the development,
manufacturing and marketing of footwear for women. The Dockers® Footwear For WomenAgreement covers the United States (including its territories and possessions). The initial term of the agreement ended December 31, 2001 and was
extended until May 2002, at which time the Company and Levi Strauss Co. entered into a new license agreement effective through December 31, 2005. The Company is obligated to pay Levi Strauss Co. a royalty on all net sales and is responsible for a
guaranteed minimum royalty payment during each year of the Dockers® Footwear For WomenAgreement. 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.



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 J. G. Hook® License Agreement through September 1999. The Company later exercised its second one-year option and renewed the J. G.
Hook® License Agreement through September 2000. In May 2000 the Company extended the license until December 2003. In May 2003, the Company extended the license until December 2006. 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 there under. The Company plans to use the J. G. Hook® label to sell footwear on a first cost basis.



The aggregate minimum royalty payments for all license agreements are $3.2
million, $3.3 million and $3.4 million for December 31, 2003, 2004 and 2005, respectively.



Inter-Pacific Corporation



In January 1997, the Company entered into a license agreement with Inter-Pacific Corporation (IPC), a 40-year-old California-based seller and distributor of mens, womens and childrens footwear. IPC had 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® trademark, IPC will pay the Company royalties at a rate based on sales volume. IPC
exercised its option to extend the license agreement until May 2003. In March 2003, IPC extended the license until May 2006. Minimum royalties for this period, June 2003 until May 2006, are $450,000.



11



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##### Table of Contents

Global Retail Inc.



In November 2001 the Company signed an exclusive multi-year licensing agreement with Global Retail Inc. to begin the
development of freestanding retail stores throughout Europe and Asia for Joan & David® sportswear and accessory items as well as the roll-out of Joan & David® in-store shops in upscale department stores. Global Retail
Inc., which is based in Hong Kong, is a widely recognized retail development and global manufacturing organization led by Chairman Jeffrey Fang. Global Retail Inc. has over 300 retail stores worldwide. Under the agreement, Global Retail Inc. will
design, source, manufacture and market a full array of Joan & David® sportswear including knitwear, wovens, outerwear and dresses all incorporating high-end European design elements. The Companys Joan & David®
footwear will be prominently featured throughout the Global Retail-owned stores complementing the new offerings. The six initial stores and in-store shops opened in the Fall 2002 season. Presently there are 13 locations in Asia.



Trademarks



Mootsies Tootsies® andMootsies Kids® are registered trademarks of the Company (or its affiliates). 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 2013, although both are renewable.



Sam & Libby® and Just Libby® are registered trademarks of the Company (or its affiliates). 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. The Companys United States trademark registration of Sam & Libby®expires in 2011 and the registration ofJust 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® Footwear For Womenis a registered trademark of the Levi Strauss Co. in the United States. Under the Dockers® Footwear For WomenAgreement, Levi Strauss Co. has the sole right to defend
against any infringement of this trademark.



AK Anne Klein is a registered trademark 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 the trademarks.



Joan & David® and
Joan Helpern Signature®are registered trademarks of the Company (or its affiliates). 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. The Companys United States trademark registrations for Joan & David® and Joan Helpern Signature®expire between 2008 and 2014, and are renewable.



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 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. Several 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



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##### Table of Contents

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.



Employees



At October
31, 2003, the Company employed 146 people, including officers, administrative, sales 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.



Available Information



The Companys internet website is www.maxwellshoe.com. The
Company makes available free of charge on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, reports filed pursuant to Section 16 of the Securities Exchange Act of 1934, as amended (the
Exchange Act) and amendments to those reports as soon as reasonably practicable after such materials are electronically filed or furnished to the SEC. Materials the Company files with the Securities and Exchange Commission may be read
and copied at the SECs Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. This information may also be obtained by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also
maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission at www.sec.gov. In addition, the Company has
posted the charters for its Audit Committee and Compensation and Stock Option Committee on its website. These charters are not incorporated by reference. The Company will provide a copy of any of the foregoing documents to shareholders upon request.



|Item 2. |  | Properties
|------- |  | ----------



The Companys headquarters, which includes approximately 20,000 square feet of office space and 60,000 square feet of warehouse space, is located in
Boston, Massachusetts The lease expires on December 31, 2011. The Company also leases a 215,000 square foot warehouse in Brockton, Massachusetts. This lease expires in 2007, subject to two five-year options to extend. In September 2001, the Company
leased an additional 173,000 square feet of warehouse space adjacent to its existing Brockton space, approximately 120,000 square feet of which is subleased to an unaffiliated third party. This lease expires on September 30, 2004. The Company also
leases a 7,800 square foot showroom in New York City under a lease that expires in 2008, subject to a five year option to extend. In November 2001, the Company leased approximately 2,200 square feet of retail space in the Wrentham Premium Outlet
Mall in Wrentham, Massachusetts. The lease expires in 2006. 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.



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##### Table of Contents

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:



|2002 |  | January 31 |       | April 30 |   | July 31 |  | October 31
|---- |  | ---------- | ----- | -------- | - | ------- |  | ----------
|Low  |  | $          | 9.00  |          | $ | 10.33   |  | $         
|High |  | $          | 11.40 |          | $ | 13.47   |  | $         
|     |  |            |       |         
|2003 |  | January 31 |       | April 30 |   | July 31 |  | October 31
|Low  |  | $          | 10.74 |          | $ | 10.71   |  | $         
|High |  | $          | 11.81 |          | $ | 12.20   |  | $         



The number of
stockholders of record of the Class A Common Stock on December 24, 2003 was 21. However, based on available information, the Company believes that the total number of Class A Common stockholders, including beneficial stockholders, is approximately
3,400.



Dividend Policy



The Company currently intends to retain any earnings for development of its
business. Accordingly, 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 wi*ll depend upon, among other things, future earnings, operations, capital requirements, the general financial condition of the Company and general business conditions.



Equity Compensation Plan Information



The following table gives information about the Companys Class A
Common Stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans as of October 31, 2003.



|Plan category                                          |  | (a) Number of securitiesto be issued upon exercise ofoutstanding options, warrants and
rights |  | (b) Weighted averageexercise price ofoutstandingoptions, warrantsand rights |      | (c) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected in column (a))
|------------------------------------------------------ |  | --------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------- | ---- | ------------------------------------------------------------------------------------------------------------------------------------------
|                                                       |  |                                                                                              
|Equity compensation plans approved by stockholders     |  | 1,566,877                                                                                     |  | $                                                                           | 7.94 |                                                                                                                                           
|Equity compensation plans not approved by stockholders |  |                                                                                              |  |                                                                             |     |                                                                                                                                           
|                                                       |  |                                                                                               |  |                                                                             |      |                                                                                                                                           
|TOTAL                                                  |  | 1,566,877                                                                                     |  | $                                                                           | 7.94 |                                                                                                                                           
|                                                       |  |                                                                                               |  |                                                                             |      |                                                                                                                                           



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##### Table of Contents

|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.



|                                             |  | Year Ended October 31,                |        
|-------------------------------------------- |  | ------------------------------------- | -------
|                                             |  | 1999                                  |        
|                                             |  | (In thousands, except per share data) |        
|Statement of Income Data:                    |  |                                       |        
|Net sales                                    |  | $                                     | 150,320
|Cost of sales                                |  |                                       | 113,820
|                                             |  |                                       |        
|Gross profit                                 |  |                                       | 36,500 
|Selling, general and administrative expenses |  |                                       | 25,745 
|                                             |  |                                       |        
|Operating income                             |  |                                       | 10,755 
|Interest income, net                         |  |                                       | (1,447 
|Amortization of trademark                    |  |                                       | 367    
|Other (income) expense, net(1)               |  |                                       | (19,588
|                                             |  |                                       |        
|Income before income taxes                   |  |                                       | 31,423 
|Income taxes                                 |  |                                       | 12,569 
|                                             |  |                                       |        
|Net income                                   |  | $                                     | 18,854 
|                                             |  |                                       |        
|Earnings per share                           |  |                                       |        
|Basic                                        |  | $                                     | 1.43   
|                                             |  |                                       |        
|Diluted                                      |  | $                                     | 1.33   
|                                             |  |                                       |        
|Shares used to compute earnings per share    |  |                                       |        
|Basic                                        |  |                                       | 13,194 
|                                             |  |                                       |        
|Diluted                                      |  |                                       | 14,199 
|                                             |  |                                       |        
|                                             | 
|                                             |  | Year Ended October 31,                |        
|                                             |  | 1999                                  |        
|Balance Sheet Data:                          |  |                                       |        
|Working capital                              |  | $                                     | 87,220 
|Total assets                                 |  |                                       | 108,764
|Total debt (including current maturities)    |  |                                       | 219    
|Total stockholders equity                   |  | $                                     | 98,326 

---

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



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##### Table of Contents

|Item 7. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- |  | -------------------------------------------------------------------------------------



Overview



The Company sells footwear for women and children to retailers located throughout the United States and Canada. Our core
operating strengths have helped us to grow significantly in the past, and, management believes, will help us to achieve further growth in the future. These strengths include our portfolio of established brands, our strong manufacturing
relationships, our emphasis on high volume, and our comprehensive customer relationships. The Company plans to continue to leverage these competitive strengths to pursue various growth initiatives, including growing sales of brands in our existing
portfolio (which currently consists of nine lines), adding brands to our portfolio and increasing our private label business. While the Company seeks to build long-term customer relationships, revenues from any particular customer can fluctuate from
period to period due to purchasing patterns. In fiscal 2003, the Company had three customers that accounted for 13.3%, 11.4% and 10.3% of net sales. At October 31, 2003, one customer accounted for 14.2% of trade receivables outstanding. Any
termination or significant disruption of our relationships with one or more of our major customers could have a material adverse effect on the Companys financial condition or results of operations. See Item 1 and Note 1 of Notes to
Consolidated Financial Statements.



The Company does not
manufacture its own products, but rather has them manufactured abroad because of supplier availability and manufacturing prices. The Company has no long-term contracts with these facilities. Instead, the Company has chosen to rely on relationships
with buying agents with access to manufacturing facilities to maximize the Companys sourcing flexibility. To protect itself against currency fluctuations, when purchasing from China and Brazil, the Company purchases products in U.S. dollars.
To minimize volatility in the price of products purchased from Spain and Italy, the Company generally buys forward exchange contracts for Euro dollars in connection with the placement of orders for products. Because our products are manufactured
abroad, risks and uncertainties relating to our business include the inability to source products because of adverse political, economic or health factors or the imposition of trade or duty restrictions.



To finance our operations and expansion, we have primarily relied on cash
flows generated from operations and borrowings under its credit facility. Both cash provided by operating activities and working capital have increased from 2002 to 2003. Our credit facility is a $40.0 million discretionary demand credit facility
bearing interest at either FleetBostons base rate or the Adjusted Eurodollar Rate plus 1.0%. As of October 31, 2003, there were no outstanding borrowings, $22.1 million was outstanding under letters of credit and $17.8 million was available
for future borrowings.



Management believes the critical
accounting policies and areas that require the most significant judgments and estimates in the preparation of the Companys financial statements are revenue recognition and allowance for doubtful accounts, inventory valuation and income taxes.
The Company recognizes revenue upon shipment of its products. Allowances for doubtful accounts are estimated based on estimates of losses related to customer receivable balances. The Companys inventory is valued at the lower of cost or market.



The Company is a licensee under three agreements which allow
for the manufacture and sale of various items of footwear. The Company generally must pay minimum royalties under these agreements regardless of sales volume. See Item 1 License Agreements and Note 8 of Notes to Consolidated
Financial Statements. We also lease equipment and office, retail and warehouse space under long-term non-cancelable operating leases expiring at various dates through January 31, 2011. Minimum payments under such leases are $2,328 and $2,333
in 2003 and 2004, respectively.



Critical Accounting Policies



Managements discussion and analysis of its
financial position and results of operations are based upon the Companys consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The Companys
significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Management believes the critical accounting policies and areas that require the most significant judgments and estimates to be used in the preparation of
the consolidated financial statements are revenue recognition and allowance for doubtful accounts, inventory valuation and income taxes.



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##### Table of Contents

Revenue Recognition and Allowance for Doubtful Accounts



The Company recognizes revenue upon shipment of its products. Allowances for
doubtful accounts are estimated based on estimates of losses related to customer receivable balances. Estimates are developed by using standard quantitative measures based on historical losses, adjusting for current economic conditions and, in some
cases, evaluating specific customer accounts for risk of loss. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Though the Company considers these balances adequate
and proper, changes in economic conditions in specific markets in which the Company operates could have a material effect on reserve balances required.



Inventory Valuation



The Companys inventories are valued at the lower of cost or market. Under certain market conditions, estimates and judgments regarding the valuation
of inventory are employed by the Company to properly value inventory. These estimates could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive
conditions differ from our expectations.



Income Taxes



As part of the process of preparing the Companys consolidated
financial statements, management is required to estimate income taxes in each of the jurisdictions in which it operates. The process involves estimating actual current tax expense along with assessing temporary differences resulting from differing
treatment of items for book and tax purposes. These timing differences result in deferred tax assets and liabilities, which are included in the Companys consolidated balance sheet.



Forward Looking Statements



Forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 (the Act), include certain
written and oral statements made, or incorporated by reference, by the Company or its representatives in this report, other reports, filings with the Securities and Exchange Commission (the SEC), press releases, conferences, or
otherwise. Such forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain the words believe, anticipate,
expect, estimate, intend, plan, project, will be, will continue, will likely result, or any variations of such words with similar meaning. These
statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such
forward-looking statements. Investors should carefully review the risk factors set forth in other reports or documents the Company files with the SEC, including Forms 10-Q, 10-K and 8-K.



Some of the other risks and uncertainties that should be considered include, but are not limited to, the following:
international, national and local general economic and market conditions; the inability to source the Companys products because of adverse political or economic factors or the imposition of trade or duty restrictions; concentration of
production in China; potential disruption in supply chain or customer purchasing habits due to health concerns relating to severe acute respiratory syndrome or other related illnesses; changing consumer preferences; changing fashion trends; intense
competition among other footwear brands; demographic changes; risk of the Companys licensors of trademarks or other intellectual property rights filing bankruptcy and potentially rejecting license agreements to which the Company is a party;
popularity of particular designs and products; seasonal and geographic demand for the Companys products; fluctuations and difficulty in forecasting operating results, including, without limitation, the ability of the Company to continue,
manage or forecast its growth and inventories;



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##### Table of Contents

risk of unavailability or price increase in raw materials needed to make the Companys products; new product development and commercialization; the
ability to secure and protect trademarks; performance and reliability of products; customer service; adverse publicity; the loss of significant customers or suppliers; dependence on distributors, buying agents and independent contractors; increased
cost of freight and transportation to meet delivery deadlines; changes in business strategy or development plans; general risks of doing business outside the United States; including without limitation, import duties, tariffs, quotas and political
and economic instability; changes in government regulations; liability and other claims asserted against the Company; the ability to attract and retain qualified personnel; the risk of the Companys customers filing bankruptcy and other factors
referenced or incorporated by reference in this report and other reports.



The Company operates in a very competitive and rapidly changing environment. New risk factors can arise and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such
risk factors on the Companys business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements.



Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Companys policy to disclose to them any material non-public information or
other confidential commercial information. Accordingly, investors should not assume that the Company agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.



Furthermore, the Company has a policy against issuing or confirming financial
forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of the Company.



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.



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##### Table of Contents

Results of Operations



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



|                            |  | Year Ended October 31,           |      
|--------------------------- |  | -------------------------------- | -----
|                            |  | 2001                             |      
|                            |  | (In millionsexcept percentages) |      
|AK Anne Klein               |  | $                                | 49.5 
|Mootsies Tootsies®          |  |                                  | 63.9 
|Sam & Libby®                |  |                                  | 23.3 
|Dockers® Footwear For Women |  |                                  | 16.5 
|Joan & David®               |  |                                  | 1.9  
|Other                       |  |                                  |     
|Private Label Footwear      |  |                                  | 27.1 
|                            |  |                                  |      
|                            |  | $                                | 182.2
|                            |  |                                  |      



Fiscal 2003
Compared to Fiscal 2002



Net sales were $225.0 million in
fiscal 2003 compared to $204.4 million in fiscal 2002, an increase of 10.1%. This increase was due primarily to the increased net sales of AK Anne Klein of 15.9% and Mootsies Tootsies of 6.8%. All branded divisions increased net sales in
fiscal 2003. These increases have been achieved notwithstanding the challenging retail market in which the Companys customers operate. No assurances can be given that these trends will continue. The other sales category refers to the net sales
of Kasper and Albert Nipon Footwear.



Gross profit was $60.2
million in fiscal 2003 compared to $54.0 million in fiscal 2002, an increase of 11.4%. The gross profit improvement was a result of the increased net sales. The increase in gross profit as a percentage of net sales of 26.8% in fiscal 2003 compared
to 26.4% in 2002 is due to a more favorable mix of net sales. The retail environment is still promotional.



Selling, general and administrative expenses were $37.3 million in fiscal 2003 as compared to $35.8 million in fiscal 2002, an increase of 4.3%. As a
percentage of net sales, selling, general and administrative expenses decreased to 16.6% in fiscal 2003 as compared to 17.5% in fiscal 2002. This decrease was due to the Companys ability to control expenses at a rate lower than the net sales
growth rate.



Other income was $1.3 million for fiscal 2003
compared to other income of $1.2 million for fiscal 2002. Other income primarily consisted of interest income from cash equivalents.



The provision for income taxes was 38.0% in fiscal 2003 and 31.8% in fiscal 2002. The lower rate for fiscal 2002 was a result of the exercise of stock
options, for which the Company received a tax benefit. The Company anticipates its 2004 tax rate to be consistent with the 38% rate in 2003.



Fiscal 2002 Compared to Fiscal 2001



Net sales were $204.4 million in fiscal 2002 compared to $182.2 million in fiscal 2001, an increase of 12.1%. This increase was due primarily to the
increased net sales of AK Anne Klein of 29.5% and the $9.0 million increase in the net sales of Joan & David. Fiscal 2002 represented the first full year of shipments of Joan and David footwear. These increases have been
achieved notwithstanding the challenging retail market in which the Companys customers operate. No assurances can be given these trends will continue.



Gross profit was $54.0 million in fiscal 2002 compared to $50.7 million in fiscal 2001, an increase of 6.6%. The gross profit improvement was a result of
the increased net sales. The decrease in gross profit as a percentage of net sales of 26.4% in fiscal 2002 compared to 27.8% in 2001 is due to the promotional activity at retail.



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##### Table of Contents

Selling, general and administrative expenses were $35.8 million in fiscal 2002 as compared to $32.6
million in fiscal 2001, an increase of 9.9%. As a percentage of net sales, selling, general and administrative expenses decreased to 17.5% in fiscal 2002 as compared to 17.9% in fiscal 2001. This decrease was due to the Companys ability to
control expenses at a rate lower than the net sales growth rate.



Other income was $1.2 million for fiscal 2002 compared to other income of $1.7 million for fiscal 2001. Other income primarily consisted of interest income from cash equivalents. The decrease was attributable to lower interest rates.



The provision for income taxes was 31.8% in fiscal 2002 and
37.9% in fiscal 2001. The change in rate for fiscal 2002 was a result of the exercise of stock options, for which the Company received a tax benefit.



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 $9.7 million in fiscal 2001, $7.7 million in fiscal 2002 and $24.8 million in fiscal 2003. At October 31, 2003, working capital was $143.7 million as compared to $124.1
million at October 31, 2002. Working 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 $.5 million for the year ended October 31, 2003.



The Company currently has a $40.0 million discretionary demand credit facility bearing interest at either FleetBostons base rate or Adjusted
Eurodollar Rate plus one percent (1.0%), renewable annually under certain conditions. The credit agreement provides the bank will both advance funds directly to the Company and issue letters of credit on behalf of the Company. As of October 31,
2003, there were no outstanding borrowings, $22.2 million was outstanding under letters of credit and $17.8 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 Euro. At October 31, 2003, forward exchange contracts totaling $0.3 million were outstanding with settlement dates ranging from November 3, 2003 through January 30, 2004.



The Company anticipates that it will be able to satisfy its cash requirements for fiscal 2003 primarily with its current
cash on hand and cash flow from operations, supplemented, if needed, by borrowings under its demand credit facility.



Off-Balance Sheet Arrangements



The Company has no off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities.



Disclosures About Contractual Obligations



The following table represents the Companys contractual obligations as
of October 31, 2003:



|                         |  | Payments Due Within
|------------------------ |  | -------------------
|                         |  | One Yr.            
|Operating leases         |  | $                  
|Minimum Royalty Payments |  |                    
|Letters of Credit        |  |                    
|                         |  |                    
|                         |  | $                  
|                         |  |                    



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.



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##### Table of Contents

|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 15(a) of this
Report.



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##### Table of Contents

INDEPENDENT AUDITORS REPORT



The Board of Directors and Stockholders

Maxwell Shoe Company Inc.



We have audited the accompanying
consolidated balance sheet of Maxwell Shoe Company Inc. as of October 31, 2003, and the related consolidated statements of income, changes in stockholders equity and cash flows the year ended October 31, 2003. Our audit also included the
financial statement schedule for the year ended October 31, 2003, listed in the Index at Item 15(a). These financial statements and financial statement schedule are the responsibility of the Companys management. Our responsibility is to
express an opinion on these financial statements and financial statement schedule based on our audit. The accompanying consolidated financial statements and financial statement schedule as of October 31, 2002 and for each of the two years then ended
were audited by other auditors whose report thereon dated December 17, 2002 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule.



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. as of October 31, 2003, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the year ended October 31, 2003, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.



KPMG LLP



Boston, Massachusetts

December 16, 2003



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##### Table of Contents

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, 2001 and 2002, 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, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(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, 2001 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 2002,
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 | 17, 2002
|-------- | --------



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##### Table of Contents

MAXWELL SHOE COMPANY INC.



CONSOLIDATED BALANCE SHEETS

(In Thousands  except per share amounts)



|                                                                                                                                     |  | October 31, |        
|------------------------------------------------------------------------------------------------------------------------------------ |  | ----------- | -------
|                                                                                                                                     |  | 2002        |        
|ASSETS                                                                                                                               |  |             |        
|Current assets:                                                                                                                      |  |             |        
|Cash and cash equivalents                                                                                                            |  | $           | 70,518 
|Accounts receivable, trade (net of allowance for doubtful accounts and discounts of $955 in 2002 and $973 in 2003)                   |  |             | 40,729 
|Inventory, net                                                                                                                       |  |             | 18,311 
|Prepaid expenses                                                                                                                     |  |             | 596    
|Prepaid income taxes                                                                                                                 |  |             | 1,721  
|Deferred income taxes                                                                                                                |  |             | 1,469  
|                                                                                                                                     |  |             |        
|Total current assets                                                                                                                 |  |             | 133,344
|Property and equipment                                                                                                               |  |             | 3,928  
|Trademarks                                                                                                                           |  |             | 14,462 
|Other assets                                                                                                                         |  |             | 15     
|                                                                                                                                     |  |             |        
|                                                                                                                                     |  | $           | 151,749
|                                                                                                                                     |  |             |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                 |  |             |        
|Current liabilities:                                                                                                                 |  |             |        
|Accounts payable                                                                                                                     |  | $           | 724    
|Accrued expenses                                                                                                                     |  |             | 8,512  
|Accrued income taxes                                                                                                                 |  |             |       
|                                                                                                                                     |  |             |        
|Total current liabilities                                                                                                            |  |             | 9,236  
|Long-term deferred income taxes                                                                                                      |  |             | 1,939  
|Stockholders equity:                                                                                                                |  |             |        
|Preferred stock, 1,000 shares authorized, 0 shares outstanding in 2002 and 2003.                                                     |  |             |       
|Class A common stock, par value $.01, 20,000 shares authorized, 14,517 shares outstanding in 2002, 14,821 shares outstanding in
2003 |  |             | 145    
|Additional paid-in capital                                                                                                           |  |             | 50,609 
|Deferred compensation                                                                                                                |  |             | (966   
|Retained earnings                                                                                                                    |  |             | 90,786 
|                                                                                                                                     |  |             |        
|Total stockholders equity                                                                                                           |  |             | 140,574
|                                                                                                                                     |  |             |        
|                                                                                                                                     |  | $           | 151,749
|                                                                                                                                     |  |             |        



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##### Table of Contents

MAXWELL SHOE COMPANY INC.



CONSOLIDATED STATEMENTS OF INCOME

(In Thousands  except per share amounts)



|                                           |  | Year Ended October 31, |        
|------------------------------------------ |  | ---------------------- | -------
|                                           |  | 2001                   |        
|Net sales                                  |  | $                      | 182,237
|Cost of sales                              |  |                        | 131,584
|                                           |  |                        |        
|Gross profit                               |  |                        | 50,653 
|Operating expenses:                        |  |                        |        
|Selling                                    |  |                        | 14,200 
|General and administrative                 |  |                        | 18,368 
|                                           |  |                        |        
|                                           |  |                        | 32,568 
|                                           |  |                        |        
|Operating income                           |  |                        | 18,085 
|Other expenses (income)                    |  |                        |        
|Interest income                            |  |                        | (2,027 
|Amortization of trademarks                 |  |                        | 457    
|Other, net                                 |  |                        | (127   
|                                           |  |                        |        
|                                           |  |                        | (1,697 
|                                           |  |                        |        
|Income before income taxes                 |  |                        | 19,782 
|Income taxes                               |  |                        | 7,502  
|                                           |  |                        |        
|Net income                                 |  | $                      | 12,280 
|                                           |  |                        |        
|Earnings per share:                        |  |                        |        
|Basic                                      |  | $                      | 0.93   
|Diluted                                    |  | $                      | 0.84   
|Shares used to compute earnings per share: |  |                        |        
|Basic                                      |  |                        | 13,235 
|Diluted                                    |  |                        | 14,565 



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##### Table of Contents

MAXWELL SHOE COMPANY INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)



|                                                                                  |  | Year Ended October 31, |       
|--------------------------------------------------------------------------------- |  | ---------------------- | ------
|                                                                                  |  | 2001                   |       
|Operating activities:                                                             |  |                        |       
|Net income                                                                        |  | $                      | 12,280
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                        |       
|Depreciation and amortization                                                     |  |                        | 2,584 
|Deferred income taxes                                                             |  |                        | (820  
|Doubtful accounts provision                                                       |  |                        | 796   
|Deferred compensation                                                             |  |                        | 361   
|Loss on sale of equipment                                                         |  |                        | 181   
|Changes in operating assets and liabilities:                                      |  |                        |       
|Accounts receivable                                                               |  |                        | (3,944
|Inventory                                                                         |  |                        | (6,253
|Prepaid expenses                                                                  |  |                        | (106  
|Prepaid income taxes                                                              |  |                        | 1,478 
|Other assets                                                                      |  |                        | 92    
|Accounts payable                                                                  |  |                        | (509  
|Accrued expenses                                                                  |  |                        | 124   
|Income taxes payable                                                              |  |                        | 3,443 
|                                                                                  |  |                        |       
|Net cash provided by operating activities                                         |  |                        | 9,707 
|                                                                                  |  |                        |       
|Investing activities:                                                             |  |                        |       
|Release of restricted cash                                                        |  |                        |      
|Purchases of property and equipment                                               |  |                        | (818  
|Adjustments to purchase price of Joan & David® trademarks                         |  |                        | 560   
|                                                                                  |  |                        |       
|Net cash used by investing activities                                             |  |                        | (258  
|                                                                                  |  |                        |       
|Financing activities:                                                             |  |                        |       
|Proceeds from exercise of stock options including tax benefit                     |  |                        | 835   
|Payments on capital lease obligation                                              |  |                        | (102  
|                                                                                  |  |                        |       
|Net cash provided (used) by financing activities                                  |  |                        | 733   
|                                                                                  |  |                        |       
|Net increase in cash and cash equivalents                                         |  |                        | 10,182
|Cash and cash equivalents at beginning of year                                    |  |                        | 48,074
|                                                                                  |  |                        |       
|Cash and cash equivalents at end of year                                          |  | $                      | 58,256
|                                                                                  |  |                        |       
|Supplemental Disclosure of Cash Flow Information:                                 |  |                        |       
|Interest paid                                                                     |  | $                      | 66    
|                                                                                  |  |                        |       
|Income taxes paid                                                                 |  | $                      | 3,045 
|                                                                                  |  |                        |       



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MAXWELL SHOE COMPANY INC.



CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(In Thousands)



|                                      |  | Class A Common Stock |  |        |     |                           |   |                      |  |   |                 
|------------------------------------- |  | -------------------- |  | ------ | --- | ------------------------- | - | -------------------- |  | - | ----------------
|                                      |  | Numberof Shares      |  | Amount |     | AdditionalPaid-In Capital |   | DeferredCompensation |  |   | RetainedEarnings
|Balance at October 31, 2000           |  | 13,196               |  |        | 132 |                           |   | 43,068               |  |   | (251            
|Options exercised                     |  | 198                  |  |        | 2   |                           |   | 477                  |  |   |                 
|Net income for 2001                   |  |                      |  |        |     |                           |   |                      |  |   |                 
|Options granted                       |  |                      |  |        |     |                           |   | 1,435                |  |   | (1,435          
|Amortization of deferred compensation |  |                      |  |        |     |                           |   |                      |  |   | 361             
|Tax benefit from options exercised    |  |                      |  |        |     |                           |   | 356                  |  |   |                 
|                                      |  |                      |  |        |     |                           |   |                      |  |   |                 
|Balance at October 31, 2001           |  | 13,394               |  |        | 134 |                           |   | 45,336               |  |   | (1,325          
|Options exercised                     |  | 1,123                |  |        | 11  |                           |   | 2,425                |  |   |                 
|Net income for 2002                   |  |                      |  |        |     |                           |   |                      |  |   |                 
|Amortization of deferred compensation |  |                      |  |        |     |                           |   |                      |  |   | 359             
|Tax benefits from options exercised   |  |                      |  |        |     |                           |   | 2,848                |  |   |                 
|                                      |  |                      |  |        |     |                           |   |                      |  |   |                 
|Balance at October 31, 2002           |  | 14,517               |  | $      | 145 |                           | $ | 50,609               |  | $ | (966            
|Options exercised                     |  | 304                  |  |        | 3   |                           |   | 1,544                |  |   |                 
|Net income for 2003                   |  |                      |  |        |     |                           |   |                      |  |   |                 
|Amortization of deferred compensation |  |                      |  |        |     |                           |   |                      |  |   | 549             
|Tax benefits from options exercised   |  |                      |  |        |     |                           |   | 692                  |  |   |                 
|                                      |  |                      |  |        |     |                           |   |                      |  |   |                 
|Balance at October 31, 2003           |  | 14,821               |  | $      | 148 |                           | $ | 52,845               |  | $ | (417            
|                                      |  |                      |  |        |     |                           |   |                      |  |   |                 



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MAXWELL SHOE COMPANY INC.



NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in Thousandsexcept per share amounts)



October 31, 2003



|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 most recent years have
generally been within or below managements expectations, although during 2001, credit losses exceeded management expectations as a large and several medium sized retailers declared bankruptcy. In fiscal 2001, one customer accounted for
approximately 11.2% of net sales. In fiscal 2002, there were three customers that accounted for 10.1%, 10.8%, and 11.4%, respectively, of net sales. In fiscal 2003, there were three customers that accounted for 13.3%, 11.4% and 10.3%, respectively,
of net sales. At October 31, 2003, one customer accounted for 14.2% of trade receivables outstanding.



Use of Estimates



The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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,
which consists only of finished goods, is valued at the lower of cost or market, using the first-in, first-out method.



Impairment of Long Lived Assets



During fiscal 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets (FAS 144). If facts and circumstances indicate that the Companys long-lived assets might be impaired, the estimated future undiscounted cash flows associated with the long-lived asset would be
compared to its carrying amount to determine if a write down to fair value is necessary. If a write-down is required, the amount is determined by estimation of the present value of net discounted cash flows in accordance with FAS 144. No impairment
losses were recorded during 2003.



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##### Table of Contents

Property and Equipment



Property and equipment are stated at cost. Depreciation is provided using the straight line method 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    |  | 5-7 Years  
|Leasehold improvements |  | 5-7 Years  
|Computer equipment     |  | 3-5 Years  



Trademarks



In fiscal 2002, the Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets (FAS 142). Amortization of indefinite lived trademarks was no longer allowed under FAS 142, however these identified assets are subject to annual impairment tests. The Company has
determined that the carrying amount of trademarks is not impaired at October 31, 2003. Diluted earnings per share without the impact of amortization was $0.86 for fiscal year 2001.



In August 1996, the Company acquired the rights to the Sam & Libby® trademark and certain related trademarks
and tradenames for $5.5 million in cash. The trademarks and tradenames were 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. No
amortization was recorded subsequent to October 31, 2001.



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 tradenames and all related
inventory for $16.8 million in cash. Upon acquisition, the Company immediately sold all inventory to a liquidator. The total acquisition price less proceeds from the sale of the inventory was approximately $11.0 million and has been recorded as the
value of the trademarks and tradenames. The Company began to amortize the trademark and tradenames over a 30-year period in the fourth quarter of 2001 when sales under the Joan & David® brand began.



Operating Expenses



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



Advertising Expenses



Advertising costs are expensed as incurred. Advertising expenses
(including cooperative advertising with retailers) amounted to $5,394, $6,119 and $6,788 for the years ended October 31, 2001, 2002 and 2003, respectively.



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.



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##### Table of Contents

Earnings Per Share



Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding
during the period. The denominator used to compute diluted earnings per share includes the effects of applying the treasury stock method to outstanding stock options, which assumes that all dilutive options are exercised.



Stock Split



On April 18, 2002 the Board of Directors approved a 3 for 2 stock split of
the Class A Common Stock of Maxwell Shoe Company Inc. Additional stock certificates were mailed on May 17, 2002 to stockholders of record at the close of business on May 3, 2002. Cash was paid in lieu of fractional shares. All per share and
outstanding share data presented in this document has been adjusted to take into account the 3 for 2 stock split.



The presentation of share data and the computations of basic and diluted earnings per share have been adjusted retroactively for all periods presented.



Forward Exchange Contracts



The Company adopted SFAS No.133, Accounting for Derivative Instruments
and Hedging Activities (FAS 133),as amended by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which established accounting and reporting standards for derivative
instruments. FAS 133, as amended, requires the recognition of all derivative instruments as either assets or liabilities in the statement of financial position measured at fair value. The Company uses forward exchange contracts to manage its foreign
currency exposure. The forward exchange contracts entered into by the Company during fiscal 2003, which remain outstanding at year-end, do not meet hedge accounting criteria as defined by FAS 133 and, accordingly, are marked to market each period,
with the resulting gains or losses recognized in other income and expense.



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 using the intrinsic value
based method of accounting 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. For stock options that have an exercise price which is less than the fair market value of the shares at the date of grant, compensation expense is recognized over the vesting
period of the options.



SFAS No. 148 Accounting for Stock
Based Compensation Transition and Disclosure, an amendment of FASB Statement No. 123 (FAS 148) provided alternative methods of transition for a voluntary change to the fair value based method of accounting for stock based employee
compensation under SFAS No. 123 Accounting for Stock Based Compensation (FAS 123) and amends the disclosure requirements of FAS 123. As allowed by FAS 148, the Company has elected to continue to apply the intrinsic value
based method of accounting under APB 25 and has adopted only the disclosure requirements of FAS 148.



The following table illustrates the effect on net income if the fair value based method of accounting had been applied to all outstanding awards in each
period. The value for these options was estimated using the Black-Scholes option pricing model with the following weighted average assumptions: risk free rates ranging from 4.41% to 6.53%, dividend yield of 0%, volatility factor of the expected
market price of the Companys common stock of 34.2%, 39.2% and 34.7% for 2001, 2002 and 2003, respectively, and an expected option life of 5 years. The estimated fair value of the options is amortized to expense over the options vesting
period.



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##### Table of Contents

|                                |  |                                                                                                                         |        | Year Ended |     
|------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------- | ------ | ---------- | ----
|                                |  |                                                                                                                         |        | 2001       |     
|Net Income, as reported         |  | $                                                                                                                       | 12,280 |            |     
|Add:                            |  | Stock based employee compensation expense included in net income, as reported, net of tax                               |        |            | 199 
|Deduct:                         |  | Total stock based employee compensation expense determined under the fair value based method for all awards, net of tax |        |            | (825
|                                |  |                                                                                                                         |        |            |     
|Pro forma net income            |  | $                                                                                                                       | 11,654 |            |     
|                                |  |                                                                                                                         |        |            |     
|Earnings per share, as reported |  |                                                                                                                         |        |            |     
|                                |  | Basic                                                                                                                   |        | $          | 0.93
|                                |  | Diluted                                                                                                                 |        | $          | 0.84
|Earnings per share, pro forma   |  |                                                                                                                         |        |            |     
|                                |  | Basic                                                                                                                   |        | $          | 0.88
|                                |  | Diluted                                                                                                                 |        | $          | 0.80



Segment Reporting



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.



|2. | Property and Equipment
|-- | ----------------------



Property and equipment consists of the following:



|                              |  | 2002 |        | 2003
|----------------------------- |  | ---- | ------ | ----
|Warehouse equipment           |  | $    | 4,690  |     
|Furniture and fixtures        |  |      | 1,091  |     
|Leasehold improvements        |  |      | 1,260  |     
|Computer equipment            |  |      | 7,021  |     
|                              |  |      |        |     
|                              |  |      | 14,062 |     
|Less accumulated depreciation |  |      | 10,134 |     
|                              |  |      |        |     
|Property and equipment, net   |  | $    | 3,928  |     
|                              |  |      |        |     



At October 31, 2002,
property and equipment included assets recorded under capital leases of $1,047, which was fully depreciated as of October 31, 2002. Depreciation expense, including amortization of assets recorded under capital leases, for the years ended October 31,
2001, 2002 and 2003 amounted to $2,127, $1,958 and $1,810, respectively.



|3. | Bank Borrowings
|-- | ---------------



The Company currently has a $40.0 million discretionary demand credit facility bearing interest at either FleetBostons base rate or the 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,
2003, there were no outstanding borrowings, $22.1 million was outstanding under letters of credit and $17.8 million was available for future borrowings.



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##### Table of Contents

|4. | Accrued Expenses
|-- | ----------------



Accrued expenses consist of the following at October 31:



|                                   |  | 2002 |       | 2003
|---------------------------------- |  | ---- | ----- | ----
|Inventory purchases                |  | $    | 1,914 |     
|Compensation                       |  |      | 2,595 |     
|Employee benefit plan contribution |  |      | 597   |     
|Advertising                        |  |      | 1,629 |     
|Other                              |  |      | 1,777 |     
|                                   |  |      |       |     
|                                   |  | $    | 8,512 |     
|                                   |  |      |       |     



|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.



Stock Options



Under the 1994 Stock Incentive Plan (the Plan), as amended, the Board of Directors has reserved 1,125,000 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 450,000 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.



In April 2000, the Company granted 15,000 options to a certain employee to purchase stock at $0.67 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 is being recognized ratably over the vesting period of five years.



In August 2000, the Companys Board of Directors approved an amendment to the Plan, which included an increase in the maximum common shares
issuable under the Plan from 1,575,000 shares to 2,475,000 shares. At the April 13, 2001 Annual Meeting of Stockholders, the Company stockholders approved an amendment to the Plan to increase the maximum common shares issuable under the Plan and
approved grants of options to certain employees of the Company. Options were granted for the purchase of 453,161 shares of the Companys Common Stock at $7.00 per share. Based on the market price of the Companys stock on the date of
shareholder approval ($10.17 per share), the Company recorded deferred compensation expense of $1,435, which is being recognized ratably over the vesting period of four years.



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##### Table of Contents

Presented below is a summary of the status of the Companys 1994 Stock Incentive Plan, as amended,
and related transactions:



|                                         |  | Year ended October 31,
|---------------------------------------- |  | ----------------------
|                                         |  | 2001                  
|                                         |  | Shares                
|Options outstanding at beginning of year |  | 1,413,815             
|Granted                                  |  | 483,160               
|Exercised                                |  | (92,550               
|                                         |  |                       
|Options outstanding at end of year       |  | 1,804,425             
|                                         |  |                       
|Options exercisable at end of year       |  | 1,095,624             
|                                         |  |                       



The following table
summarizes information about stock options outstanding under the Companys 1994 Stock Incentive Plan, as amended, at October 31, 2003:



|                        |  | Options Outstanding |  | Options Exercisable                                
|----------------------- |  | ------------------- |  | ---------------------------------------------------
|Range of Exercise Price |  | Shares              |  | Weighted- Average RemainingContractual Life (Years)
|$0.67                   |  | 60,000              |  | 5.4                                                
|$3.33 - $ 4.33          |  | 76,750              |  | 2.8                                                
|$5.17 - $ 7.00          |  | 823,877             |  | 6.2                                                
|$9.53 - $12.96          |  | 606,250             |  | 7.3                                                
|                        |  |                     |  |                                                    
|                        |  | 1,566,877           |  | 6.4                                                
|                        |  |                     |  |                                                    



At October 31, 2003
there were 5,080 shares available for future grants under stock option plans.



In February 2003, the Companys Board of Directors adopted the 2003 Stock Incentive Plan of Maxwell Shoe Company, which reserved 750,000 shares of Class A Common Stock for issuance upon exercise of options or
grants of other awards under the 2003 Plan. Except for options granted to non-employee directors, which vest immediately, options generally vest over a four year period. At the April 10, 2003 Annual Meeting of Stockholders, the Companys
stockholders approved the 2003 Plan. As of October 31, 2003, no options had been granted under the 2003 Plan.



In 1994, in consideration of 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 1,332,618 shares of Class A Common Stock at an exercise price of $1.00 per share. The grant was outside of the Companys 1994 Stock Incentive Plan, as amended, and the stock options were immediately exercisable.
During 2001, 2002 and 2003, options for 105,450, 752,575 and 24,593 shares were exercised under this grant. At October 31, 2003, 0 shares remained exercisable pursuant to the CEOs 1994 stock option grant.



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 of Directors. 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.



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##### Table of Contents

|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:



|                                             |  | 2002 |       |   | 2003
|-------------------------------------------- |  | ---- | ----- | - | ----
|Deferred tax assets                          |  |      |       |   |     
|Stock option compensation                    |  | $    | 51    |   |     
|Inventory reserve                            |  |      | 453   |   |     
|Accrued payroll bonus                        |  |      |      |   |     
|Allowance for doubtful accounts              |  |      | 382   |   |     
|Profit sharing contribution                  |  |      |      |   |     
|Inventory capitalization                     |  |      | 245   |   |     
|Unearned compensation                        |  |      | 389   |   |     
|                                             |  |      |       |   |     
|                                             |  |      | 1,520 |   |     
|Valuation allowances for deferred tax assets |  |      | (51   | ) |     
|                                             |  |      |       |   |     
|Total deferred tax assets                    |  |      | 1,469 |   |     
|Deferred tax liabilities:                    |  |      |       |   |     
|Trademark                                    |  |      | 1,497 |   |     
|Property and equipment                       |  |      | 281   |   |     
|Profit sharing contribution                  |  |      | 161   |   |     
|                                             |  |      |       |   |     
|Total deferred tax liabilities               |  |      | 1,939 |   |     
|                                             |  |      |       |   |     
|Net deferred tax liabilities                 |  | $    | 470   |   |     
|                                             |  |      |       |   |     



The valuation
allowance for deferred tax assets as of October 31, 2003 and 2002 was $0 and $51, respectively. The net change in the total valuation allowance for the years ended October 31, 2003 and 2002 was a decrease of $51 and $1,581, respectively. In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies
in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences at October 31, 2003.



In connection with stock option compensation discussed in note 5, the Company recognized tax compensation expense in excess of book compensation expense, for the difference between the market price at the date of
grant and the market price at the date of exercise of stock options . This additional tax benefit of $2,848 and $692 for 2002 and 2003 was recorded as a reduction of current taxes payable and an increase in additional paid-in-capital.



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##### Table of Contents

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



|               |  | 2001 |       |   | 2002 |   | 2003 
|-------------- |  | ---- | ----- | - | ---- | - | -----
|Current:       |  |      |       |   |      |   |      
|Federal        |  | $    | 6,719 |   |      | $ | 5,343
|State          |  |      | 1,603 |   |      |   | 764  
|               |  |      |       |   |      |   |      
|Total current  |  |      | 8,322 |   |      |   | 6,107
|Deferred:      |  |      |       |   |      |   |      
|Federal        |  |      | (663  | ) |      |   | 60   
|State          |  |      | (157  | ) |      |   | 9    
|               |  |      |       |   |      |   |      
|Total deferred |  |      | (820  | ) |      |   | 69   
|               |  |      |       |   |      |   |      
|               |  | $    | 7,502 |   |      | $ | 6,176
|               |  |      |       |   |      |   |      



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



|                                               |  | 2001 |   |  | 2002 |   |  | 2003 |  
|---------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|U.S. statutory rate                            |  | 35   | % |  | 35   | % |  | 35   | %
|State income taxes, net of federal tax benefit |  | 5    |   |  | 6    |   |  | 5    |  
|Stock option compensation                      |  | (1   | ) |  | (8   | ) |  |     |  
|Tax free interest                              |  | (1   | ) |  | (1   | ) |  | (1   | )
|Other                                          |  |     |   |  |     |   |  | (1   | )
|                                               |  |      |   |  |      |   |  |      |  
|Effective tax rate                             |  | 38   | % |  | 32   | % |  | 38   | %
|                                               |  |      |   |  |      |   |  |      |  



|7. | Profit-Sharing Plan
|-- | -------------------



The Company has a contributory 401(k) profit-sharing plan covering substantially all employees. Employees may contribute a percent 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 company contributions
expensed amounted to $532, $608 and $697 for fiscal years 2001, 2002 and 2003, respectively.



|8. | Commitments
|-- | -----------



The Company leases equipment and office, retail and warehouse space under long-term non-cancelable operating leases which expire at various dates through
January 31, 2011. These leases require the Company to pay the real estate taxes on the real property.



At October 31, 2003, future minimum payments under such leases were as follows:



|2004                         |  | $ | 2,333
|---------------------------- |  | - | -----
|2005                         |  |   | 1,598
|2006                         |  |   | 1,577
|2007                         |  |   | 1,005
|2008                         |  |   | 704  
|Later years                  |  |   | 987  
|                             |  |   |      
|Total minimum lease payments |  | $ | 8,204
|                             |  |   |      



In September 2001, the
Company entered into an agreement to sublease approximately 120,000 square feet of its Brockton facility to an unaffiliated third party. The contract term expires in September 2004. Future minimum lease payments to be received in fiscal 2004 are
$523. The Company received $570 in sublease income for 2002 and 2003.



Rent expense for the years ended October 31, 2001, 2002 and 2003 was $1,487, $1,789 and $1,906 respectively.



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##### Table of Contents

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. The aggregate minimum royalty payments for all license agreements are $3,208,
$3,268 and $3,368 for the years ending December 31, 2003, 2004 and 2005, respectively.



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 Hook Agreement, with three one year options to extend. In May 2003, the Company extended the license until December 2006.



In November 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® Footwear For Women brand name. The agreement requires the payment of royalties on qualified sales and
guarantees minimum royalty payments. The initial term of the agreement ended December 31, 2001 and was extended until May 2002, at which time the Company and Levi Strauss Co. entered into a new license agreement effective through December 31, 2005.



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 AK Anne Kleinbrand. The agreement requires the payment of royalties. In addition, the agreement requires payments into an
advertising fund. The minimum payment for 2001 was $300, and thereafter, the minimum is calculated as a percentage of royalties paid. The Company extended the term of the agreement, as amended, for an additional five (5) year term ending December
31, 2007, with an option to extend, subject to certain conditions through December 2012.



In January 1997, the Company entered into a license agreement with 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 paid the Company royalties based on qualified product sales subject to payment of minimum royalties of $396 over the initial term of the
agreement. IPC exercised its option to extend the license agreement until May 2003. In March 2003, IPC extended the license until May 2006. Minimum royalties for this period, June 2003 until May 2006, are $450.



|9. | Earnings Per Share
|-- | ------------------



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



|                                                                  |  | 2001 |        | 2002 |   | 2003  
|----------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------
|Numerator:                                                        |  |      |        |      |   |       
|Net income                                                        |  | $    | 12,280 |      | $ | 13,258
|                                                                  |  |      |        |      |   |       
|Denominator (shares in thousands):                                |  |      |        |      |   |       
|Denominator for basic earnings per share Weighted average shares  |  |      | 13,235 |      |   | 13,954
|Denominator for diluted earnings per share Dilutive stock options |  |      | 1,330  |      |   | 920   
|                                                                  |  |      |        |      |   |       
|Adjusted weighted average shares and assumed conversions          |  |      | 14,565 |      |   | 14,874
|                                                                  |  |      |        |      |   |       
|Earnings per share                                                |  |      |        |      |   |       
|Basic                                                             |  | $    | 0.93   |      | $ | 0.95  
|                                                                  |  |      |        |      |   |       
|Diluted                                                           |  | $    | 0.84   |      | $ | 0.89  
|                                                                  |  |      |        |      |   |       



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##### Table of Contents

Options for 17,042, 4,054 and 0 shares for the years 2001, 2002 and 2003, respectively, were excluded
from the calculation of diluted earnings per share as the effect would have been anti-dilutive.



|10. | Supplementary Quarterly Financial Data (Unaudited)
|--- | --------------------------------------------------



The following is a summary of unaudited quarterly results for the fiscal years ended October 31, 2002 and October 31, 2003.



|                   |  | Quarter Ended
|------------------ |  | -------------
|                   |  | January 31   
|Fiscal 2002        |  |              
|Net sales          |  | $            
|Gross profit       |  |              
|Net income         |  |              
|Earnings per share |  |              
|Basic              |  | $            
|                   |  |              
|Diluted            |  | $            
|                   |  |              
|Fiscal 2003        |  |              
|Net sales          |  | $            
|Gross profit       |  |              
|Net income         |  |              
|Earnings per share |  |              
|Basic              |  | $            
|                   |  |              
|Diluted            |  | $            
|                   |  |              



MAXWELL SHOE COMPANY INC.



SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

(In Thousands)



|Description                                                |  | Balance atBeginningof Period |       | Charged toCosts andExpenses |   | Deductions1 |  | Balance atEnd ofPeriod
|---------------------------------------------------------- |  | ---------------------------- | ----- | --------------------------- | - | ----------- |  | ----------------------
|Year ended October 31, 2001Allowance for doubtful accounts |  | $                            | 625   |                             | $ | 796         |  | $                     
|Year ended October 31, 2002Allowance for doubtful accounts |  | $                            | 1,326 |                             | $ | 250         |  | $                     
|Year ended October 31, 2003Allowance for doubtful accounts |  | $                            | 955   |                             | $ | 250         |  | $                     

---

|1 | Uncollectible accounts written off, net of recoveries.
|- | ------------------------------------------------------



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



(a) Previous Independent Accountant



(i) Effective August 11, 2003, the Company dismissed Ernst & Young LLP
as its independent accountants.



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##### Table of Contents

(ii) The reports of Ernst & Young LLP on the Companys consolidated financial statements for the
past two years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.



(iii) The Companys Audit Committee participated in and approved the decision to change independent accountants.



(iv) In connection with its audits for the Companys two
most recent fiscal years and through the date hereof, there have been no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Ernst & Young LLP, would have caused them to make reference to the subject matter of the disagreement in connection with their reports.



(v) During the Companys two most recent fiscal years and through the
date hereof, there have been no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.



(b) New Independent Accountant



The Company engaged KPMG LLP as its new independent accountants with the engagement commencing as of August 11, 2003. Such engagement was recommended and
approved by the Companys Audit Committee. During the Companys two most recent fiscal years and through the date hereof, the Company has not consulted with KPMG LLP regarding either (i) the application of accounting principles to a
specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Companys consolidated financial statements, and neither a written report nor oral advice was provided by KPMG LLP to the Company
that KPMG LLP concluded was an important factor considered by the Company in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(v) of Regulation S-K.



|Item 9a. |  | Controls and Procedures
|-------- |  | -----------------------



(a) Evaluation of Disclosure Controls and Procedures. The Companys Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act) as of the end of the period covered by this Report (the Evaluation Date).
Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Companys disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Companys periodic filings under the Exchange Act.



(b) Changes in Internal Control Over Financial Reporting. No changes in the Companys internal control over financial reporting have come to
managements attention during the Companys last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

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 8, 2004. The Companys proxy statement will be filed with the Securities and Exchange Commission within 120 days after October 31, 2003 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 to be held April 8,
2004. The Companys proxy statement will be filed with the Securities and Exchange Commission within 120 days after October 31, 2003 and is incorporated herein by reference.



|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- |  | ----------------------------------------------------------------------------------------------



The information required by this item will be contained in the
Companys Proxy Statement for its Annual Stockholders Meeting to be held April 8, 2004. The Companys proxy statement will be filed with the Securities and Exchange Commission within 120 days after October 31, 2003 and is incorporated
herein by reference.



|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 to be held April 8,
2004. The Companys proxy statement will be filed with the Securities and Exchange Commission within 120 days after October 31, 2003 and is incorporated herein by reference.



|Item 14. |  | Principal Accounting Fees and Services
|-------- |  | --------------------------------------



The information required by this item will be contained in the Companys Proxy Statement for its Annual Stockholders Meeting to be held April 8,
2004. The Companys Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after October 31, 2003 and is incorporated herein by reference.



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##### Table of Contents

PART IV



|Item 15. |  | 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.



|                                                                                                                            |  | Page Reference Form 10-K
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|Independent Auditors Report                                                                                                |  | 23                      
|Consolidated Balance Sheets as of October 31, 2002 and 2003                                                                 |  | 24                      
|Consolidated Statements of Income for each of the three years in the period ended October 31, 2003                          |  | 25                      
|Consolidated Statements of Cash Flows for each of the three years in the period ended October 31, 2003                      |  | 26                      
|Consolidated Statements of Changes in Stockholders Equity for each of the three years in the period ended October 31, 2003 |  | 27                      
|Notes to Consolidated Financial Statements                                                                                  |  | 28                      



(a) (2) Financial
Statement Schedule:



|                                                                                                                                                        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Schedule II  Valuation and qualifying accounts for the years ended October 31, 2001, 2002 and 2003                                                     | 
|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



On August 13, 2003, the Company filed a Current Report on
Form 8-K indicating a change in its independent auditor.



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##### Table of Contents

(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)                                                                                                                      
|       | 
|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)                                                                                    
|       | 
|4.4    |  | Amendment No. 1 to Rights Agreement dated December 6, 2001 between Maxwell Shoe Company Inc. and EquiServe Trust Company, N.A. (incorporated by reference to Exhibit 4.4 to
Registrants Form 10-K for fiscal year ended October 31, 2001 as filed on January 29, 2002)                                      
|       | 
|10.1   |  | Amended 1994 Stock Incentive Plan dated as of September 13, 2002 (incorporated by reference to Exhibit 10.1 to Registrants Form 10-K for the fiscal year ended October 31,
2002 as filed on January 29, 2003)                                                                                               
|       | 
|10.2.1 |  | Amendment No. 1 to Form of Employee Nonqualified Stock Option Agreement pursuant to the 1994 Stock Incentive Plan as amended (incorporated by reference to Exhibit 10.2.1 to
Registrants Form 10-K for the fiscal year ended October 31, 2002 as filed on January 29, 2003)                                 
|       | 
|10.2.2 |  | Form of Employee Incentive Stock Option Agreement pursuant to the 1994 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2.2 to the Registrants Form
S-1 Registration Statement No 33-74768)                                                                                        
|       | 
|10.2.3 |  | Amendment No. 1 to Form of Nonemployee Director Stock Option Agreement pursuant to the 1994 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.2.3 to
Registrants Form 10-K for the fiscal year ended October 31, 2002 as filed on January 29, 2003)                                 
|       | 
|10.3   |  | Form of Restricted Stock Agreement pursuant to the 1994 Stock Incentive Plan, as amended, (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 March 26, 2001 by and between Highland Sprague Associates, L.P., as lessor, and Maxwell Shoe Company Inc., as lessee (incorporated by reference to Exhibit 10.6
to Registrants Form 10-K for the fiscal year ended October 31, 2001 as filed on January 29, 2002)                         
|       | 
|10.7   |  | Agreement of Lease dated as of July 12, 1985, between Solow Management, lessor to 4 West 58thStreet, New York, New York, and Joan & David® USA, Inc., as lessee (incorporated by reference to Exhibit 10.7 to Registrants Form 10-K for the fiscal year ended October 31, 2001
as filed on January 29, 2002)
|       | 
|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)                                            





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|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   |  | 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)                                                                                                                                                                                                               
|        | 
|10.10.1 |  | Amendment to Change of Control Severance Agreement dated April 3, 2001 between Maxwell Shoe Company Inc. and Richard J. Bakos (incorporated by reference to Exhibit 10.37 to
Registrants Form 10-Q filed on June 11, 2001)                                                                                                                                                                           
|        | 
|10.10.2 |  | Amendment No. 2 to Change of Control Severance Agreement, dated as of April 8, 2003, between Maxwell Shoe Company Inc. and Richard J. Bakos                                                                                                                                                                                                                                                           
|        | 
|10.11   |  | 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)                                                                                                                                                       
|        | 
|10.11.1 |  | Amendment No. 1 to Stock Option and Registration Rights Agreement (incorporated by reference to Exhibit 10.11.1 to Registrants Form 10-K for the fiscal year ended October
31, 2002 as filed on January 29, 2003)                                                                                                                                                                                    
|        | 
|10.12   |  | 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)                                                                                                                                      
|        | 
|10.13   |  | 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).                                                                                                    
|        | 
|10.14   |  | Employment Agreement dated as of August 30, 2000 between Maxwell Shoe Company Inc. and Mark J. Cocozza (incorporated by reference to Exhibit 10.35 to Registrants Form 10-K
filed on January 29, 2001)                                                                                                                                                                                               
|        | 
|10.14.1 |  | Amendment No. 1 to Employment Agreement dated as of September 11, 2003, between Maxwell Shoe Company Inc. and Mark J. Cocozza.                                                                                                                                                                                                                                                                        
|        | 
|10.15   |  | Employment Agreement effective as of August 31, 2003 between Maxwell Shoe Company Inc. and James J. Tinagero (incorporated by reference to Exhibit 10.1 to Registrants Form
10-Q filed on June 12, 2003)                                                                                                                                                                                             
|        | 
|10.16   |  | Loan Modification Agreement dated April 30, 2001 between Maxwell Shoe Company Inc. and Fleet National Bank (incorporated by reference to Exhibit 10.19 to Registrants Form
10-K for fiscal year ended October 31, 2001 as filed on January 29, 2002)                                                                                                                                                 
|        | 
|10.16.1 |  | Second Loan Modification Agreement dated April 28, 2003 between Maxwell Shoe Company Inc. and Fleet National Bank.                                                                                                                                                                                                                                                                                    
|        | 
|10.17   |  | Agreement dated as of July 9, 1999 between ANNE KLEIN, a division of Kasper A.S.L., Ltd., B.D.S., Inc., Lion Licensing, Ltd. and Maxwell Shoe Company Inc. (incorporated by
reference to Exhibit 10.21 to Registrants Form 10-K for the fiscal year ended October 31, 2001 as filed on January 29, 2002; (portions of the Exhibit have been omitted pursuant to a request for confidential treatment)
|        | 
|10.18   |  | Amendment to Agreement between ANNE KLEIN, a division of Kasper A.S.L., Ltd., B.D.S., Inc., Lion Licensing, Ltd. And Maxwell Shoe Company Inc. dated March 19, 2002 (incorporated
by reference to Exhibit 10.18 to Registrants Form 10-K for the fiscal year ended October 31, 2002 as filed on January 29, 2003)                                                                                    
|        | 
|10.19   |  | 2003 Stock Incentive Plan of Maxwell Shoe Company Inc. (incorporated by reference to Appendix A to Registrants definitive Schedule 14A as filed on February 28,
2003)                                                                                                                                                                                                                                
|        | 
|14      |  | Maxwell Shoe Company Inc. Code Of Ethics for the Chief Executive Officer, the Chief Operating Officer, Senior Financial Officers and Board Of Directors.                                                                                                                                                                                                                                              
|        | 
|21      |  | Subsidiaries of Maxwell Shoe Company Inc. (incorporated by reference to Exhibit 21 to Registrants Form 10-K for the fiscal year ended October 31, 2001).                                                                                                                                                                                                                                             
|        | 
|23.1    |  | Consent of KPMG LLP, Independent Auditors                                                                                                                                                                                                                                                                                                                                                             
|        | 
|23.2    |  | Consent of Ernst & Young LLP, Independent Auditors                                                                                                                                                                                                                                                                                                                                                    
|        | 
|31.1    |  | Certification of the CEO pursuant to Rules 13a-14 and 15d-14 under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                            
|        | 
|31.2    |  | Certification of the CFO pursuant to Rules 13a-14 and 15d-14 under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                            
|        | 
|32.1    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                               





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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. COCOZZAMark J. Cocozza,Chairman and Chief Executive OfficerJanuary 16, 2004




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



|Signature              |  | Title                                                          |  | Date            
|---------------------- |  | -------------------------------------------------------------- |  | ----------------
|/s/ MARK J. COCOZZA    |  | Chairman of the Board and Chief Executive Officer              |  | January 16, 2004
|Mark J. Cocozza        |  | (Principal Executive Officer)                                  |  |                 
|                       |  |                                                               
|/s/ JAMES J. TINAGERO  |  | Executive Vice President, Chief Operating Officer and Director |  | January 16, 2004
|James J. Tinagero      |  | (Principal Operating Officer)                                  |  |                 
|                       |  |                                                               
|/s/ RICHARD J. BAKOS   |  | Vice President Finance and Chief Financial Officer             |  | January 16, 2004
|Richard J. Bakos       |  | (Principal Financial Officer and Principal Accounting Officer) |  |                 
|                       |  |                                                               
|/s/ STEPHEN A. FINE    |  | Director                                                       |  | January 16, 2004
|Stephen A. Fine        |  |                                                                |  |                 
|                       |  |                                                               
|/s/ MALCOLM L. SHERMAN |  | Director                                                       |  | January 16, 2004
|Malcolm L. Sherman     |  |                                                                |  |                 
|                       |  |                                                               
|/s/ ANTHONY J. TIBERII |  | Director                                                       |  | January 16, 2004
|Anthony J. Tiberii     |  |                                                                |  |                 



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