<PAGE>

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

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

                                    FORM 10-K

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

               For the Fiscal Year Ended  February 1, 2003

               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: 33-59380

                         FINLAY FINE JEWELRY CORPORATION
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                           13-3287757
-------------------------------                           -----------------
(State or other jurisdiction of                            (I.R.S. Employer
incorporation or organization)                            Identification No.)

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

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

        Securities registered pursuant to Section 12 (b) of the Act: None
        Securities registered pursuant to Section 12(g) of the Act: None

                                ----------------

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 Securities Exchange Act of 1934).

                               Yes  [ ]   No  [X]
                                   -----     -----

As of April 29, 2003 there were 1,000 shares of common stock, par value $.01 per
share, of the Registrant outstanding. As of such date, all shares of common
stock were owned by the Registrant's parent, Finlay Enterprises, Inc., a
Delaware corporation.

*The Registrant is not subject to the filing requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 and is voluntarily filing this Annual
Report on Form 10-K.

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


<PAGE>

                         FINLAY FINE JEWELRY CORPORATION

                                    FORM 10-K

                   FOR THE FISCAL YEAR ENDED FEBRUARY 1, 2003

                                      INDEX

<TABLE>
<CAPTION>
                                                                                              PAGE(S)
<S>               <C>                                                                         <C>
PART I
    Item 1.       Business..................................................................     3
    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 the Registrant's Common Equity and Related Stockholder
                     Matters................................................................    14
    Item 6.       Selected Consolidated Financial Data......................................    15
    Item 7.       Management's Discussion and Analysis of Financial
                     Condition and Results of Operations....................................    17
    Item 7A.      Quantitative and Qualitative Disclosures about Market Risk................    27
    Item 8.       Financial Statements and Supplementary Data...............................    28
    Item 9.       Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure....................................    28

PART III
    Item 10.      Directors and Executive Officers of the Registrant........................    29
    Item 11.      Executive Compensation....................................................    32
    Item 12.      Security Ownership of Certain Beneficial Owners and Management and
                       Related Stockholder Matters..........................................    38
    Item 13.      Certain Relationships and Related Transactions............................    42
    Item 14.      Controls and Procedures...................................................    44

PART IV
    Item 15.      Exhibits, Financial Statement Schedules and Reports on Form 8-K...........    45

SIGNATURES        ..........................................................................    50

CERTIFICATIONS    ..........................................................................    51
</TABLE>

                                       2
<PAGE>



                                     PART I

ITEM 1. BUSINESS

THE COMPANY

     Finlay Fine Jewelry Corporation, a Delaware corporation, and its wholly
owned subsidiaries ("Finlay Jewelry") is a wholly owned subsidiary of Finlay
Enterprises, Inc., a Delaware corporation (the "Holding Company"). References to
"Finlay" mean, collectively, the Holding Company and Finlay Jewelry. All
references herein to "Departments" refer to fine jewelry departments operated
pursuant to license agreements or other arrangements with host department
stores.

     Finlay is one of the leading retailers of fine jewelry in the United
States. Finlay operates leased fine jewelry Departments in major department
stores for retailers such as The May Department Stores Company ("May"),
Federated Department Stores ("Federated"), Belk, the Carson Pirie Scott division
of Saks Incorporated, Marshall Field's and Dillard's. Finlay sells a broad
selection of moderately priced fine jewelry, including necklaces, earrings,
bracelets, rings and watches, and markets these items principally as fashion
accessories with an average sales price of approximately $186 per item. Average
sales per Department were $923,000 in 2002 and the average size of a Department
is approximately 700 square feet.

     On a domestic basis, Finlay's sales have increased from $822.0 million in
1998 to $930.7 million in 2002, a compound annual growth rate of 3.2%. On a
consolidated basis, including the operations of Sonab (as defined below),
Finlay's sales have increased from $863.4 million in 1998 to $930.7 million in
2002, a compound annual growth rate of 1.9%. Income from operations before
depreciation and amortization expense has increased from $78.0 million to $81.6
million in the same period. Finlay has increased in size from 959 locations at
the beginning of 1998 to 1,011 locations at the end of 2002.

     As of February 1, 2003, Finlay operated its 1,011 locations in 20 host
store groups, in 45 states and the District of Columbia. Finlay's largest host
store relationship is with May, for which Finlay has operated Departments since
1948. Finlay operates in 440 of May's fine jewelry departments, representing
substantially all of May's department stores. Finlay's second largest host store
relationship is with Federated, for which Finlay has operated Departments since
1983. Finlay operates Departments in 160 of Federated's 463 department stores.
Over the past three years, store groups owned by May and Federated accounted for
an average of 47% and 23%, respectively, of Finlay's sales. Management believes
that it maintains excellent relations with its host store groups, 18 of which
have had leases with Finlay for more than five years (representing 94% of
Finlay's sales in 2002) and 15 of which have had leases with Finlay for more
than ten years (representing 80% of Finlay's sales in 2002).

     On January 22, 2003, Finlay Jewelry's revolving credit agreement with
General Electric Capital Corporation ("G.E. Capital") and certain other lenders
was amended and restated (the "Revolving Credit Agreement"). The Revolving
Credit Agreement, which matures in January 2008, provides Finlay Jewelry with a
senior secured revolving line of credit up to $225.0 million (the "Revolving
Credit Facility").

     On April 3, 2000, Finlay completed the acquisition of certain assets of Jay
B. Rudolph, Inc. ("J.B. Rudolph") for $20.6 million, consisting primarily of
inventory and fixed assets. By acquiring J.B. Rudolph (the "J.B. Rudolph
Acquisition"), Finlay added 57 Departments and also added new host store
relationships with Bloomingdale's and Dayton's and Hudson's (both now operating
as Marshall Field's).

     On January 3, 2000, Societe Nouvelle d'Achat de Bijouterie - S.O.N.A.B.
("Sonab"), Finlay Jewelry's European leased jewelry department subsidiary, sold
the majority of its assets for $9.9 million. After the sale, the buyer operated
more than 80 locations previously included in Sonab's 130-location base in
France. The remaining departments were closed in 1999. Finlay Jewelry recorded a
pre-tax charge in 1999 of $28.6 million for the write-down of assets for
disposition and related closure expenses.

                                       3
<PAGE>


In 2002, Finlay Jewelry revised its original estimate of closure expenses to
reflect its remaining liability and, as a result, recorded a gain of $1.4
million, on a pre-tax basis.

      Finlay's fiscal year ends on the Saturday closest to January 31.
References to 2003, 2002, 2001, 2000, 1999 and 1998 relate to the fiscal years
ending on January 31, 2004, February 1, 2003, February 2, 2002, February 3,
2001, January 29, 2000 and January 30, 1999, respectively. Each of the fiscal
years includes 52 weeks except 2000, which includes 53 weeks.

     Finlay Jewelry was initially incorporated on August 2, 1985 as SL Holdings
Corporation ("SL Holdings"). The Holding Company, a Delaware corporation
incorporated on November 22, 1988, was organized by certain officers and
directors of SL Holdings to acquire certain operations of SL Holdings. In
connection with a reorganization transaction in 1988, which resulted in the
merger of a wholly owned subsidiary of the Holding Company into SL Holdings, SL
Holdings changed its name to Finlay Fine Jewelry Corporation and became a wholly
owned subsidiary of the Holding Company. The principal executive offices of
Finlay Jewelry are located at 529 Fifth Avenue, New York, New York 10017 and its
telephone number at this address is (212) 808-2800.


GENERAL

     OVERVIEW. Host stores benefit from outsourcing the operation of their fine
jewelry departments. By engaging Finlay, host stores gain specialized
managerial, merchandising, selling, marketing, inventory control and security
expertise. Additionally, by avoiding the high working capital investment
typically required of the jewelry business, host stores improve their return on
investment and can potentially increase their profitability.

     As a lessee, Finlay benefits from the host stores' reputation, customer
traffic, advertising, credit services and established customer base. Finlay also
avoids the substantial capital investment in fixed assets typical of stand-alone
retail formats. These factors have generally enabled Finlay's new Departments to
achieve profitability within their first 12 months of operation. Finlay further
benefits because net sales proceeds are generally remitted to Finlay by each
host store on a monthly basis with essentially all customer credit risk borne by
the host store.

     As a result of Finlay's strong relationships with its vendors, management
believes that Finlay Jewelry's working capital requirements are lower than those
of many other jewelry retailers. In recent years, on average, approximately 50%
of Finlay's merchandise has been carried on consignment. The use of consignment
merchandise also reduces Finlay's inventory exposure to changing fashion trends
because, in general, unsold consigned merchandise can be returned to the vendor.

     INDUSTRY. Management believes that current trends in jewelry retailing,
particularly in the department store sector, provide a significant opportunity
for Finlay's growth. Consumers spent approximately $53.2 billion on jewelry
(including both fine and costume jewelry) in the United States in 2002, an
increase of approximately $21.6 billion over 1992, according to the United
States Department of Commerce. In the department store sector in which Finlay
operates, consumers spent $4.1 billion on fine jewelry in 2002. Management
believes that demographic factors such as the maturing of the U.S. population
and an increase in the number of working women have resulted in greater
disposable income, thus contributing to the growth of the fine jewelry retailing
industry. Management also believes that jewelry consumers today increasingly
perceive fine jewelry as a fashion accessory, resulting in purchases which
augment Finlay's gift and special occasion sales. Finlay's Departments are
typically located in "high traffic" areas of leading department stores, enabling
Finlay to capitalize on these consumer buying patterns.

     GROWTH STRATEGY. Finlay intends to continue to pursue the following key
initiatives to increase sales and earnings:

     o    INCREASE COMPARABLE DEPARTMENT SALES. Finlay's merchandising and
          marketing strategy includes emphasizing key merchandise items,
          increasing focus on holiday and event-driven promotions,

                                       4
<PAGE>


          participating in host store marketing programs and positioning its
          Departments as a "destination location" for fine jewelry. Finlay
          believes that comparable Department sales will continue to benefit
          from these strategies. As a result of a challenging retail
          environment, Finlay's comparable store sales have slowed in the past
          two years, although they have continued to outpace the comparable
          store sales of its host stores.

     o    ADD DEPARTMENTS WITHIN EXISTING HOST STORE GROUPS. Finlay's well
          established relationships with many of its host store groups have
          enabled Finlay to add Departments in new locations opened by existing
          host stores. Finlay has operated Departments in May stores since 1948
          and operates in 440 of May's fine jewelry departments, representing
          substantially all of May's department stores. Finlay has also operated
          Departments in Federated stores since 1983 and operates Departments in
          160 of Federated's 463 department stores.

     o    ESTABLISH NEW HOST STORE RELATIONSHIPS. Finlay has an opportunity to
          grow primarily by establishing new relationships with department
          stores that presently operate their own fine jewelry departments or
          have an interest in opening jewelry departments. Finlay seeks to
          establish these new relationships by demonstrating to department store
          management the potential for improved financial performance. Through
          acquisitions, Finlay has added Marshall Field's, Parisian, Dillard's
          and Bloomingdale's to its host store relationships.

     o    IMPROVE OPERATING LEVERAGE. Finlay seeks to continue to leverage
          expenses both by increasing sales at a faster rate than expenses and
          by reducing its current level of certain operating expenses. For
          example, Finlay has demonstrated that by increasing the selling space
          (with host store approval) of certain high volume Departments,
          incremental sales can be achieved without having to incur
          proportionate increases in selling and administrative expenses. In
          addition, management believes Finlay will benefit from further
          investments in technology and refinements of operating procedures
          designed to allow Finlay's sales associates more time for customer
          sales and service. In March 2002, Finlay implemented a new
          merchandising and inventory control system and a point-of-sale system
          for its Departments. These systems will provide the foundation for
          future productivity and expense control initiatives. Further, Finlay's
          central distribution facility has enabled Finlay to improve the flow
          of merchandise to Departments and to reduce payroll and freight costs.

     MERCHANDISING STRATEGY. Finlay seeks to maximize sales and profitability
through a unique merchandising strategy known as the "Finlay Triangle", which
integrates store management (including host store management and Finlay's store
group management), vendors and Finlay's central office. By coordinating efforts
and sharing access to information, each Finlay Triangle participant plays a role
which emphasizes its area of expertise in the merchandising process, thereby
increasing productivity. Within guidelines set by the central office, Finlay's
store group management contributes to the selection of the specific merchandise
most appropriate to the demographics and customer tastes within their particular
geographical area. Finlay's advertising initiatives and promotional planning are
closely coordinated with both host store management and Finlay's store group
management to ensure the effective use of Finlay's marketing programs. Vendors
participate in the decision-making process with respect to merchandise
assortment, including the testing of new products, marketing, advertising and
stock levels. By utilizing the Finlay Triangle, opportunities are created for
the vendor to assist in identifying fashion trends thereby improving inventory
turnover and profitability, both for the vendor and Finlay. As a result,
management believes it capitalizes on economies of scale by centralizing certain
activities, such as vendor selection, advertising and planning, while allowing
store management the flexibility to implement merchandising programs tailored to
the host store environments and clientele.

                                       5
<PAGE>




                               THE FINLAY TRIANGLE


                                 ---------------
                                     CENTRAL
                          /  /       OFFICE         \  \
                         /  /    ---------------     \  \
                        /  /                          \  \
                   -------------                 ---------------
                      VENDORS        - - - -          STORE
                                    - - - -         MANAGEMENT
                   -------------                 ---------------


     Finlay has structured its relationships with vendors to encourage sharing
of responsibility for marketing and merchandise management. Finlay furnishes to
vendors, through on-line access to Finlay's information systems, the same sales,
stock and gross margin information that is available to Finlay's store group
management and central office for each of the vendor's styles in Finlay's
merchandise assortment. Using this information, vendors are able to participate
in decisions to replenish inventory which has been sold and to return or
exchange slower-moving merchandise. New items are tested in specially selected
"predictor" Departments where sales experience can indicate an item's future
performance in Finlay's other Departments. Management believes that the access
and input which vendors have in the merchandising process results in a better
assortment, timely replenishment, higher turnover and higher sales of inventory,
differentiating Finlay from its competitors.

     Since many of the host store groups in which Finlay operates differ in
fashion image and customer demographics, Finlay's flexible approach to
merchandising is designed to complement each host store's own merchandising
philosophy. Finlay emphasizes a "fashion accessory" approach to fine jewelry and
watches, and seeks to provide items that coordinate with the host store's
fashion focus as well as to maintain stocks of traditional and gift merchandise.


STORE RELATIONSHIPS

     HOST STORE RELATIONSHIPS. As of February 1, 2003, Finlay operated 1,011
locations in 20 host store groups, in 45 states and the District of Columbia.
Management believes that it maintains excellent relations with its host store
groups, 18 of which have had leases with Finlay for more than five years
(representing 94% of Finlay's sales in 2002) and 15 of which have had leases
with Finlay for more than ten years (representing 80% of Finlay's sales in
2002). As a consequence of the strong and, in many instances, long-term
relationships, host store groups have routinely renewed Finlay's lease
agreements at their renewal dates. Management believes that the majority of its
lease agreements will continue to be renewed routinely.

                                       6
<PAGE>




     The following table identifies the host store groups in which Finlay
operated Departments at February 1, 2003, the year in which Finlay's
relationship with each host store group commenced and the number of Departments
operated by Finlay in each host store group.


<TABLE>
<CAPTION>

HOST STORE GROUP                                                       INCEPTION OF             NUMBER OF
----------------                                                       RELATIONSHIP            DEPARTMENTS
                                                                      --------------           -----------
<S>                                                                       <C>                     <C>          <C>
MAY
Robinsons-May/Meier & Frank....................................            1948                    71
Filene's/Kaufmann's............................................            1977                    95
Lord & Taylor..................................................            1978                    85
Famous Barr/L.S. Ayres/Jones...................................            1979                    43
Foley's........................................................            1986                    66
Hecht's/Strawbridge's..........................................            1986                    80
                                                                                                  ----
    Total May Departments......................................                                                  440

FEDERATED
Rich's/Lazarus/Goldsmith's.....................................            1983                    67
Burdines.......................................................            1992                    46
The Bon Marche.................................................            1993                    21
Bloomingdale's.................................................            2000                    26
                                                                                                  ----
    Total Federated Departments................................                                                  160

SAKS INCORPORATED
Younkers (1)...................................................            1973                    33
Carson Pirie Scott/Bergner's/Boston Store......................            1975                    50
Parisian.......................................................            1997                    35
Herberger's....................................................            1999                     3
                                                                                                  ----
    Total Saks Incorporated Departments........................                                                  121

OTHER DEPARTMENTS
Gottschalks....................................................            1969                    38
Belk...........................................................            1975                    65
The Bon-Ton....................................................            1986                    43
Elder Beerman..................................................            1992                    35
Dillard's......................................................            1997                    52
Marshall Field's (2)...........................................            1997                    57
                                                                                                  ----
    Total Other Departments....................................                                                  290
                                                                                                               -----
    Total Departments..........................................                                                1,011
                                                                                                               =====
</TABLE>


--------------------
(1)  Effective February 2, 2003, Younkers was consolidated into the Carson Pirie
     Scott host store group.
(2)  Includes the former Dayton's and Hudson's Departments added in 2000 as a
     result of the J.B. Rudolph Acquisition.

                                       7
<PAGE>


         TERMS OF LEASE AGREEMENTS. Finlay's lease agreements typically have an
initial term of one to five years. Finlay has, where possible, entered into
five-year lease agreements. Substantially all of Finlay's lease agreements
contain renewal options or provisions for automatic renewal absent prior notice
of termination by either party. Lease renewals are generally for one to five
year periods. In exchange for the right to operate a Department within the host
store, Finlay pays each host store group a lease fee, calculated as a percentage
of sales (subject to a minimum annual fee in a limited number of cases).

     Finlay's lease agreements require host stores to remit sales proceeds for
each month (without regard to whether such sales were cash, store credit or
national credit card) to Finlay approximately three weeks after the end of such
month. However, Finlay cannot ensure the collection of sales proceeds from its
host stores. Additionally, substantially all of Finlay's lease agreements
provide for accelerated payments during the months of November and December,
which require the host store groups to remit to Finlay 75% of the estimated
months' sales prior to or shortly following the end of each such month. Each
host store group withholds from the remittance of sales proceeds a lease fee and
other expenditures, such as advertising costs, which the host store group may
have incurred on Finlay's behalf.

     Finlay is usually responsible for providing and maintaining any fixtures
and other equipment necessary to operate its Departments, while the host store
is typically required to provide clean space for installation of any necessary
fixtures. The host store is generally responsible for paying utility costs
(except certain telephone charges), maintenance and certain other expenses
associated with the operation of the Departments. Finlay's lease agreements
typically provide that Finlay is responsible for the hiring (subject to the
suitability of such employees to the host store) and discharge of its sales and
Department supervisory personnel, and substantially all lease agreements require
Finlay to provide its employees with salaries and certain benefits comparable to
those received by the host store's employees. Many of Finlay's lease agreements
provide that Finlay may operate the Departments in any new stores opened by the
host store group. In certain instances, Finlay is operating Departments without
written agreements, although the arrangements in respect of such Departments are
generally in accordance with the terms described herein.

     In several cases, Finlay is subject to limitations under its lease
agreements which prohibit Finlay from operating Departments for competing host
store groups within a certain geographical radius of the host stores (typically
five to ten miles). Such limitations restrict Finlay from further expansion
within areas where it currently operates Departments, including expansion by
possible acquisitions. Certain lease agreements, however, make an exception for
adding Departments in stores established by groups with which Finlay has a
preexisting lease arrangement. In addition, Finlay has from time to time
obtained the consent of an existing host store group to operate in another host
store group within a prohibited area. For example, May and Federated have
granted consents of this type to Finlay with respect to one another's stores.
Further, Finlay sought and received the consent of certain of its existing host
store groups in connection with the 1997 acquisition of certain assets of the
Diamond Park Fine Jewelers division of Zale Corporation and the J.B. Rudolph
Acquisition.

     CREDIT. Substantially all consumer credit risk is borne by the host store
rather than by Finlay. Purchasers of Finlay's merchandise at a host store are
entitled to the use of the host store's credit facilities on the same basis as
all of the host store's customers. Payment of credit card or check transactions
is generally guaranteed to Finlay by the host store, provided that the proper
credit approvals have been obtained in accordance with the host store's policy.
Accordingly, payment to Finlay in respect of its sales proceeds is generally not
dependent on when, or if, payment is received by the host store.

     DEPARTMENTS OPENED/CLOSED. During 2002, Department openings offset by
closings resulted in a net increase of five Departments. The openings, which
totaled 21 Departments, and the closings, which totaled 16 Departments, were all
within existing store groups. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--2002 Compared with 2001".

                                       8
<PAGE>


     The following table sets forth data regarding the number of domestic
Departments which Finlay has operated from the beginning of 1998:

<TABLE>
<CAPTION>
                                                                             FISCAL YEAR ENDED
                                                        -------------------------------------------------------------
                                                         FEB. 1,    FEB. 2,       FEB. 3,      JAN. 29,     JAN. 30,
                                                         2003         2002         2001          2000         1999
                                                        --------    ---------     --------     ---------    ---------
<S>                                                     <C>         <C>           <C>          <C>           <C>
   DEPARTMENTS/STORES:

   Open at beginning of year......................       1,006        1,053           987          959          959
   Opened during year.............................          21           33            86           61           68
   Closed during year.............................         (16)         (80)          (20)         (33)         (68)
                                                        --------    ---------     --------     ---------    ---------
   Open at end of year............................       1,011        1,006         1,053          987          959
                                                        --------    ---------     --------     ---------    ---------
   Net increase (decrease)........................           5          (47)           66           28            -
                                                        ========    =========     ========     =========    =========
</TABLE>


     For the years presented in the table above, Department closings were
primarily attributable to: ownership changes in host store groups; internal
consolidation within host store groups; the closing or sale by host store groups
of individual stores; host store group decisions to consolidate with one lessee;
and Finlay's decision to close unprofitable Departments. To management's
knowledge, none of the Department closings during the periods presented in the
table above resulted from dissatisfaction of a host store group with Finlay's
performance.


PRODUCTS AND PRICING

     Each of Finlay's Departments offers a broad selection of necklaces,
earrings, bracelets, rings and watches. Other than watches, substantially all of
the fine jewelry items sold by Finlay are made from precious metals and many
also contain diamonds or colored gemstones. Finlay also provides jewelry and
watch repair services. Finlay does not carry costume or gold-filled jewelry.
Specific brand identification is generally not important within the fine jewelry
business, except for watches and designer jewelry. With respect to watches,
Finlay emphasizes brand name vendors, including Citizen, Bulova, Movado and
Seiko. Many of Finlay's lease agreements with host store groups restrict Finlay
from selling certain types of merchandise or, in some cases, selling particular
merchandise below certain price points.

   The following table sets forth the sales and percentage of sales by category
of merchandise for 2002, 2001 and 2000:

<TABLE>
<CAPTION>

                                                             FISCAL YEAR ENDED
                              ----------------------------------------------------------------------------------------
                                    FEB. 1, 2003                  FEB. 2, 2002                   FEB. 3, 2001
                              --------------------------    --------------------------    ----------------------------
                                                % OF                         % OF                            % OF
                                 SALES          SALES         SALES          SALES          SALES            SALES
                              -----------     ----------    ----------     -----------    -----------     ------------
                                                               (DOLLARS IN MILLIONS)
<S>                          <C>               <C>          <C>              <C>          <C>               <C>
Diamonds..................    $   263.8          28.3%      $   264.0          27.7%      $   267.7          26.7%
Gold......................        214.5          23.1           216.1          22.7           222.3          22.2
Gemstones.................        192.9          20.7           201.7          21.2           209.5          21.0
Watches...................        145.8          15.7           152.2          16.0           167.9          16.8
Other (1).................        113.7          12.2           118.8          12.4           132.7          13.3
                              -----------     ----------    ----------     -----------    -----------     ------------
Total Sales...............    $   930.7         100.0%      $   952.8         100.0%       $1,000.1         100.0%
                              ===========     ==========    ==========     ===========    ===========     ============
</TABLE>

---------------
(1)  Includes special promotional items, remounts, estate jewelry, pearls,
     beads, cubic zirconia, sterling silver and men's jewelry, as well as repair
     services and accommodation sales to Finlay employees.


     See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

     Finlay sells its merchandise at prices generally ranging from $50 to
$1,000. In 2002, the average price of items sold by Finlay was approximately
$186 per item. An average Department has over 5,000 items in stock. Consistent
with fine jewelry retailing in general, a substantial portion of Finlay's sales
are made at prices discounted from listed retail prices. Finlay's advertising
and promotional planning are closely

                                       9
<PAGE>


coordinated with its pricing strategy. Publicized sales events are an important
part of Finlay's marketing efforts. A substantial portion of Finlay's sales
occur during such promotional events. The amount of time during which
merchandise may be offered at discount prices is limited by applicable laws and
regulations. See "Legal Proceedings".


PURCHASING AND INVENTORY

     GENERAL. A key element of Finlay's strategy has been to lower the working
capital investment required for operating its existing Departments and opening
new Departments. In recent years, on average, approximately 50% of Finlay's
merchandise has been obtained on consignment and certain additional inventory
has been purchased with extended payment terms. In 2002, Finlay's net monthly
investment in inventory (i.e., the total cost of inventory owned and paid for)
averaged 33% of the total cost of its on-hand merchandise. Finlay is generally
granted exchange privileges which permit Finlay to return or exchange unsold
merchandise for new products at any time. In addition, Finlay structures its
relationships with vendors to encourage their participation in and
responsibility for merchandise management. By making the vendor a participant in
Finlay's merchandising strategy, Finlay has created opportunities for the vendor
to assist in identifying fashion trends, thereby improving inventory turnover
and profitability. As a result, Finlay's direct capital investment in inventory
has been reduced to levels which it believes are low for the retail jewelry
industry. In addition, Finlay's inventory exposure to changing fashion trends is
reduced because, in general, unsold consignment merchandise can be returned to
the vendor.

     Management believes the willingness of vendors to participate in the
inventory management process is due, in part, to the large volume of merchandise
which Finlay sells in its Departments and the desire of vendors to take
advantage of Finlay's nationwide distribution network. By offering their
merchandise through Finlay's Departments, vendors are able to reach a broad
spectrum of the marketplace in coordination with national or regional
advertising campaigns conducted by the vendors or their service organizations.

     In 2002, merchandise obtained by Finlay from its 40 largest vendors (out of
a total of approximately 500 vendors) generated approximately 79% of sales, and
merchandise obtained from Finlay's largest vendor generated approximately 10% of
sales. Finlay does not believe the loss of any one of its vendors would have a
material adverse effect on its business.

     GOLD CONSIGNMENT AGREEMENT. Finlay Jewelry is party to an amended and
restated gold consignment agreement (as amended, the "Gold Consignment
Agreement"), which enables Finlay Jewelry to receive consignment merchandise by
providing gold, or otherwise making payment, to certain vendors. While the
merchandise involved remains consigned, title to the gold content of the
merchandise transfers from the vendors to the gold consignor. Effective
September 30, 2002, Finlay Jewelry amended the Gold Consignment Agreement to
extend the term to July 31, 2005, and to permit Finlay Jewelry to obtain up to
the lesser of (i) 165,000 fine troy ounces or (ii) $50.0 million worth of gold,
subject to a formula as prescribed by the Gold Consignment Agreement. At
February 1, 2003, amounts outstanding under the Gold Consignment Agreement
totaled 134,785 fine troy ounces, valued at approximately $49.5 million. The
average amount outstanding under the Gold Consignment Agreement was $39.1
million for the fiscal year ended February 1, 2003. In the event this
arrangement is terminated, Finlay Jewelry will be required to return or
repurchase the outstanding gold at the prevailing gold rate in effect on that
date.

     Under the Gold Consignment Agreement, Finlay Jewelry is required to pay a
daily consignment fee on the dollar equivalent of the fine gold value of the
ounces of gold consigned thereunder. The daily consignment fee is based on a
floating rate which, as of February 1, 2003, was 2.8% per annum. In conjunction
with the Gold Consignment Agreement, Finlay granted to the gold consignor a
first priority perfected lien on, and a security interest in, specified gold
jewelry of participating vendors approved under the Gold Consignment Agreement
and a lien on proceeds and products of such jewelry, subject to the terms of an
intercreditor agreement between the gold consignor and the Revolving Credit
Agreement lenders.

                                       10
<PAGE>


OPERATIONS

     GENERAL. Most of Finlay's Departments have between 50 and 150 linear feet
of display cases (with an average of approximately 72 linear feet) generally
located in high traffic areas on the main floor of the host stores. Each
Department is supervised by a manager whose primary duties include customer
sales and service, scheduling and training of personnel, maintaining security
controls and merchandise presentation. Most of the Departments utilize up to 260
staff hours per week on a permanent basis, depending on the Department's sales
volume, and employ additional sales staff during the peak year-end holiday
season. Each Department is open for business during the same hours as its host
store. Subject to the terms of the applicable host store group lease agreement,
Finlay is generally responsible for its own operating decisions within each of
its Department operations, including the hiring and compensation of sales staff.
See "--Store Relationships--Terms of Lease Agreements".

     To parallel host store operations, Finlay establishes separate group
service organizations responsible for managing Departments operated for each
host store. Staffing for each group organization varies with the number of
Departments in each group. Typically, Finlay services each host store group with
a group manager, an assistant group manager, one or more group buyers, one or
more regional supervisors who oversee the individual Department managers and a
number of clerical employees. Each group manager reports to a regional vice
president, who is responsible for the supervision of up to six host store
groups. In its continued efforts to improve comparable Department sales through
improved operating efficiency, Finlay has taken steps to minimize administrative
tasks at the Department level, to improve customer service and, as a result,
sales.

     Finlay had average sales per linear foot of approximately $12,600 in 2002,
$12,700 in 2001 and $13,600 in 2000. Finlay determines average sales per linear
foot by dividing its sales by the aggregate estimated measurements of the outer
perimeters of the display cases of Finlay's Departments. Finlay had average
sales per Department of approximately $923,000, $925,000 and $981,000 in 2002,
2001 and 2000, respectively.

     MANAGEMENT INFORMATION AND INVENTORY CONTROL SYSTEMS. Finlay and its
vendors use Finlay's management information systems to monitor sales, gross
margin and inventory performance by location, merchandise category, style number
and vendor. Using this information, Finlay is able to monitor merchandise trends
and variances in performance and improve the efficiency of its inventory
management. Finlay also measures the productivity of its sales force by
maintaining current statistics for each employee such as sales per hour,
transactions per hour and transaction size. In March 2002, Finlay implemented a
new merchandising and inventory control system and a point-of-sale system for
its Departments. These systems will serve to support future growth of Finlay as
well as provide improved analysis and reporting capabilities to facilitate
merchandising solutions. Additionally, these systems will provide the foundation
for future productivity and expense control initiatives.

     PERSONNEL AND TRAINING. Finlay considers its employees an important
component of its operations and devotes substantial resources to training and
improving the quality of sales and management personnel. Finlay seeks to
motivate its employees by linking a substantial percentage of their compensation
to performance standards. In most cases, individual sales personnel are
compensated on an hourly basis and paid a commission on sales. Department
managers are generally compensated on the basis of a salary plus a percentage of
their Department's sales. Group managers and regional vice presidents are
eligible to earn bonuses of up to 50% of their base salaries upon the
achievement of specified goals.

     As of the end of 2002, Finlay employed approximately 6,100 persons of which
approximately 95% were regional and local sales and supervisory personnel and
the balance were employed in administrative or executive capacities. Of Finlay's
6,100 employees, approximately 3,000 were part-time employees, working less than
32 hours per week. Finlay's labor requirements fluctuate because of the seasonal
nature of Finlay's business. See "--Seasonality". Management believes that its
relations with its employees are good. Less than 1% of Finlay's employees are
unionized.

                                       11
<PAGE>


     ADVERTISING. Finlay promotes its products through four-color direct mail
catalogs, using targeted mailing lists, and newspaper advertising of the host
store groups. Finlay maintains an in-house advertising staff responsible for
preparing a majority of Finlay's advertisements and for coordinating the
finished advertisements with the promotional activities of the host stores.
Finlay's gross advertising expenditures over the past five fiscal years have
consistently been approximately 6% of sales, a level which is consistent with
the jewelry industry's reliance on promotional efforts to generate sales. The
majority of Finlay's lease agreements with host store groups require Finlay to
expend certain specified minimum percentages of the respective Department's
annual sales on advertising and promotional activities.

     INVENTORY LOSS PREVENTION AND INSURANCE. Finlay undertakes substantial
efforts to safeguard its merchandise from loss or theft, including the
installation of safes at each location and the taking of a daily diamond
inventory count. During 2002, inventory shrinkage amounted to approximately 0.7%
of sales. Finlay maintains insurance covering the risk of loss of merchandise in
transit or on Finlay's premises (whether owned or on consignment) in amounts
that management believes are reasonable and adequate for the types and amounts
of merchandise carried by Finlay.

     GOLD HEDGING. The cost to Finlay of gold merchandise sold on consignment in
some cases is not fixed until the sale is reported to the vendor or the gold
consignor in the case of merchandise sold pursuant to the Gold Consignment
Agreement. In such cases, the cost of merchandise varies with the price of gold
and Finlay is exposed to the risk of fluctuations in the price of gold between
the time Finlay establishes the advertised or other retail price of a particular
item of merchandise and the date on which the sale of the item is reported to
the vendor or the gold consignor. In order to hedge against this risk and to
enable Finlay to determine the cost of such goods prior to their sale, Finlay
may elect to fix the price of gold prior to the sale of such merchandise.
Accordingly, Finlay, at times, enters into futures contracts, such as forwards,
based upon the anticipated sales of gold product in order to hedge against the
risk arising from its payment arrangements. The value of gold hedged under such
contracts represented approximately 6.0% of Finlay Jewelry's cost of goods sold
in 2002. Under such contracts, Finlay obtains the right to purchase a fixed
number of fine troy ounces of gold at a specified price per ounce for a
specified period. Such contracts typically have durations ranging from one to
nine months and are generally priced at the spot gold price plus an amount based
on prevailing interest rates plus customary transactions costs. When sales of
such merchandise are reported to the consignment vendors and the cost of such
merchandise becomes fixed, Finlay sells its related hedge position. At February
1, 2003, Finlay Jewelry had two open positions in futures contracts for gold
totaling 4,000 fine troy ounces, valued at $1.4 million, which expire during
2003. The fair market value of gold under such contracts was $1.5 million at
February 1, 2003.

     Finlay manages the purchase of futures contracts by estimating and
monitoring the quantity of gold that it anticipates it will require in
connection with its anticipated level of sales of the type described above.
Finlay's gold hedging transactions are entered into by Finlay in the ordinary
course of its business. Finlay's gold hedging strategies are determined and
monitored on a regular basis by Finlay's senior management and its Board of
Directors.


COMPETITION

     Finlay faces competition for retail jewelry sales from national and
regional jewelry chains, other department stores, local independently owned
jewelry stores and chains, specialty stores, mass merchandisers, catalog
showrooms, discounters, direct mail suppliers, televised home shopping and the
internet. Management believes that competition in the retail jewelry industry is
based primarily on the price, quality, fashion appeal and perceived value of the
product offered and on the reputation, integrity and service of the retailer.
See "--Store Relationships--Terms of Lease Agreements" with respect to certain
limitations on Finlay's ability to compete.

                                       12
<PAGE>


SEASONALITY

     The retail jewelry business is highly seasonal. See "Selected Consolidated
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations-- Seasonality".


ITEM 2. PROPERTIES
        ----------

     The only real estate owned by Finlay is the central distribution facility,
totaling 106,200 square feet at 205 Edison Avenue, Orange, Connecticut. Finlay
leases approximately 18,400 square feet at 521 Fifth Avenue, New York, New York,
and 49,100 square feet at 529 Fifth Avenue, New York, New York for its
executive, accounting, advertising, the majority of its data processing
operations and other administrative functions. The leases for such space expire
September 30, 2008. Generally, as part of Finlay's lease arrangements, host
stores provide office space to Finlay's host store group management personnel
free of charge.


ITEM 3. LEGAL PROCEEDINGS
        -----------------

      From time to time, Finlay is involved in litigation relating to claims
arising out of its operations in the normal course of business. As of April 29,
2003, Finlay is not a party to any legal proceedings that, individually or in
the aggregate, are reasonably expected to have a material adverse effect on
Finlay's business, results of operations, financial condition or cash flows.
However, the results of these matters cannot be predicted with certainty, and an
unfavorable resolution of one or more of these matters could have a material
adverse effect on Finlay's business, results of operations, financial condition
or cash flows.

     Commonly in the retail jewelry industry, a substantial amount of
merchandise is sold at a discount to the "regular" or "original" price. Finlay's
experience is consistent with this practice. See "Business-- Products and
Pricing". A number of states in which Finlay operates have regulations which
require retailers who offer merchandise at discounted prices to offer the
merchandise at the "regular" or "original" prices for stated periods of time.
Management believes it is in substantial compliance with all applicable legal
requirements with respect to such practices.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
        ---------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of 2002.

                                       13
<PAGE>





                                     PART II
                                     -------

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
        -----------------------------------------------------------------
        MATTERS
        -------

     Finlay Jewelry is a wholly owned subsidiary of the Holding Company.
Accordingly, there is no established public trading market for Finlay Jewelry's
common stock.

     During 2002, cash dividends of $15.7 million were distributed by Finlay
Jewelry to the Holding Company. The distributions are generally utilized to pay
interest on the Holding Company's $75.0 million aggregate principal amount of 9%
Senior Debentures due May 1, 2008 (the "Senior Debentures") and certain expenses
of the Holding Company, such as legal, accounting and directors' fees and to
purchase the Holding Company's common stock, par value $.01 per share ("Common
Stock"), under its stock repurchase program. Certain restrictive covenants in
the indenture relating to Finlay Jewelry's $150.0 million aggregate principal
amount of 83/8% Senior Notes due May 1, 2008 (the "Senior Notes") (the "Senior
Note Indenture") and the indenture relating to the Senior Debentures (the
"Senior Debenture Indenture", and collectively with the Senior Note Indenture,
the "Senior Indentures"), the Revolving Credit Agreement and the Gold
Consignment Agreement impose limitations on the payment of dividends by Finlay
Jewelry. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

     Information regarding the Holding Company's equity compensation plans is
set forth in Item 12 of Part III of this Form 10-K, which information is
incorporated herein by reference.

     There was one record holder of Finlay Jewelry's common stock at April 29,
2003.

                                       14
<PAGE>


ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
        ------------------------------------

     The selected consolidated financial information below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and Notes
thereto. See "Index to Consolidated Financial Statements". The income statement
and balance sheet data for each of the years ended February 1, 2003, February 2,
2002, February 3, 2001, January 29, 2000 and January 30, 1999 have been derived
from Finlay Jewelry's audited Consolidated Financial Statements.

<TABLE>
<CAPTION>

                                                                                  FISCAL YEAR ENDED (1)
                                                        -------------------------------------------------------------------------
                                                          FEB. 1,        FEB. 2,          FEB. 3,        JAN. 29,        JAN. 30,
                                                           2003           2002            2001            2000            1999
                                                        ----------     ----------       -----------    ----------       ---------
                                                                                 (DOLLARS IN THOUSANDS)
<S>                                                     <C>            <C>              <C>           <C>               <C>
STATEMENT OF OPERATIONS DATA:
 Sales..........................................        $ 930,709      $ 952,789         $1,000,120     $ 912,978       $ 863,428
 Cost of sales..................................          450,532        479,255            496,291       449,912         421,450
 Cost of sales - Sonab inventory write-down (2).             -              -                 -             7,839            -
                                                        ----------    ----------         ----------     ----------      ---------
 Gross margin (3)...............................          480,177        473,534            503,829       455,227         441,978
 Selling, general and administrative expenses...          398,578        393,457            409,019       378,112         364,002
 (Credit) charges associated with the
    sale and closure of Sonab (2)...............           (1,432)          -                 -            20,792            -
 Depreciation and amortization..................           17,566         20,089             17,549        16,895          15,672
                                                        ----------    ----------         ----------     ----------      ---------
 Income from operations.........................           65,465         59,988             77,261        39,428          62,304
 Interest expense, net (4)......................           17,927         19,989             23,117        22,565          25,029
                                                        ----------    ----------         ----------     ----------      ---------
 Income before income taxes, cumulative effect
   of accounting change and extraordinary
   charges......................................           47,538         39,999             54,144        16,863          37,275
 Provision for income taxes.....................           18,510         16,672             22,715         7,801          15,323
                                                        ----------    ----------         ----------     ----------      ---------
  Income before cumulative effect of accounting
   change and extraordinary charges.............           29,028         23,327             31,429         9,062          21,952
 Cumulative effect of accounting change, net (5)           17,209           -                 -              -               -
 Extraordinary charges from early extinguishment
   of debt, net (6).............................             -              -                 -              -              4,755
                                                        ----------    ----------         ----------     ----------      ---------
 Net income.....................................        $  11,819      $  23,327         $   31,429     $   9,062       $  17,197
                                                        ==========    ==========         ==========     ==========      =========

OPERATING AND FINANCIAL DATA:
 Operations (7):
   Number of Departments (end of year) (7):
     Consolidated...............................            1,011          1,006              1,053           987           1,109
     Domestic...................................            1,011          1,006              1,053           987             959
   Percentage increase (decrease) in sales (8)..             (2.3)%         (4.7)%              9.5%          5.7%           12.2%
   Percentage increase (decrease) in comparable
     Department sales (7)(10):
     Consolidated...............................              0.1%          (3.0)%              2.1%          6.8%            3.9%
     Domestic...................................              0.1%          (3.0)%              2.1%          8.1%            5.4%
   Average domestic sales per Department (10)...        $     923      $     925          $     981      $    911       $     857
   EBITDA (11)..................................           83,031         80,077             94,810        56,323          77,976
   Capital expenditures.........................           12,489         13,850             18,118        14,972          14,874

CASH FLOWS PROVIDED FROM (USED IN):
   Operating activities.........................        $  52,540      $  42,636          $  34,455      $ 46,448       $ (13,018)
   Investing activities.........................          (15,750)       (17,432)           (30,403)      (21,054)        (23,134)
   Financing activities.........................          (17,527)        (7,231)            (7,640)       (7,159)         40,067

BALANCE SHEET DATA-END OF PERIOD:
   Working capital..............................        $ 173,960      $ 173,334          $ 152,003      $132,696       $ 126,723
   Total assets.................................          578,575        583,422            602,254       554,994         541,403
   Short-term debt, including current portion of
     long-term debt.............................             -              -                -                -              -
   Long-term debt...............................          150,000        150,000            150,000       150,000         150,000
   Total stockholder's equity...................          187,816        193,596            179,423       157,026         152,083
</TABLE>

                                       15
<PAGE>


-----------------
(1)  Each of the fiscal years for which information is presented includes 52
     weeks except 2000, which includes 53 weeks.
(2)  Included in 1999 are charges associated with the sale and closure of Sonab
     totaling $28.6 million. Included in cost of sales is $7.8 million for the
     write-down of inventory with the balance of $20.8 million recorded as an
     operating expense. Included in 2002 is a $1.4 million credit which
     represents a revision of the Company's estimate of closure expenses to
     reflect its remaining liability associated with the closure of Sonab. Refer
     to Note 13 of Notes to Consolidated Financial Statements.
(3)  Finlay utilizes the LIFO method of accounting for inventories. If Finlay
     had valued inventories using the first-in, first-out inventory valuation
     method, the gross margin would have increased (decreased) as follows: $2.3
     million, $3.8 million, $1.8 million, $(1.1) million and $(1.0) million for
     2002, 2001, 2000, 1999 and 1998, respectively.
(4)  As a result of certain call requirements associated with the previously
     outstanding notes, Finlay had outstanding both the new debt and the old
     debt for a period of twenty-five days in 1998. The net effect of the above,
     offset by reduced interest expense on the borrowings under the Revolving
     Credit Agreement and interest income on excess cash balances, was $0.4
     million.
(5)  In accordance with the provisions of the Financial Accounting Standards
     Board's ("FASB") Emerging Issues Task Force ("EITF") Issue No. 02-16,
     "Accounting by a Customer (Including a Reseller) for Cash Consideration
     Received from a Vendor" ("EITF 02-16"), Finlay Jewelry recorded a
     cumulative effect of accounting change as of February 3, 2002, the date of
     adoption, that decreased net income for 2002 by $17.2 million, net of tax.
     The application of EITF 02-16 changes Finlay Jewelry's accounting treatment
     for the recognition of vendor allowances. In 2002, $20.0 million of vendor
     allowances has been reflected as a reduction to cost of sales. In prior
     years, these allowances were recorded as a reduction to gross advertising
     expenses and thus decreased selling, general and administrative expenses
     ("SG&A"). Refer to Note 2 of Notes to Consolidated Financial Statements.
(6)  The extraordinary charges of $8.0 million include $5.4 million for
     redemption premiums on the previously outstanding notes and $2.0 million to
     write off deferred financing costs associated with the previously
     outstanding notes. The income tax benefit on the extraordinary charges
     totaled $3.2 million.
(7)  Includes Departments and stand-alone locations.
(8)  Excluding sales for the 53rd week of 2000, the percentage increase in sales
     for 2000 was 8.8% and the percentage decrease in sales for 2001 was 4.1%.
(9)  Comparable Department sales are calculated by comparing the sales from
     Departments open for the same months in the comparable periods.
(10) Average domestic sales per Department is determined by dividing domestic
     sales by the average of the number of domestic Departments open at the
     beginning and at the end of each period.
(11) EBITDA, a non-GAAP financial measure, represents income from operations
     before depreciation and amortization expenses and is calculated as follows:

<TABLE>
<CAPTION>


                                                                          FISCAL YEAR ENDED
                                              -------------------------------------------------------------------------

                                                FEB. 1,        FEB. 2,         FEB. 3,        JAN. 29,         JAN. 30,
                                                 2003           2002            2001            2000             1999
                                              ----------      ---------      ---------      ---------         --------
                                                                       (DOLLARS IN THOUSANDS)
<S>                                           <C>            <C>           <C>             <C>              <C>
     Income from operations..............     $   65,465      $  59,988     $   77,261        $  39,428      $  62,304
     Add: Depreciation and amortization..         17,566         20,089         17,549           16,895         15,672
                                              ----------      ---------     ----------        ---------      ---------
     EBITDA..............................     $   83,031      $  80,077     $   94,810        $  56,323      $  77,976
                                              ==========      =========     ==========        =========      =========
</TABLE>


     For 1999 and 2002, consolidated EBITDA includes the charges totaling $28.6
     million and the credit totaling $1.4 million, respectively, associated with
     the sale and closure of Sonab. Finlay Jewelry believes EBITDA provides
     additional information for determining its ability to meet future debt
     service requirements. EBITDA should not be construed as a substitute for
     income from operations, net income or cash flow from operating activities
     (all as determined in accordance with generally accepted accounting
     principles) for the purpose of analyzing Finlay's operating performance,
     financial position and cash flows as EBITDA is not defined by generally
     accepted accounting principles. Finlay has presented EBITDA, however,
     because it is commonly used by certain investors to analyze and compare
     companies on the basis of operating performance and to determine a
     company's ability to service and/or incur debt. Finlay's computation of
     EBITDA may not be comparable to similar titled measures of other companies.

                                       16
<PAGE>




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        -----------------------------------------------------------------------
        OF OPERATIONS
        -------------

     The following should be read in conjunction with "Selected Consolidated
Financial Information" and the Consolidated Financial Statements and Notes
thereto included elsewhere in this Form 10-K.

     Certain statements under this caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward-looking
statements" under the Securities Act of 1933, as amended (the "Securities Act"),
and the Exchange Act. See "Special Note Regarding Forward-Looking Statements".


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

      Certain of Finlay Jewelry's significant accounting policies are described
in Note 2 of Notes to the Consolidated Financial Statements. Finlay believes
that the following discussion addresses the critical accounting policies, which
are those that are most important to the portrayal of Finlay Jewelry's financial
condition and results of operations and require management's most difficult,
subjective or complex judgments. Finlay Jewelry is not aware of any likely
events or circumstances which would result in different amounts being reported
that would materially affect its financial condition or results of operations.


     MERCHANDISE INVENTORIES

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


      DERIVATIVE INSTRUMENTS

     Finlay is exposed to market risk related to changes in the price of gold
and at times enters into futures contracts, such as forwards, to hedge against
the risk of gold price fluctuations. In 2001, Finlay Jewelry adopted Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which requires that all derivative
instruments be recorded on the balance sheet as either an asset or a liability
measured at its fair value. Accounting for derivative instruments under this
pronouncement did not have a material impact on Finlay Jewelry's financial
condition, results of operations and cash flows for 2002 and 2001.


       VENDOR ALLOWANCES

     Finlay Jewelry receives allowances from its vendors through a variety of
programs and arrangements, including cooperative advertising. The allowances are
generally intended to offset Finlay Jewelry's costs of promoting, advertising
and selling the vendors' products in its Departments. Vendor allowances are
recognized as a reduction of cost of sales or SG&A when the purpose for which
the vendor funds were intended to be used has been fulfilled. Accordingly, a
reduction or increase in vendor allowances has an inverse impact on cost of
sales and/or SG&A.

                                       17
<PAGE>


     In March 2003, the EITF finalized Issue No. 02-16, "Accounting by a
Customer (Including a Reseller) for Cash Consideration Received from a Vendor".
EITF 02-16 addresses the accounting treatment for vendor allowances and provides
that cash consideration received from a vendor should be presumed to be a
reduction of the prices of the vendors' product and should therefore be shown as
a reduction in the purchase price of the merchandise. Further, these allowances
should be recognized as a reduction in cost of sales when the related product is
sold. To the extent that the cash consideration represents a reimbursement of a
specific, incremental and identifiable cost, then those vendor allowances should
be used to offset such costs.

         In accordance with EITF 02-16, Finlay Jewelry recorded a cumulative
effect of accounting change as of February 3, 2002, the date of adoption, that
decreased net income for 2002 by $17.2 million, net of tax. As of February 3,
2002, deferred vendor allowances totaled (i) $17,129,000 for owned merchandise,
and (ii) $12,306,000 for merchandise received on consignment. As of February 1,
2003, Finlay Jewelry's fiscal year end, deferred vendor allowances totaled (i)
$18,452,000 for owned merchandise, which is included as an offset to merchandise
inventories on the 2002 Consolidated Balance Sheet, and (ii) $10,493,000 for
merchandise received on consignment, which is included as deferred income on the
2002 Consolidated Balance Sheet. In 2002, this change resulted in the
reclassification of vendor allowances of $20.0 million, which had previously
been accounted for as a reduction to SG&A, to now reduce cost of sales and
consequently, increase gross margin. Finlay Jewelry's 2002 unaudited quarterly
financial data has been revised to reflect this change in accounting method. See
Note 10 of Notes to Consolidated Financial Statements of Finlay Jewelry. The
adoption of EITF 02-16 is not expected to have a material impact on the
financial position or results of operations of Finlay Jewelry in 2003.

     During 2001 and 2000, Finlay Jewelry recorded its vendor allowances as an
offset to gross advertising expenses, which is included in SG&A on the
Consolidated Statements of Operations. For 2001 and 2000, the unaudited pro
forma impact of the adoption of EITF 02-16, as if it had occurred prior to 2000,
was to decrease cost of sales and increase SG&A by $20,374,000 and $23,665,000,
respectively. For both years, net income would not have been materially
different.


         REVENUE RECOGNITION

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


        COVENANT REQUIREMENTS

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

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

       The Senior Note Indenture contains restrictions relating to, among other
things, the payment of dividends, the making of certain investments or other
restricted payments, the incurrence of additional

                                       18
<PAGE>



indebtedness, the creation of certain liens, entering into transactions with
affiliates, the disposition of certain assets and engaging in mergers and
consolidations.

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


EFFECT OF NEW ACCOUNTING STANDARDS

     On February 3, 2002 Finlay Jewelry adopted SFAS No. 142, "Goodwill and
Other Intangible Assets". SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives are no longer to be amortized but tested for
impairment on an annual basis. Finlay Jewelry has determined that there was no
impairment of goodwill as of February 3, 2002 since the carrying value of Finlay
Jewelry's reporting unit did not exceed its fair value. In making this
assessment, management relied on a number of factors including 2002's operating
results, business plans, economic projections, anticipated future cash flows and
marketplace data. A change in these underlying assumptions may cause a change in
the results of the tests and, as such, could cause fair value to be less than
the carrying value. In such event, Finlay would then be required to record a
charge, which would impact earnings. Finlay will continue to review the carrying
value of goodwill for impairment on an annual basis, or more frequently if
circumstances indicate impairment may have occurred. Finlay Jewelry's goodwill
amortization in 2001 and 2000 totaled $3.7 million in each year.

      In October 2001, the FASB issued SFAS No. 144, "Accounting for Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. This
statement extends the reporting requirements to include reporting separately as
discontinued operations components of an entity that have either been disposed
of or classified as held-for-sale. Finlay Jewelry adopted the provisions of SFAS
No. 144 in 2002 and the adoption did not have a material impact on Finlay
Jewelry's financial position or results of operations.


ACCOUNTING STANDARDS NOT YET ADOPTED

     In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement
No. 4, 44, and 64, Amendment of FASB No. 13, and Technical Corrections", which
amends certain existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. Additionally, the statement provides that gains and losses from debt
extinguishment are not automatically shown as an extraordinary item on a
company's statement of operations. The provisions of SFAS No. 145 are effective
for fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 is
not expected to have a material impact on the financial position or results of
operations of Finlay Jewelry.

                                       19
<PAGE>



RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                                  FISCAL YEAR ENDED
                                                                 ------------------------------------------------
                                                                   FEB. 1,           FEB. 2,           FEB. 3,
                                                                    2003               2002             2001
                                                                 ------------      -------------     ------------
<S>                                                              <C>               <C>               <C>
   STATEMENT OF OPERATIONS DATA:
   Sales....................................................         100.0%            100.0%            100.0%
   Cost of sales............................................          48.4              50.3              49.6
                                                                 ------------      -------------     ------------
      Gross margin...........................................         51.6              49.7              50.4
   Selling, general and administrative expenses.............          42.8              41.3              40.9
   Credit associated with the sale and
      closure of Sonab......................................          (0.2)              -                 -
   Depreciation and amortization............................           1.9               2.1               1.8
                                                                 ------------      -------------     ------------
   Income from operations...................................           7.1               6.3               7.7
   Interest expense, net....................................           1.9               2.1               2.3
                                                                 ------------      -------------     ------------
   Income before income taxes and cumulative effect
      of accounting change..................................           5.2               4.2               5.4
   Provision for income taxes...............................           2.0               1.7               2.3
                                                                 ------------      -------------     ------------
   Income before cumulative effect of accounting
      change................................................           3.2               2.5               3.1
   Cumulative effect of accounting change, net (1)..........           1.8               -                 -
                                                                 ------------      -------------     ------------
   Net income...............................................           1.4%              2.5%              3.1%
                                                                 ============      =============     ============
</TABLE>


---------------
(1)  See Note 5 to "Selected Consolidated Financial Data".


2002 COMPARED WITH 2001

     SALES. Sales decreased $22.1 million, or 2.3%, in 2002 compared to 2001.
Comparable Department sales increased 0.1% in 2002, which management attributes
to a continued challenging retail environment. Comparable Department sales
includes sales from Departments open for the same month during comparable
periods. Total sales were negatively impacted by approximately $31.0 million, or
3.3%, as a result of the 2001 closing of three host store groups, offset by the
net effect of new Department openings and closings.

     Finlay's merchandising and marketing strategy includes the following
initiatives: (i) emphasizing its "Key Item" and "Best Value" merchandising
programs, which provide a targeted assortment of items at competitive prices;
(ii) increasing focus on holiday and event-driven promotions as well as host
store marketing programs; and (iii) positioning Finlay's Departments as a
"destination location" for fine jewelry.

     During 2002, Finlay opened 21 Departments within existing store groups,
which included 11 Departments in May. During this period, Finlay closed 16
Departments including five in May and three in Federated.

     GROSS MARGIN. Gross margin increased by $6.6 million in 2002 compared to
2001 and, as a percentage of sales, gross margin increased by 1.9%, primarily
due to Finlay Jewelry's adoption of EITF 02-16. The application of EITF 02-16
changes Finlay Jewelry's accounting treatment for the recognition of vendor
allowances. In 2002, $20.0 million of vendor allowances has been reflected as a
reduction to cost of sales based on the sale of the related product. In prior
years, these allowances were recorded as a reduction to gross advertising
expenses and thus decreased SG&A.

                                       20
<PAGE>



     Excluding the adoption of EITF 02-16, gross margin decreased by $14.0
million in 2002 compared to 2001 and, as a percentage of sales, gross margin
decreased by 0.3%, primarily due to (i) management's continued efforts to
increase market penetration and market share through its pricing strategy and
(ii) the impact of higher gold prices. Offsetting these factors were favorable
physical inventory shortage results and a lower LIFO charge of $2.3 million in
2002 versus $3.8 million in 2001.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A totaled $398.6 million,
an increase of $5.1 million, or 1.3%, in 2002 compared to 2001, primarily due to
Finlay Jewelry's adoption of EITF 02-16 which, as discussed above, resulted in a
$20.0 million increase to SG&A. SG&A as a percentage of sales increased to 42.8%
in 2002 from 41.3% in 2001.

     Excluding the adoption of EITF 02-16, SG&A decreased by $14.9 million, or
3.8%, in 2002 compared to 2001 primarily due to payroll expense and lease fees
associated with the decrease in Finlay Jewelry's sales and reduced gross
advertising expenses. Additionally, Finlay Jewelry recorded a $1.8 million
reduction in employee medical benefits expense associated with favorable claims
experience subsequent to a change in medical insurance carriers. SG&A as a
percentage of sales, excluding the adoption of EITF 02-16, decreased to 40.7% in
2002 from 41.3% in 2001.

     CREDIT ASSOCIATED WITH THE SALE AND CLOSURE OF SONAB. In 2002, Finlay
Jewelry revised its 1999 estimate of closure expenses to reflect its remaining
liability associated with the closure of Sonab and, as a result, recorded a
credit of $1.4 million.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased by
$2.5 million in 2002 compared to 2001, reflecting the discontinuance of goodwill
amortization of $3.7 million and the effect of certain assets becoming fully
depreciated, offset by additional depreciation and amortization as a result of
capital expenditures and capitalized software costs for the most recent 12
months.

     INTEREST EXPENSE, NET. Interest expense decreased by $2.1 million
reflecting a lower weighted average interest rate (7.1% for 2002 compared to
7.4% for 2001) and a decrease in average borrowings ($211.2 million for 2002
compared to $230.8 million for 2001).

     PROVISION FOR INCOME TAXES. The effective tax rate, before the cumulative
effect of accounting change, decreased to 38.9% in 2002 from 41.7% in 2001,
primarily as a result of the cessation in 2002 of the amortization of
non-deductible goodwill.

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

     NET INCOME. Net income of $11.8 million for 2002 represents a decrease of
$11.5 million as compared to net income of $23.3 million in 2001 as a result of
the factors discussed above.


2001 COMPARED WITH 2000

     SALES. Sales decreased $47.3 million, or 4.7%, in 2001 compared to 2000.
Excluding sales for the 53rd week of 2000, sales decreased 4.1%. Comparable
Department sales decreased 3.0%. Management attributes this decrease in
comparable Department sales primarily to a challenging retail environment and
the extraordinary events of September 11, 2001 and its impact on the economy,
which resulted in reduced consumer discretionary spending. Total sales were
negatively impacted by $17.3 million as a result of the 2001 closing of two host
store groups, offset by the benefit of a full year of sales from the former J.B.
Rudolph departments and the net effect of new Department openings and closings.

                                       21
<PAGE>


     During 2001, Finlay opened 33 Departments within existing store groups,
which included 22 Departments in May. During this period Finlay closed 80
Departments which were comprised of the following:

<TABLE>
<CAPTION>
                                          NUMBER OF
               STORE GROUP               DEPARTMENTS                                 REASON
    ---------------------------------    -------------     --------------------------------------------------------
<S>                                         <C>           <C>
    Stern's.........................           23          Store group was closed by Federated.
    Proffitt's......................           16          Closed smaller Departments and, at the end of 2001,
                                                           host store consolidated under one lessee.
    Liberty House...................           12          Federated's acquisition of Liberty House.
    Dillard's.......................            7          Closed smaller Departments.
    Other...........................           22          Department closings within existing store groups.
                                              ---
                                               80
                                              ===
</TABLE>


     GROSS MARGIN. Gross margin decreased by $30.3 million in 2001 compared to
2000 and, as a percentage of sales, gross margin decreased by 0.7%, primarily
due to (i) management's continued efforts to increase market penetration and
market share through its pricing strategy, (ii) a charge of $3.8 million in the
LIFO provision compared to the prior year's provision of $1.8 million and (iii)
a charge of $1.5 million for the markdown of aged inventory.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A totaled $393.5 million,
a decrease of $15.6 million, or 3.8%, in 2001 compared to 2000 due primarily to
payroll expense and lease fees associated with the decrease in Finlay Jewelry's
sales. SG&A as a percentage of sales increased to 41.3% in 2001 from 40.9% in
2000 as a result of the negative impact of payroll and other expenses as a
percentage of sales due to the lower sales volume.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$2.5 million in 2001 compared to 2000, reflecting $13.9 million in capital
expenditures and an increase in capitalized software costs for the most recent
12 months. Additionally, during 2001, Finlay began amortizing the capitalized
software for its new merchandising and point-of-sale systems. These costs were
offset by the effect of certain assets becoming fully depreciated.

     INTEREST EXPENSE, NET. Interest expense decreased by $3.1 million
reflecting a lower weighted average interest rate (7.4% for 2001 compared to
8.5% for 2000) and a decrease in average borrowings ($230.8 million for 2001
compared to $246.6 million for 2000).

     PROVISION FOR INCOME TAXES. The effective income tax rate for 2001 and 2000
was 40.5%.

     NET INCOME. Net income of $23.3 million for 2001 represents a decrease of
$8.1 million as compared to net income of $31.4 million in 2000 as a result of
the factors discussed above.


LIQUIDITY AND CAPITAL RESOURCES

     Finlay's primary capital requirements are for funding working capital for
new Departments and for working capital growth of existing Departments and, to a
lesser extent, capital expenditures for opening new Departments, renovating
existing Departments and information technology investments. For 2002 and 2001,
capital expenditures totaled $12.5 million and $13.9 million, respectively.
Total capital expenditures for 2003 are estimated to be approximately $12.0 to
$13.0 million. Although capital expenditures are limited by the terms of the
Revolving Credit Agreement, to date this limitation has not precluded Finlay
from satisfying its capital expenditure requirements.

     Finlay's operations substantially preclude customer receivables as Finlay's
lease agreements require host stores to remit sales proceeds for each month
(without regard to whether such sales were cash, store credit or national credit
card) to Finlay approximately three weeks after the end of such month. However,
Finlay cannot ensure the collection of sales proceeds from its host stores.
Additionally, on average,

                                       22
<PAGE>



approximately 50% of Finlay's merchandise has been carried on consignment.
Finlay Jewelry's working capital balance was $174.0 million at February 1, 2003,
an increase of $0.7 million from February 2, 2002. The increase resulted
primarily from the impact of 2002's net income (exclusive of depreciation and
amortization) offset by the adoption of EITF 02-16, capital expenditures,
additions to deferred charges and the payment of dividends to the Holding
Company.

     The seasonality of Finlay's business causes working capital requirements,
and therefore borrowings under the Revolving Credit Agreement, to reach their
highest level in the months of October, November and December in anticipation of
the year-end holiday season. Accordingly, Finlay experiences seasonal cash needs
as inventory levels peak. Additionally, substantially all of Finlay's lease
agreements provide for accelerated payments during the months of November and
December, which require the host store groups to remit to Finlay 75% of the
estimated months' sales prior to or shortly following the end of each such
month. These proceeds result in a significant increase in Finlay's cash, which
is used to reduce Finlay's borrowings under the Revolving Credit Agreement.
During 2002, by closely monitoring sales and the continued challenging retail
environment, Finlay reduced its inventory levels as compared to 2001. During
2002, the reduced inventory levels favorably impacted Finlay's outstanding
borrowings under the Revolving Credit Agreement.

     In January 2003, Finlay entered into the Revolving Credit Agreement, which
expires in January 2008. The Revolving Credit Agreement provides Finlay Jewelry
with a line of credit of up to $225.0 million to finance working capital needs.
Amounts outstanding under the Revolving Credit Agreement bear interest at a rate
equal to, at Finlay's option, (i) the prime rate plus a margin ranging from zero
to 1.0% or (ii) adjusted Eurodollar rate plus a margin ranging from 1.0% to
2.0%, in each case depending on the financial performance of Finlay.

     In each year, Finlay is required to reduce the outstanding revolving credit
balance and letter of credit balance under the Revolving Credit Agreement to
$50.0 million or less and $20.0 million or less, respectively, for a 30
consecutive day period (the "Balance Reduction Requirement"). Borrowings under
the Revolving Credit Agreement at February 1, 2003 and February 2, 2002 were
zero. The average amounts outstanding under the Revolving Credit Agreement for
2002 and 2001 were $61.2 million and $80.8 million, respectively. The maximum
amount outstanding for 2002 was $111.4 million, at which point the unused excess
availability was $106.4 million. At February 1, 2003, Finlay was in compliance
with all of its covenants under the Revolving Credit Agreement.

     Finlay's long-term needs for external financing will depend on its rate of
growth, the level of internally generated funds and the ability to continue
obtaining substantial amounts of merchandise on advantageous terms, including
consignment arrangements with its vendors. At both February 1, 2003 and February
2, 2002, $359.7 million of consignment merchandise from approximately 300
vendors was on hand. For 2002, Finlay had an average balance of consignment
merchandise of $360.5 million as compared to an average balance of $377.4
million in 2001. See "Business--Store Relationships" and "Business--Purchasing
and Inventory".

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

     Finlay may, at the discretion of management, purchase Senior Debentures
and/or Senior Notes from time to time in the open market. Additionally,
beginning on May 1, 2003, the Senior Debentures and Senior Notes will be
redeemable, in whole or in part, at the option of Finlay, at specified
redemption prices plus accrued and unpaid interest, if any, to the date of the
redemption. The extent and timing of any bond repurchases will depend upon
general business and market conditions, bond prices, availability

                                       23
<PAGE>


under the Revolving Credit Facility, compliance with certain restrictive
covenants and Finlay's cash position and requirements going forward.

     Effective September 30, 2002, Finlay Jewelry amended the Gold Consignment
Agreement to extend the term to July 31, 2005 and to permit Finlay to obtain up
to the lesser of (i) 165,000 fine troy ounces or (ii) $50.0 million worth of
gold, subject to a formula as prescribed by the Gold Consignment Agreement. At
February 1, 2003, amounts outstanding under the Gold Consignment Agreement
totaled 134,785 fine troy ounces, valued at approximately $49.5 million. The
average amount outstanding under the Gold Consignment Agreement was $39.1
million in 2002. In the event this agreement is terminated, Finlay Jewelry will
be required to return or repurchase the outstanding gold at the prevailing gold
rate in effect on that date. For financial statement purposes, the consigned
gold is not included in merchandise inventories on Finlay Jewelry's Consolidated
Balance Sheets and, therefore, no related liability has been recorded. At
February 1, 2003, Finlay Jewelry was in compliance with all of its covenants
under the Gold Consignment Agreement.

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

<TABLE>
<CAPTION>
                                                            PAYMENTS DUE BY PERIOD
                                  -------------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS              TOTAL       LESS THAN 1 YEAR    1 - 3 YEARS   4 - 5 YEARS     AFTER 5 YEARS
------------------------------    -----------    ----------------    -----------   -----------    ---------------
<S>                               <C>             <C>                <C>           <C>             <C>
 Senior Notes (due 2008) (1)...    $ 150,000        $   -            $   -          $   -            $ 150,000
 Operating leases (2)..........       11,011          1,974            3,925           3,834             1,278
                                   ---------        -------          -------        --------         ---------
 Total.........................    $ 161,011        $ 1,974          $ 3,925        $  3,834         $ 151,278
                                   =========        =======          =======        ========         =========
</TABLE>


-------------
(1)  The Holding Company has $75.0 million of Senior Debentures due 2008
     outstanding. Refer to Note 4 of Notes to the Consolidated Financial
     Statements.
(2)  Represents future minimum payments under noncancellable operating leases.


<TABLE>
<CAPTION>

                                                  AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
   OTHER COMMERCIAL                 ------------------------------------------------------------------------------
   COMMITMENTS                        TOTAL      LESS THAN 1 YEAR    1 - 3 YEARS     4 - 5 YEARS    AFTER 5 YEARS
-------------------------------     ----------   ----------------    -----------     -----------    --------------
<S>                                  <C>             <C>              <C>            <C>              <C>
Revolving Credit
    Agreement (due 2008) (1) ..      $  -            $   -            $    -           $   -             $  -
Gold Consignment
   Agreement (due 2005) (2)....       49,500           49,500              -               -                -
Letters of credit..............        7,250            7,000              -               -               250
                                    --------         --------         ----------       --------          ------
Total .........................     $ 56,750         $ 56,500         $    -           $   -             $ 250
                                    ========         ========         ==========       ========          ======
</TABLE>


-------------------
(1)  There were no borrowings under the Revolving Credit Agreement at February
     1, 2003. The average amount outstanding during 2002 was $61.2 million and
     the outstanding balance as of April 29, 2003 was $25.9 million.
(2)  Represents amount outstanding at February 1, 2003.

     Finlay believes that, based upon current operations, anticipated growth,
and continued availability under the Revolving Credit Agreement, Finlay Jewelry
will, for the foreseeable future, be able to meet its debt service and
anticipated working capital obligations, and to make distributions to the
Holding Company sufficient to permit the Holding Company to meet its debt
service obligations and to pay certain other expenses as they come due. No
assurances, however, can be given that Finlay Jewelry's current level of
operating results will continue or improve or that Finlay Jewelry's income from
operations will continue to be sufficient to permit Finlay Jewelry and the
Holding Company to meet their debt service and other obligations. Currently,
Finlay Jewelry's principal financing arrangements restrict annual

                                       24
<PAGE>



distributions from Finlay Jewelry to the Holding Company to 0.25% of Finlay
Jewelry's net sales for the preceding fiscal year and also allow distributions
to the Holding Company to enable it to make interest payments on the Senior
Debentures. Other dividends and distributions, including those required to fund
stock or bond repurchases, are subject to Finlay's satisfaction of certain
restrictive covenants. The amounts required to satisfy the aggregate of Finlay
Jewelry's interest expense totaled $16.8 million and $19.0 million for 2002 and
2001, respectively.

     Finlay has an employment agreement with one senior executive which provides
for a minimum salary level as well as incentive compensation based on meeting
specific financial goals. Such agreement has a remaining term of two years and
has a remaining aggregate minimum value of $1,975,000 as of February 1, 2003.

     In December 2000, the Holding Company announced that its Board of Directors
had approved a stock repurchase program to acquire up to $20 million of
outstanding Common Stock. The Holding Company may, at the discretion of
management, purchase its Common Stock, from time to time through September 29,
2003 under the stock repurchase program. The extent and timing of repurchases
will depend upon general business and market conditions, stock prices,
availability under the Revolving Credit Facility, compliance with certain
restrictive covenants and its cash position and requirements going forward. As
of February 1, 2003, the Holding Company repurchased 1,332,942 shares for $13.8
million.

     In March 2002, Finlay implemented a new merchandising and inventory control
system and a point-of-sale system for its Departments. These systems will serve
to support future growth of Finlay as well as provide improved analysis and
reporting capabilities and more timely sales and inventory information to
facilitate merchandising solutions. Additionally, these systems will provide the
foundation for future productivity and expense control initiatives. At February
1, 2003, a total of $22.1 million has been expended for software and
implementation costs and is included in Deferred charges and other assets.

     From time to time, Finlay enters into futures contracts, such as forwards,
based upon the anticipated sales of gold product in order to hedge against the
risk arising from its payment arrangements. At February 1, 2003, Finlay Jewelry
had two open positions in futures contracts for gold, which expire during 2003,
totaling 4,000 fine troy ounces, valued at $1.4 million. There can be no
assurance that these hedging techniques will be successful or that hedging
transactions will not adversely affect Finlay Jewelry's results of operations or
financial position.

     In February 2001, Federated announced its plans to close its Stern's
division in which Finlay operated 23 departments. Finlay closed the majority of
the Stern's departments during the second quarter of 2001. Subsequently,
Federated converted the majority of the Departments to a host store in which
Finlay does not operate. Finlay recorded a charge of approximately $1.0 million
related to the write-off of fixed assets and employee severance. During 2001,
Federated acquired the Liberty House department store chain and converted those
Departments to a host store in which Finlay does not operate. Finlay operated in
all twelve of the Liberty House department stores through mid-November 2001.
Finlay recorded a charge of approximately $0.2 million related to the write-off
of fixed assets and employee severance. During 2002, sales were reduced by
approximately $31.0 million compared to the prior year as a result of the
closings of Stern's, Liberty House and another smaller host store group.

      During 1998, Sonab, Finlay Jewelry's European leased jewelry department
subsidiary, began to experience lower sales trends due to the transition from a
promotional pricing strategy to an everyday low price strategy. This change was
made as a result of Sonab reassessing its pricing policy following certain local
French court decisions. The adverse impact of such change continued through
1999. As a result of the foregoing, on January 3, 2000, Sonab sold the majority
of its assets for approximately $9.9 million. After the sale, the buyer operated
more than 80 locations previously included in Sonab's 130-location base in
France. The remaining Departments were closed. All of Sonab's employees,
excluding those that were hired by the buyer, were involuntary terminated,
including sales associates, supervisors and corporate personnel. Finlay Jewelry
recorded a pre-tax charge in the fourth quarter of 1999 of $28.6 million. The
charge included the write down of inventory and fixed assets, employee payroll
and

                                       25
<PAGE>


severance costs, realization of foreign exchange losses and other close-down
costs. As of February 1, 2003, Finlay Jewelry's exit plan has been completed
with the exception of certain employee litigation and other legal matters.
During the fourth quarter of 2002, Finlay Jewelry revised its original estimate
of closure expenses to reflect its remaining liability, and as a result recorded
a credit of $1.4 million. To date, Finlay Jewelry has charged a total of $26.4
million against its revised estimate of $27.2 million. Finlay Jewelry does not
believe future operating results or liquidity will be materially impacted by any
remaining payments.


SEASONALITY

     Finlay's business is highly seasonal, with a significant portion of its
sales and income from operations generated during the fourth quarter of each
year, which includes the year-end holiday season. The fourth quarter accounted
for an average of approximately 41% of Finlay's sales and approximately 79% of
its income from operations for 2002, 2001 and 2000. Finlay has typically
experienced net losses in the first three quarters of its fiscal year. During
these periods, working capital requirements have been funded by borrowings under
the Revolving Credit Agreement. Accordingly, the results for any of the first
three quarters of any given fiscal year, taken individually or in the aggregate,
are not indicative of annual results. See Note 10 of Notes to Consolidated
Financial Statements of Finlay Jewelry.

     Finlay Jewelry's Sales and Income from operations for each quarter of 2002,
2001 and 2000 were as follows. For 2002, the quarterly financial data has been
revised to reflect Finlay Jewelry's retroactive adoption of EITF 02-16 to the
beginning of 2002.

<TABLE>
<CAPTION>

                                                                             FISCAL QUARTER
                                                    -----------------------------------------------------------------
                                                        FIRST             SECOND           THIRD            FOURTH
                                                    --------------     -------------    -------------     -----------
                                                                         (DOLLARS IN THOUSANDS)
                                                                               (UNAUDITED)
<S>                                                 <C>               <C>               <C>               <C>
  2002:
    Sales.......................................     $ 187,365           $ 187,130        $ 168,359        $ 387,855
    Income from operations......................         5,964               5,007              658           53,836
  2001:
    Sales.......................................       193,249             196,167          175,292          388,081
    Income from operations......................         4,381               5,751            1,753           48,103
  2000:
    Sales.......................................       178,614             211,229          189,728          420,549
    Income from operations......................         4,580              10,263            5,649           56,769
</TABLE>



INFLATION

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


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     This Form 10-K includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical information provided herein are
forward-looking statements and may contain information about financial results,
economic conditions, trends and known uncertainties. The forward-looking
statements contained herein are subject to certain risks and uncertainties that
could cause actual results, performances or achievements to differ materially
from those reflected in, or implied by, the forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed under "Management's Discussion and Analysis of Financial Condition and
Results of Operations", as well as trends in the general economy in the United
States, low or negative growth in the economy or in the financial markets which
reduce discretionary spending on goods perceived to be luxury items, attacks or
threats of attacks by terrorists or war which may negatively impact the economy
and/or the financial

                                       26
<PAGE>


markets and reduce discretionary spending on such goods, competition in the
retail jewelry business, the seasonality of the retail jewelry business, Finlay
Jewelry's ability to increase comparable department sales and to open new
departments, Finlay Jewelry's dependence on or loss of certain host store
relationships, particularly with respect to May and Federated, due to the
concentration of sales generated by such host stores, the impact of any host
store bankruptcy, the impact of declining mall traffic levels, the availability
to Finlay Jewelry of alternate sources of merchandise supply in the case of an
abrupt loss of any significant supplier, Finlay Jewelry's ability to continue to
obtain substantial amounts of merchandise on consignment, the impact of
fluctuations in gold and diamond prices, Finlay Jewelry's continuation of its
Gold Consignment Agreement, Finlay Jewelry's compliance with applicable
contractual covenants, the impact of future claims and legal actions arising in
the ordinary course of business, the impact of recent accounting developments,
Finlay Jewelry's dependence on key officers, Finlay Jewelry's ability to
integrate future acquisitions into its existing business, Finlay Jewelry's high
degree of leverage and the availability to Finlay Jewelry of financing and
credit on favorable terms and changes in regulatory requirements which are
applicable to Finlay Jewelry's business. Other such factors include the ability
of the Holding Company to complete the repurchases contemplated under its stock
repurchase program, the adequacy of Finlay's working capital to complete the
repurchases, the availability and liquidity of the Holding Company's Common
Stock, and overall market conditions for the Holding Company's Common Stock.

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


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

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

     The jewelry industry in general is affected by fluctuations in the prices
of precious metals and precious and semi-precious stones. The availability and
prices of gold, diamonds and other precious metals and precious and
semi-precious stones may be influenced by cartels, political instability in
exporting countries and inflation. Shortages of these materials or sharp changes
in their prices could have a material adverse effect on Finlay Jewelry's results
of operations or financial condition. Finlay Jewelry enters into forward
contracts for the purchase of gold to hedge the risk of gold price fluctuations
for future sales of gold consignment merchandise. Finlay Jewelry does not enter
into forward contracts or other financial instruments for speculation or trading
purposes. The fair value of gold under the forward contracts was $1.5 million at
February 1, 2003.

                                       27
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                   PAGE
                                                                                                   ----
<S>                                                                                               <C>
FINLAY FINE JEWELRY CORPORATION

Independent Auditors' Report......................................................................  F-2

Previously Issued Report of Independent Public Accountants........................................  F-3

Consolidated Statements of Operations for the years ended February 1, 2003,
    February 2, 2002 and February 3, 2001.........................................................  F-4

Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002...........................  F-5

Consolidated Statements of Changes in Stockholder's Equity and Comprehensive Income
    for the years ended February 1, 2003, February 2, 2002 and February 3, 2001...................  F-6

Consolidated Statements of Cash Flows for the years ended February 1, 2003,
    February 2, 2002 and February 3, 2001.........................................................  F-7

Notes to Consolidated Financial Statements........................................................  F-8
</TABLE>


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         ---------------------------------------------------------------
         FINANCIAL DISCLOSURE
         --------------------

     For information regarding Finlay Jewelry's change in independent auditors
from Arthur Andersen LLP to Deloitte & Touche LLP, please refer to our Current
Report on Form 8-K filed with the Commission on June 21, 2002.

     We have had no disagreements with our independent auditors regarding
accounting or financial disclosure matters.

                                       28
<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

     Set forth below is certain information with respect to each of the current
executive officers and directors of the Holding Company and Finlay Jewelry. Each
of the persons listed as a director is a member of the Board of Directors of
both the Holding Company and Finlay Jewelry.

<TABLE>
<CAPTION>

                 NAME                        AGE                                POSITION
----------------------------------------    -----      ------------------------------------------------------------
<S>                                         <C>        <C>
Arthur E. Reiner....................          62       Chairman of the Board, President and Chief Executive
                                                       Officer of the Holding Company, Chairman and Chief
                                                       Executive Officer of Finlay Jewelry and Director
Joseph M. Melvin....................          52       Executive  Vice  President and Chief  Operating  Officer of
                                                       the  Holding  Company  and  President  and Chief  Operating
                                                       Officer of Finlay Jewelry
Leslie A. Philip....................          56       Executive  Vice President and Chief  Merchandising  Officer
                                                       of the Holding Company and Finlay Jewelry
Edward Stein........................          58       Senior  Vice  President  and  Director  of Stores of Finlay
                                                       Jewelry
Bruce E. Zurlnick...................          51       Senior  Vice  President,   Treasurer  and  Chief  Financial
                                                       Officer of the Holding Company and Finlay Jewelry
David B. Cornstein..................          64       Director
Rohit M. Desai......................          64       Director
Michael Goldstein...................          61       Director
James Martin Kaplan.................          58       Director
John D. Kerin.......................          64       Director
Norman S. Matthews..................          70       Director
Hanne M. Merriman...................          61       Director
Thomas M. Murnane...................          56       Director
</TABLE>


     See information under the caption "Certain Relationships and Related
Transactions--Stockholders Agreement".

     On March 26, 2003, Thomas H. Lee and Warren C. Smith, Jr. resigned from the
Board of Directors of the Holding Company and its subsidiaries, including Finlay
Jewelry. On March 27, 2003, Mr. Lee and Mr. Smith, along with Thomas H. Lee
Equity Partners, L.P. ("Equity Partners") and other affiliates, sold their
Common Stock in the Holding Company to Palisade Concentrated Equity Partnership
(see footnote 4 of Item 12). Prior thereto, on July 12, 2002, the Holding
Company had repurchased an aggregate of 50,000 shares of Common Stock for
$712,500 from Messrs. Lee and Smith, Equity Partners and other affiliates.

     Under the Holding Company's Restated Certificate of Incorporation, the
Holding Company's Board of Directors is classified into three classes. The
members of each class will serve staggered three-year terms. Messrs. Desai,
Goldstein and Murnane are Class I directors; Messrs. Cornstein, Kaplan, Kerin
and Reiner are Class II directors; and Mr. Matthews and Ms. Merriman are Class
III directors. The terms of the Class II, Class III and Class I directors expire
at the annual meeting of stockholders to be held in 2003, 2004 and 2005,
respectively. Officers serve at the discretion of the Board of Directors.

     The business experience, principal occupations and employment of each of
the executive officers and directors of the Holding Company and Finlay Jewelry,
together with their periods of service as directors and executive officers of
the Holding Company and Finlay Jewelry, are set forth below.

                                       29
<PAGE>


     ARTHUR E. REINER became Chairman of the Holding Company effective February
1, 1999 and, from January 1995 to such date, served as Vice Chairman of the
Holding Company. Mr. Reiner has also served as President and Chief Executive
Officer of the Holding Company since January 30, 1996 and as Chairman of the
Board and Chief Executive Officer of Finlay Jewelry since January 3, 1995. Prior
to joining Finlay, Mr. Reiner had spent over 30 years with the Macy's
organization. From February 1992 to October 1994, Mr. Reiner was Chairman and
Chief Executive Officer of Macy's East, a subsidiary of Macy's. From 1988 to
1992, Mr. Reiner was Chairman and Chief Executive Officer of Macy's Northeast,
which was combined with Macy's Atlanta division to form Macy's East in 1992.

     JOSEPH M. MELVIN was appointed as Executive Vice President and Chief
Operating Officer of the Holding Company and President and Chief Operating
Officer of Finlay Jewelry on May 1, 1997. From September 1975 to March 1997, Mr.
Melvin served in various positions with May, including, from 1990 to March 1997,
as Chairman of the Board and Chief Operating Officer of Filene's (a division of
May).

     LESLIE A. PHILIP has been Executive Vice President and Chief Merchandising
Officer of the Holding Company and Finlay Jewelry since May 1997. From May 1995
to May 1997, Ms. Philip was Executive Vice President-Merchandising and Sales
Promotion of Finlay Jewelry. From 1993 to May 1995, Ms. Philip was Senior Vice
President--Advertising and Sales Promotion of Macy's, and from 1988 to 1993, Ms.
Philip was Senior Vice President--Merchandise--Fine Jewelry at Macy's. Ms.
Philip held various other positions at Macy's from 1970 to 1988.

     EDWARD STEIN has been Senior Vice President and Director of Stores of
Finlay Jewelry since July 1995. From December 1988 to June 1995, Mr. Stein was
Vice President - Regional Supervisor of Finlay Jewelry, and occupied similar
positions with Finlay's predecessors from 1983 to December 1988. Mr. Stein held
various other positions at Finlay from 1965 to 1983.

     BRUCE E. ZURLNICK has been Senior Vice President, Treasurer and Chief
Financial Officer of the Holding Company and Finlay Jewelry since January 2000.
From June 1990 to December 1999, he was Treasurer of the Holding Company and
Vice President and Treasurer of Finlay Jewelry. From December 1978 through May
1990, Mr. Zurlnick held various finance and accounting positions with Finlay's
predecessors.

     DAVID B. CORNSTEIN has been Chairman Emeritus of the Holding Company since
his retirement from day-to-day involvement with the Holding Company effective
January 31, 1999. He served as Chairman of the Holding Company from May 1993
until his retirement, and has been a director of the Holding Company and Finlay
Jewelry since their inception in December 1988. Mr. Cornstein is a Principal of
Pinnacle Advisors Limited. From December 1988 to January 1996, Mr. Cornstein was
President and Chief Executive Officer of the Holding Company. From December 1985
to December 1988, Mr. Cornstein was President, Chief Executive Officer and a
director of a predecessor of the Holding Company. Mr. Cornstein is a director of
TeleHubLink Corporation and Opticare Health Systems, Inc.

     ROHIT M. DESAI has been a director of the Holding Company and Finlay
Jewelry since May 1993. Mr. Desai is the founder of and, since its formation in
1984, has been Chairman and President of Desai Capital Management Incorporated,
a specialized equity investment management firm in New York which manages the
assets of various institutional clients through Equity-Linked Investors-II,
Private Equity Investors III, L.P. and Private Equity Investors IV, L.P. Mr.
Desai is also the managing general partner of the general partner of
Equity-Linked Investors-II and the managing member of the general partners of
Private Equity Investors III, L.P. and Private Equity Investors IV, L.P. Mr.
Desai serves as a director of The Rouse Company, SITEL Corporation, Triton PCS
and Independence Community Bank Corp.

     MICHAEL GOLDSTEIN has been a director of the Holding Company and Finlay
Jewelry since May 1999. Mr. Goldstein has been Chairman of the Toys "R" Us
Children's Fund, Inc. since June 2001. Mr. Goldstein was Chairman of the Board
of Toys "R" Us, Inc. from February 1998 to June 2001. From February 1994 to
February 1998, Mr. Goldstein was Vice Chairman of the Board and Chief Executive
Officer of Toys "R" Us, Inc., and served as acting Chief Executive Officer from
August 1999 to January

                                       30
<PAGE>


14, 2000. Mr. Goldstein is also a director of Toys "R" Us, Inc., United Retail
Group Inc. and 4Kids Entertainment, Inc.

     JAMES MARTIN KAPLAN has been a director of the Holding Company, Finlay
Jewelry and their predecessors since 1985. Mr. Kaplan is a partner of the law
firm of Blank Rome LLP, counsel to Finlay, the successor to Tenzer Greenblatt
LLP, which he joined in 1998. From 1977 to 1998, Mr. Kaplan was a partner with
the law firm of Zimet, Haines, Friedman & Kaplan, former counsel to Finlay.

     JOHN D. KERIN has been a director since December 1999. Since January 2000,
Mr. Kerin has been a consultant to The McGraw Hill Companies, Inc. From July
1979 to January 2000, Mr. Kerin served in various positions with The McGraw-Hill
Companies, Inc., including, from May 1994 to January 2000, as Senior Vice
President, Information Management and Chief Information Officer.

     NORMAN S. MATTHEWS has been a director of the Holding Company and Finlay
Jewelry since July 1993. Mr. Matthews has been a retail consultant based in New
York for more than the past five years. Mr. Matthews served as Vice Chairman and
then President of Federated Department Stores from 1983 to 1988. He is also a
director of Toys "R" Us, Inc., The Progressive Corporation, Henry Schein, Inc.,
Eye Care Centers of America, Inc. and Sunoco, Inc.

     HANNE M. MERRIMAN was elected a director of the Holding Company and Finlay
Jewelry in December 1997. Ms. Merriman is the Principal in Hanne Merriman
Associates, a retail business consulting firm. She is also a director of Ameren
Corp., State Farm Mutual Automobile Insurance Company, The Rouse Company, Ann
Taylor Stores Corporation and T. Rowe Price Mutual Funds. She is a member of the
National Women's Forum.

     THOMAS M. MURNANE has served as a director since December 2002. Mr. Murnane
is a recently retired partner of PricewaterhouseCoopers, LLP, who served in
various capacities during his tenure with that firm since 1980, including
Director of the firm's Retail Strategy Consulting Practice, Director of Overall
Strategy Consulting for the East Region of the United States, and most recently
Global Director of Marketing and Brand Management for PwC Consulting. Mr.
Murnane is also a director of The Pantry, Inc. and Pacific Sunwear of
California, Inc.

                                       31
<PAGE>



ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

                           SUMMARY COMPENSATION TABLE

     The following table sets forth information with respect to the compensation
in 2002, 2001 and 2000 of Finlay's Chief Executive Officer and each of the four
other most highly compensated executive officers of the Holding Company or
Finlay Jewelry (collectively, the "Named Executive Officers").

<TABLE>
<CAPTION>

                                                 ANNUAL COMPENSATION                              LONG TERM COMPENSATION
                                 ---------------------------------------------------  ---------------------------------------------
                                                                                                     NUMBER OF
                                                                                      RESTRICTED     SECURITIES
      NAME AND PRINCIPAL                                              OTHER ANNUAL      STOCK        UNDERLYING        ALL OTHER
           POSITION               YEAR      SALARY       BONUSES    COMPENSATION (1)    AWARDS      OPTIONS/SARS    COMPENSATION (2)
--------------------------------  ----    ----------   -----------  ----------------  -----------  -------------    ----------------
<S>                              <C>      <C>          <C>           <C>               <C>            <C>             <C>
ARTHUR E. REINER                  2002    $ 935,000     $ 521,169     $ 18,343             -               -           $  38,702(3)
  Chairman, President             2001      900,000       180,900       18,465        1,219,000(3)      100,000           29,071
  and Chief Executive             2000      750,000       145,875       19,292             -            100,000           28,453
  Officer of the Holding
  Company and Chairman
  and Chief Executive
  Officer of Finlay Jewelry
JOSEPH M. MELVIN                  2002    $ 407,057     $ 226,893          -               -               -            $  8,895
  Executive Vice President        2001      387,060        77,799          -               -             45,000           83,895(4)
  and Chief Operating             2000      387,059        75,283          -               -             20,000          133,277(4)
  Officer of the Holding
  Company and President
  and Chief Operating
  Officer of Finlay Jewelry
LESLIE A. PHILIP                  2002    $ 426,690     $ 237,837          -               -               -            $  8,895
  Executive Vice President        2001      406,691        81,745          -               -             50,000          158,895(5)
  and Chief Merchandising         2000      406,691        79,101          -               -             30,000          208,277(5)
  Officer of the Holding
  Company and
  Finlay Jewelry
EDWARD STEIN                      2002    $ 360,055     $ 200,695          -               -               -            $  8,895
  Senior Vice President and       2001      347,052     $  69,757          -               -             15,000            8,895
  Director of Stores              2000      347,052        67,503          -               -             10,000            8,277
   of Finlay Jewelry
BRUCE E. ZURLNICK                 2002    $ 275,000     $ 153,285          -               -               -            $  8,895
  Senior Vice President,          2001      262,500        52,763          -               -             15,000            8,895
  Treasurer and Chief             2000      249,996        50,095          -               -              5,000            8,277
  Financial Officer of the
  Holding Company and
  Finlay Jewelry
</TABLE>


-----------------
(1)  Represents tax equalization payments made in connection with life insurance
     premiums paid by Finlay on behalf of the Named Executive Officers.

(2)  Includes for each Named Executive Officer the sum of the following amounts
     earned in 2002, 2001 and 2000 for such Named Executive Officer:

                                       32
<PAGE>


<TABLE>
<CAPTION>

                                                                      LIFE           RETIREMENT       MEDICAL
                                                                  INSURANCE (a)      BENEFITS (b)   BENEFITS (c)
                                                                 ---------------    -------------  ------------
<S>                                                     <C>         <C>             <C>              <C>
    Arthur E. Reiner.................................     2002      $   20,176       $   5,525      $   3,370
                                                          2001          20,176           5,525          3,370
                                                          2000          20,176           5,200          3,077

    Joseph M. Melvin.................................     2002      $    -            $  5,525      $   3,370
                                                          2001           -               5,525          3,370
                                                          2000           -               5,200          3,077

    Leslie A. Philip.................................     2002      $    -            $  5,525      $   3,370
                                                          2001           -               5,525          3,370
                                                          2000           -               5,200          3,077

    Edward Stein.....................................     2002      $    -            $  5,525      $   3,370
                                                          2001           -               5,525          3,370
                                                          2000           -               5,200          3,077

    Bruce E. Zurlnick................................     2002      $    -            $  5,525      $   3,370
                                                          2001           -               5,525          3,370
                                                          2000           -               5,200          3,077
</TABLE>


     (a)  Insurance premiums paid by Finlay with respect to life insurance for
          the benefit of the Named Executive Officer.

     (b)  The dollar amount of all matching contributions and profit sharing
          contributions under Finlay's 401(k) profit sharing plan allocated to
          the account of the Named Executive Officer.

     (c)  The insurance premiums paid in respect of the Named Executive Officer
          under Finlay's Executive Medical Benefits Plan.

(3)  Included in the other compensation set forth in Note 2 above, are taxable
     auto allowances and employer provided travel of $9,631. The value of the
     100,000 shares of restricted stock issued to Mr. Reiner in February 2001 is
     based on the closing price on the date of issuance. At February 1, 2003,
     Mr. Reiner held 100,000 shares of restricted stock, subject to vesting,
     having an aggregate market value at such date of $1,319,000. To the extent
     dividends are paid on the Holding Company's Common Stock, generally,
     dividends would be paid on the restricted stock. See "--Employment and
     Other Agreements and Change of Control Arrangements".

(4)  Included in the other compensation set forth in Note 2 above, were special
     bonuses of $75,000 and $125,000 in accordance with a retention agreement
     entered into in February 1999 that Finlay paid to Mr. Melvin in February
     2002 and February 2001, respectively.

(5)  Included in the other compensation set forth in Note 2 above, were special
     bonuses of $150,000 and $200,000 in accordance with a retention agreement
     entered into in February 1999 that Finlay paid to Ms. Philip in February
     2002 and February 2001, respectively.

      Mr. Reiner was named Chairman of the Holding Company effective February 1,
1999 and, from January 1995 to such date, served as Vice Chairman of the Holding
Company. For a discussion of the employment and other arrangements with Mr.
Reiner, see "--Employment and Other Agreements and Change of Control
Arrangements".

                                       33
<PAGE>


LONG-TERM INCENTIVE PLANS

     The Holding Company currently has two long-term incentive plans, for which
it has reserved a total of 2,582,596 shares of Common Stock for issuance in
connection with awards. Of this total, 732,596 shares of Common Stock have been
reserved for issuance under the Holding Company's Long Term Incentive Plan (the
"1993 Plan"), of which 263,977 shares have been issued to date in connection
with exercises of options granted under the 1993 Plan and 424,020 shares are
reserved for issuance upon exercise of currently outstanding options. The
remaining 44,599 shares of Common Stock are available for future grants under
the 1993 Plan. In 1997, the Holding Company's Board of Directors and
stockholders approved the Holding Company's 1997 Long Term Incentive Plan (as
amended, the "1997 Plan" and, together with the 1993 Plan, the "Incentive
Plans"), which is intended as a successor to the 1993 Plan. The 1997 Plan is
similar to the 1993 Plan and provides for the grant of the same types of awards
as are currently available under the 1993 Plan. The maximum number of shares of
Common Stock available for issuance under the 1997 Plan is 1,850,000. Of this
total, 42,894 shares have been issued to date in connection with exercises of
options granted under the 1997 Plan, 106,000 shares have been issued to date in
connection with restricted stock arrangements and 1,132,015 shares are reserved
for issuance upon exercise of currently outstanding options. The remaining
569,091 shares of Common Stock are available for future grants under the 1997
Plan.

     The Incentive Plans permit the Holding Company to grant to key employees of
the Holding Company and its subsidiaries, consultants and certain other persons
and directors of the Holding Company, the following: (i) stock options; (ii)
stock appreciation rights in tandem with stock options; (iii) limited stock
appreciation rights in tandem with stock options; (iv) restricted or
nonrestricted stock awards subject to such terms and conditions as the
Compensation Committee shall determine; (v) performance units which are based
upon attainment of performance goals during a period of not less than two nor
more than five years and which may be settled in cash or in Common Stock in the
discretion of the Holding Company's Compensation Committee; or (vi) any
combination of the foregoing. The 1997 Plan provides, however, that no
participant may be granted, during any fiscal year, options or other awards
relating to more than 200,000 shares of Common Stock.

     Under the Incentive Plans, the Holding Company may grant stock options
which are either "incentive stock options" ("Incentive Options") within the
meaning of Section 422 of the Code, or non-incentive stock options
("Non-incentive Options"). Incentive Options are designed to result in
beneficial tax treatment to the optionee, but no tax deduction for the Holding
Company. Nonincentive Options will not give the optionee the tax benefits of
Incentive Options, but generally will entitle the Holding Company to a tax
deduction when and to the extent income is recognized by the optionee.

     The Incentive Plans are administered by the Compensation Committee of the
Holding Company's Board of Directors which, pursuant to the Incentive Plans,
consists of at least two directors. Subject to the provisions of the Incentive
Plans, the Compensation Committee has sole discretion (i) to select the
individuals to participate in the Incentive Plans, (ii) to determine the form
and substance of grants made under the Incentive Plans to each participant, and
the conditions and restrictions, if any, subject to which grants are made, (iii)
to interpret the Incentive Plans and (iv) to adopt, amend or rescind rules and
regulations for carrying out the Incentive Plans as it may deem appropriate.

     The Incentive Plans provide that the per share exercise price of an option
granted under the plans shall be determined by the Compensation Committee. The
exercise price of an Incentive Option may not, however, be less than 100% of the
fair market value of the Common Stock on the date the option is granted and the
duration of an Incentive Option may not exceed ten years from the date of grant.
In addition, an Incentive Option that is granted to an employee who, at the time
the option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of capital stock of the "employer corporation" (as
used in the Code) or any parent or subsidiary thereof shall have a per share
exercise price which is at least 110% of the fair market value of the Common
Stock on the date the option is granted and the duration of any such option may
not exceed five years from the date of grant. Options granted under the
Incentive Plans become exercisable at such time or times as the Compensation

                                       34
<PAGE>


Committee may determine at the time the option is granted. Options are
nontransferable (except by will or intestacy on the death of the optionee) and
during a participant's lifetime are exercisable only by the participant.

     In making grants to employees under the Incentive Plans, the Holding
Company has generally utilized a uniform Agreement and Certificate of Option
(the "Option Agreement"), under which the Holding Company grants ten-year
options, subject to various vesting periods of up to five years. Other vesting
schedules have also been utilized by Finlay. The Option Agreement contains
transfer and certain other restrictions and provides that options not vested may
expire, or shares acquired upon exercise of options may be repurchased at their
exercise price, in the event of termination of employment under certain
circumstances. In addition, the Option Agreement provides that (i) if an
optionee's employment is terminated for "cause" (as defined in the Option
Agreement), such optionee's options will terminate immediately, (ii) if an
optionee's employment is terminated due to death, "disability" or "retirement"
(each as defined in the Incentive Plans), such optionee's options become fully
vested and exercisable for a specific period following termination and (iii) if
an optionee's employment is terminated for any other reason, such optionee's
options remain exercisable to the extent vested for a specific period following
termination.

     The Incentive Plans may be amended or terminated by the Board at any time,
but no such termination or amendment may, without the consent of a participant,
adversely affect the participant's rights with respect to previously granted
awards. Under the 1993 Plan, the approval of the Holding Company's stockholders
is required for any amendment (i) to increase the maximum number of shares
subject to awards under the 1993 Plan, (ii) to change the class of persons
eligible to participate and/or receive incentive stock options under the 1993
Plan, (iii) to change the requirements for serving on the Compensation Committee
or (iv) to increase materially the benefits accruing to participants under the
1993 Plan. Under the 1997 Plan, the approval of the Holding Company's
stockholders is required to amend the 1997 Plan if the Compensation Committee
determines that such approval would be necessary to retain the benefits of Rule
16b-3 under the Exchange Act (with respect to participants who are subject to
Section 16 thereof), Section 162(m) of the Code (with respect to "covered
employees" within the meaning of Section 162(m) of the Code) or Section 422 of
the Code (with respect to Incentive Options), or if stockholder approval is
otherwise required by federal or state law or regulation or the rules of any
exchange or automated quotation system on which the Common Stock may then be
listed or quoted, or if the Board of Directors otherwise determines to submit
the proposed amendment for stockholder approval.

     Subject to certain limitations set forth in the Incentive Plans, if the
Compensation Committee determines that any corporate transaction or event
affects the shares of Common Stock (or other securities or property subject to
an award under the Incentive Plans) such that an adjustment is determined by the
Compensation Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Incentive Plans, then the Compensation Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of shares
(or other securities or property) with respect to which awards may be granted
under the Incentive Plans, (ii) the number and type of shares (or other
securities or property) subject to outstanding awards under the Incentive Plans
or (iii) the grant or exercise price with respect to any awards under the
Incentive Plans or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding award in consideration for the cancellation of such
award (which, in the case of an option, will be equal to the positive
difference, if any, between the Market Value (as defined in the Incentive Plans)
of the shares covered by such option, as determined immediately prior to such
corporate transaction or event, and the exercise price per share of such
option).

                                       35
<PAGE>



OPTION/SAR GRANTS IN 2002/LONG-TERM INCENTIVE PLAN AWARDS IN 2002

     There were no options granted or stock appreciation rights issued, or any
long-term incentive plan awards, by the Holding Company in 2002 to the Named
Executive Officers.


CERTAIN INFORMATION CONCERNING STOCK OPTIONS/SARS

     The following table sets forth certain information with respect to stock
options exercised in 2002 as well as the value of stock options at the fiscal
year end. No stock appreciation rights were exercised during 2002.

AGGREGATED OPTION/SAR EXERCISES IN 2002 AND FISCAL YEAR-END OPTION SAR VALUE

<TABLE>
<CAPTION>
                                                            NUMBER OF
                                                           SECURITIES              VALUE OF
                                                           UNDERLYING            UNEXERCISED
                                                           UNEXERCISED           IN-THE-MONEY
                                                          OPTIONS/SARS         OPTIONS/SARS AT
                               SHARES                      AT YEAR-END           YEAR-END ($)
                              ACQUIRED       VALUE        EXERCISABLE/           EXERCISABLE/
               NAME          ON EXERCISE   REALIZED       UNEXERCISABLE      UNEXERCISABLE (1)(2)
               ----          -----------   --------     ------------------   --------------------
<S>                             <C>           <C>       <C>                  <C>
Arthur E. Reiner............      -            -         394,632 / 140,000    $140,400 /$517,600
Joseph M. Melvin............      -            -          95,000 /  50,000    $157,580 /$226,320
Leslie A. Philip............      -            -         132,000 /  58,000    $281,629 /$253,520
Edward Stein................      -            -          57,000 /  28,000    $217,080 /$ 86,200
Bruce E. Zurlnick...........      -            -          26,333 /  20,000    $100,145 /$ 79,940
</TABLE>

------------------
(1)  The value of Unexercised In-the-Money Options/SARs represents the aggregate
     amount of the excess of $13.19, the closing price for a share of Common
     Stock at year end, over the relevant exercise price of all "in-the-money"
     options.

(2)  The options granted under the 1997 Plan generally vest over periods of up
     to five years. Other vesting schedules have also been utilized by Finlay.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The Board of Directors of each of the Holding Company and Finlay Jewelry
have established a Compensation Committee (the "Compensation Committee"). The
Compensation Committee is presently comprised of Norman S. Matthews and John D.
Kerin. All decisions with respect to executive compensation, and all decisions
with respect to benefit plans, involving employees of the Holding Company and
Finlay Jewelry are currently made by the Compensation Committee. None of the
present Compensation Committee members were, at any time, an officer or employee
of the Holding Company or any of its subsidiaries.

     In connection with a series of recapitalization transactions in 1993 (the
"1993 Recapitalization"), the Holding Company, affiliates of Thomas H. Lee
Company (together with certain transferees, the "Lee Investors"), partnerships
managed by Desai Capital Management Incorporated (collectively, the "Desai
Investors"), certain members of management of the Holding Company (the
"Management Stockholders") and certain other stockholders entered into (i) the
Registration Rights Agreement, which grants certain registration rights to the
Lee Investors and the Management Stockholders and (ii) the Stockholders'
Agreement, which granted certain rights to, and imposed certain restrictions on
the rights of, the Lee Investors, the Management Stockholders and certain other
stockholders. See "Certain Transactions".

     The Holding Company and Finlay Jewelry entered into management agreements
with Thomas H. Lee Capital LLC (the "Lee Management Agreement") and DCMI (the
"Desai Management Agreement" and collectively with the Lee Management Agreement,
the "Management Agreements"), affiliates of Mr. Lee and Mr. Desai, respectively,
who were members of the Compensation Committee during 2002. Pursuant to the
Management Agreements, as amended, Thomas H. Lee Capital LLC and DCMI received
$90,000 and $30,000 per year plus expenses, respectively, for

                                       36
<PAGE>



consulting and management advisory services rendered to the Holding Company and
Finlay Jewelry. The Desai Management Agreement terminated in June 2002 and the
Lee Management Agreement terminated in March 2003. Each of the Management
Agreements contained provisions entitling the managing company to
indemnification under certain circumstances for losses incurred in the course of
service to the Holding Company or Finlay Jewelry.

     In July 2002, as part of the Holding Company's stock repurchase program,
the Holding Company repurchased 50,000 shares of Common Stock for $712,500 from
Thomas H. Lee and Warren C. Smith (then directors of Finlay) along with Thomas
H. Lee Equity Partners, L.P., and other affiliates. In addition, in April 2002,
as part of the Holding Company's stock repurchase program, the Holding Company
repurchased 526,562 shares of Common Stock for $5,792,000 from Equity-Linked
Investors-II, a partnership, the managing partner of the general partner of
which is Rohit M. Desai, a director of Finlay.

     Any future transactions between the Holding Company and/or Finlay Jewelry
and the officers, directors and affiliates thereof will be on terms no less
favorable to the Holding Company and Finlay Jewelry than can be obtained from
unaffiliated third parties, and any material transactions with such persons will
be approved by a majority of the disinterested directors of the Holding Company
or Finlay Jewelry, as the case may be.


EMPLOYMENT AND OTHER AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS

     Mr. Reiner is party to an employment agreement pursuant to which he is
serving as Chairman of the Board, President and Chief Executive Officer of the
Holding Company for a term expiring on January 31, 2005. In accordance with the
agreement, Mr. Reiner's annual base salary is currently at an annual rate of
$970,000. Under the agreement, his base salary is to be increased in increments
of not less than $35,000 per year. In addition to his base salary, Mr. Reiner is
entitled to an annual bonus payment based on the satisfaction by Finlay of
certain financial performance criteria. Under Mr. Reiner's agreement, Finlay is
required to provide Mr. Reiner with certain insurance and other ancillary
benefits.

      In connection with the extension of Mr. Reiner's employment agreement to
January 31, 2005, the Holding Company issued to Mr. Reiner in February 2001 an
aggregate of 100,000 shares of restricted stock which will become vested and
nonforfeitable if Mr. Reiner is continuously employed by Finlay through January
31, 2005. If Mr. Reiner's employment is terminated without cause or for other
specified circumstances, a pro rata portion of the restricted stock would become
nonforfeitable. If Mr. Reiner's employment is terminated prior to a change of
control (as defined in the agreement) without cause, or under other specified
circumstances, Mr. Reiner would continue to receive his base salary for the
balance of the term and bonus compensation as if such termination had not
occurred. In the event his employment is terminated under certain circumstances
following a change of control, Mr. Reiner would be entitled to a lump sum
payment equal to 299% of his "base amount" (as defined in Section 280G(b)(3) of
the Code), subject to certain restrictions. In addition, upon termination of his
employment coincident with or following a change of control, all of his
restricted stock would become nonforfeitable.

       If at the expiration of the term of employment (or a renewal term) Mr.
Reiner and Finlay cannot agree upon terms to continue his employment, or if his
employment is terminated without cause or for other specified reasons, Mr.
Reiner would be entitled to receive a severance payment in an amount equal to
one year's base salary, together with certain insurance benefits.

         In May 1997, the Holding Company appointed Mr. Melvin to serve as
Executive Vice President and Chief Operating Officer of the Holding Company and
President and Chief Operating Officer of Finlay Jewelry. The Holding Company has
agreed to pay to Mr. Melvin an annual base salary of at least $350,000 as well
as an annual bonus based on the achievement of certain targets. If Mr. Melvin's
employment is terminated by Finlay without cause or his title is changed to a
lesser title, he is entitled to receive a lump sum payment equal to one year's
base salary.

                                       37
<PAGE>


DIRECTORS' COMPENSATION

     Directors who are employees, or who receive fees or compensation (directly
or indirectly) other than as directors, receive no additional compensation for
serving as members of the Board. Mr. Kaplan receives no compensation for serving
as a director of the Holding Company and Finlay Jewelry. For a discussion of
certain fees paid to affiliates of Mr. Desai and Mr. Lee, who resigned as a
director in March 2003, see "Compensation Committee Interlocks and Insider
Participation".

     For serving as a director of the Holding Company and Finlay Jewelry, each
independent non-employee director receives aggregate compensation at the rate of
$20,000 per year and, also receives a fee of $1,000 for each regular and special
meeting attended and a fee of $500 for each committee meeting attended. Mr.
Matthews received an aggregate annual fee of $1,500 for service as chairperson
of the Compensation Committee in 2002. In addition, Mr. Goldstein received an
aggregate annual fee of $1,500 for service as chairperson of the Audit Committee
in 2002. Effective April 2003, the chairperson of the Audit Committee will
receive an aggregate annual fee of $6,000 and the chairperson for all other
committees will receive an aggregate annual fee of $3,000. Each independent
non-employee director generally receives, with respect to each year of service,
options to purchase 5,000 shares of Common Stock, at an exercise price equal to
the fair market value on the date of grant. The options typically vest on the
first anniversary of the date of grant, except Mr. Matthews' options are subject
to various vesting periods of up to five years.

     Mr. Reiner has an employment contract with Finlay. See information under
the caption "Executive Compensation--Employment and Other Agreements and Change
of Control Arrangements".


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          ------------------------------------------------------------------
          RELATED STOCKHOLDER MATTERS
          ---------------------------

     The following table sets forth certain information with respect to
beneficial ownership of the Common Stock as of April 29, 2003 by (i) each person
who, to the knowledge of the Holding Company, was the beneficial owner of more
than 5% of the outstanding Common Stock of the Holding Company, (ii) each of the
Holding Company's directors, the Holding Company's Chief Executive Officer and
each of the four other most highly compensated executive officers of the Holding
Company or Finlay Jewelry, and by all current directors and executive officers
as a group. The Holding Company owns all of the issued and outstanding capital
stock of Finlay Jewelry.

                                       38
<PAGE>


<TABLE>
<CAPTION>
                                                                                   SHARES OF COMMON STOCK
                                                                                   BENEFICIALLY OWNED (1)
                                                                            -------------------------------------

                                                                              NUMBER OF             PERCENTAGE
                                   NAME                                        SHARES                OF CLASS
    -------------------------------------------------------------------     --------------        ---------------
<S>                                                                           <C>                      <C>
    FMR Corp.(2)...................................................            1,042,700                10.2%
    Mellon Financial Corporation(3)................................              883,657                 8.6%
    Palisade Capital Management, LLC(4) ...........................              835,751                 8.2%
    David B. Cornstein(1)(5).......................................              685,439                 7.4%
    Arthur E. Reiner(1)(6).........................................              559,279                 5.8%
    Investment Counselors of Maryland, LLC(7) .....................              537,025                 5.3%
    Neuberger Berman, LLC(8).......................................              498,200                 4.9%
    Leslie A. Philip(1)(9).........................................              138,000                 1.5%
    Norman S. Matthews(10).........................................              112,000                 1.2%
    Joseph M. Melvin(1)(11)........................................              102,000                 1.1%
    Edward Stein(1)(12)............................................               60,000                  *
    Michael Goldstein(13)..........................................               29,000                  *
    Bruce E. Zurlnick(1)(14).......................................               28,633                  *
    Hanne M. Merriman(15)..........................................               25,000                  *
    John D. Kerin(1)(16)...........................................               16,000                  *
    Rohit M. Desai(17).............................................                7,000                  *
    James Martin Kaplan(1).........................................                4,000                  *
    Thomas M. Murnane(1)...........................................                 -                     -
    All directors and executive officers
    as a group (13 persons)(18)....................................            1,766,351                 17.4%
</TABLE>

-------------

 *   Less than one percent.

(1)  Based on 9,204,408 shares outstanding on April 29, 2003. A person is deemed
     to be the beneficial owner of securities that can be acquired by such
     person within 60 days from April 29, 2003 upon the exercise of options.
     Each beneficial owner's percentage ownership is determined by assuming that
     options that are held by such person and which are exercisable within 60
     days of April 29, 2003 have been exercised. Except as noted below, each
     beneficial owner has sole voting power and sole investment power, subject
     (in the case of the Holding Company's directors and executive officers) to
     the terms of the Stockholders' Agreement. The address for the beneficial
     owners named in the table, unless specified otherwise in a subsequent
     footnote, is c/o the Holding Company, 529 Fifth Avenue, New York, New York
     10017.

(2)  These shares represent shares reported as beneficially owned by FMR Corp.
     in a joint filing on Amendment No. 3 dated June 11, 2001 to a Schedule 13G
     dated February 1, 1999, as amended, filed with the Commission by FMR Corp.,
     Edward C. Johnson 3d, Abigail P. Johnson, Fidelity Management & Research
     Company ("Fidelity") and Fidelity Low Priced Stock Fund (the "Fund").
     According to said Schedule 13G Amendment, members of the Edward C. Johnson
     3d family are the predominant owners of Class B shares of common stock of
     FMR Corp., representing approximately 49% of the voting power of FMR Corp.
     Mr. Johnson 3d owns 12.0% and Abigail Johnson owns 24.5% of the aggregate
     outstanding voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR
     Corp. and Abigail P. Johnson is a Director of FMR Corp. The Johnson family
     group and all other Class B shareholders have entered into a shareholders'
     voting agreement under which all Class B shares will be voted in accordance
     with the majority vote of Class B shares. Accordingly, through their
     ownership of voting common stock and the execution of the shareholders'
     voting agreement, members of the Johnson family may be deemed, under the
     Investment Company Act of 1940, to form a controlling group with respect to
     FMR Corp. The Schedule 13G Amendment further states that Fidelity, a
     wholly-owned subsidiary of FMR Corp. and a registered investment adviser,
     is the beneficial owner of the 1,042,700 shares which are the subject of
     the Schedule 13G Amendment as a result of its acting as investment adviser
     to the Fund, an investment company which owns all of such 1,042,700 shares.
     Edward C. Johnson 3d,

                                       39
<PAGE>


     FMR Corp., through its control of Fidelity, and the Fund each has sole
     power to dispose of the 1,042,700 shares owned by the Fund. Neither FMR
     Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power
     to vote or direct the voting of the shares owned directly by the Fund,
     which power resides with the Fund's Board of Trustees. Fidelity carries out
     the voting of the shares under written guidelines established by the Fund's
     Board of Trustees. The address for FMR Corp., Fidelity and the Fund is 82
     Devonshire Street, Boston, Massachusetts 02109.

(3)  According to Amendment No. 6 dated January 15, 2003 to a Schedule 13G dated
     February 4, 1999, as amended, filed with the Commission by Mellon Financial
     Corporation ("Mellon Financial"), (i) Mellon Financial has sole power to
     vote 596,448 shares and sole power to dispose of 883,657 shares, and shares
     power to vote 97,800 shares and shares power to dispose of none of such
     shares, (ii) Boston Safe Deposit and Trust Company has sole power to vote
     452,700 shares and sole power to dispose of 739,109 shares, and shares
     power to vote 97,800 shares and shares power to dispose of none of such
     shares, and (iii) The Boston Company, Inc. Asset Management, LLC has sole
     power to vote 422,100 shares and sole power to dispose of 540,200 shares,
     and shares power to vote 97,800 shares and shares power to dispose of none
     of such shares. All of the shares reported in the Schedule 13G Amendment
     are beneficially owned by Mellon Financial Corporation and direct or
     indirect subsidiaries in their various fiduciary capacities. The address
     for Mellon Financial Corporation is One Mellon Center, Pittsburgh,
     Pennsylvania 15258.

(4)  These shares represent shares reported as beneficially owned by Palisade
     Capital Management, LLC, an investment adviser ("Palisade"), and Palisade
     Concentrated Equity Partnership ("PCEP"), in a Schedule 13D filed with the
     Commission on April 7, 2003. According to said Schedule 13D, each of
     Palisade and PCEP has sole power to vote, and sole power to dispose of, all
     of such shares, and each of Palisade and PCEP shares power to vote, and
     power to dispose of, none of such shares. PCEP is an investment fund which
     is managed by Palisade. The address for Palisade and PCEP is One Bridge
     Plaza, Fort Lee, New Jersey 07024.

(5)  Includes options to acquire 66,667 shares of Common Stock having an
     exercise price of $14.00 per share.

(6)  Includes options to acquire 414,632 shares of Common Stock having exercise
     prices ranging from $7.05 to $14.00 per share. Also includes 100,000 shares
     of restricted stock.

(7)  According to a Schedule 13G, dated February 6, 2003, filed with the
     Commission by Investment Counselors of Maryland, LLC ("Investment
     Counselors"), Investment Counselors has sole power to vote 389,925 shares
     and sole power to dispose of all the indicated shares, and shares power to
     vote 177,100 shares and shares power to dispose of none of such shares. All
     of the indicated shares are owned by various investment advisory clients of
     Investment Counselors, which is deemed to be a beneficial owner of the
     shares due to its discretionary power to make investment decisions over
     such shares for its clients and its ability to vote such shares. In all
     cases, persons other than Investment Counselors have the right to receive,
     or the power to direct the receipt of, dividends from, or the proceeds from
     the sale of the shares. According to the Schedule 13G, no individual client
     of Investment Counselors holds more than five percent of the class. The
     address for Investment Counselors of Maryland, LLC is 803 Cathedral Street,
     Baltimore, Maryland 21201-5297.

(8)  According to Amendment No. 4 dated February 12, 2003 to a Schedule 13G
     dated February 10, 1999, as amended, filed with the Commission by Neuberger
     Berman, LLC and Neuberger Berman, Inc. (collectively, "Neuberger Berman"),
     Neuberger Berman, LLC is deemed to be a beneficial owner of the indicated
     number of shares since it has shared power to make decisions whether to
     retain or dispose of, and in some cases the sole power to vote, such
     shares, which are held by many unrelated clients. Neuberger Berman, LLC
     does not, however, have any economic interest in the securities of those
     clients. The clients are the actual owners of the securities and have the
     sole right to receive and the power to direct the receipt of dividends from
     or proceeds from the sale of such securities. Neuberger Berman has sole
     power to vote or direct the voting of 401,200 shares, shared power to vote
     or direct the voting of none of such shares, sole power to dispose of or
     direct the disposition of none of such shares, and shared power to dispose
     of or direct the disposition of 498,200 shares. Employee(s) of Neuberger
     Berman, LLC and Neuberger Berman Management, Inc. own 235,000 shares in
     their own personal securities accounts.

                                       40
<PAGE>



     Neuberger Berman, LLC disclaims beneficial ownership of these shares since
     these shares were purchased with each employee(s)' personal funds and each
     employee has exclusive dispositive and voting power over the shares held in
     their respective accounts. According to the Schedule 13G Amendment,
     Neuberger Berman, Inc. owns 100% of both Neuberger Berman, LLC and
     Neuberger Berman Management, Inc. and does not own over 1% of the Holding
     Company's shares. The address of Neuberger Berman, LLC and Neuberger
     Berman, Inc. is 605 Third Avenue, New York, New York 10158-3698.

(9)  Includes options to acquire an aggregate of 138,000 shares of Common Stock
     having exercise prices ranging from $7.05 to $23.1875 per share.

(10) Includes options to acquire an aggregate of 112,000 shares of Common Stock
     having exercise prices ranging from $8.50 to $16.50 per share. Mr.
     Matthews' address is 650 Madison Avenue, New York, New York 10022.

(11) Includes options to acquire an aggregate of 101,000 shares of Common Stock
     having exercise prices ranging from $7.05 to $24.3125 per share.

(12) Includes options to acquire an aggregate of 52,000 shares of Common Stock
     having exercise prices ranging from $7.05 to $13.4219 per share.

(13) Includes options to acquire an aggregate of 20,000 shares of Common Stock
     having exercise prices ranging from $9.85 to $13.4375 per share. The
     address of Mr. Goldstein is c/o Toys "R" Us, Inc., 461 From Road, Paramus,
     New Jersey 07652.

(14) Includes options to acquire an aggregate of 23,333 shares of Common Stock
     having exercise prices ranging from $7.05 to $13.5625 per share.

(15) Includes options to acquire an aggregate of 25,000 shares of Common Stock
     having exercise prices ranging from $8.50 to $21.3125 per share. Ms.
     Merriman's address is c/o Hanne Merriman Associates, 3201 New Mexico
     Avenue, N.W., Washington, DC 20016.

(16) Includes options to acquire an aggregate of 15,000 shares of Common Stock
     having exercise prices ranging from $9.85 to $14.5938 per share.

(17) Includes options to acquire an aggregate of 5,000 shares of Common Stock
     having an exercise price of $15.877 per share. The address of Mr. Desai and
     ELI-II is c/o Desai Capital Management Incorporated, 410 Park Avenue, New
     York, New York 10022.

(18) Includes options to acquire an aggregate of 972,632 shares of Common Stock
     having exercise prices ranging from $7.05 to $24.3125 per share.


                                       41
<PAGE>

     Options to purchase Common Stock have been granted to employees and
non-employee directors under various stock-based compensation plans. See Note 5
of Notes to Consolidated Financial Statements. The following table summarizes
the number of stock options issued, the weighted-average exercise price and the
number of securities remaining to be issued under all outstanding equity
compensation plans as of February 1, 2003.

<TABLE>
<CAPTION>
                                                                                                      (c)
                                                                                              NUMBER OF SECURITIES
                                                  (a)                       (b)             REMAINING AVAILABLE FOR
                                        NUMBER OF SECURITIES TO       WEIGHTED-AVERAGE       FUTURE ISSUANCE UNDER
                                        BE ISSUED UPON EXERCISE      EXERCISE PRICE OF     EQUITY COMPENSATION PLANS
                                        OF OUTSTANDING OPTIONS,     OUTSTANDING OPTIONS,     (EXCLUDING SECURITIES
            PLAN CATEGORY                 WARRANTS AND RIGHTS       WARRANTS AND RIGHTS     REFLECTED IN COLUMN (a))
------------------------------------    ------------------------    --------------------   --------------------------
<S>                                            <C>                     <C>                          <C>
Equity compensation plans
       approved by security holders.           1,590,335                $    11.46                  718,690(1)
Equity compensation plans not
       approved by security holders.               -                         -                          -
                                               ---------                ----------                  -------
Total...............................           1,590,335                $    11.46                  718,690
                                               =========                ==========                  =======
</TABLE>

------------------
(1)  Grants are permitted under the plans in the form of (i) stock options; (ii)
     stock appreciation rights in tandem with stock options; (iii) limited stock
     appreciation rights in tandem with stock options; (iv) restricted or
     nonrestricted stock awards subject to such terms and conditions as the
     Compensation Committee shall determine; (v) performance units which are
     based upon attainment of performance goals during a period of not less than
     two nor more than five years and which may be settled in cash or in Common
     Stock in the discretion of the Holding Company's Compensation Committee; or
     (vi) any combination of the foregoing.

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


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

STOCKHOLDERS' AGREEMENT

     The Management Stockholders, the Lee Investors, all employees holding
options to purchase Common Stock, certain private investors and the Holding
Company are parties to the Stockholders' Agreement, which sets forth certain
rights and obligations of the parties with respect to the Common Stock
(including certain "come along" and "take along" rights relating to sales of
Common Stock) and corporate governance of the Holding Company. Any employees of
Finlay not parties to the Stockholders' Agreement, as amended, who have received
or in the future receive options to purchase Common Stock in connection with
their employment have also been required or will also be required, as the case
may be, to


                                       42
<PAGE>


become parties to the Stockholders' Agreement. The Stockholders' Agreement
provides that the parties thereto must vote their shares in favor of certain
directors who are nominated by Mr. Cornstein and Mr. Reiner. Notwithstanding the
foregoing, the right of various persons to designate directors will be reduced
or eliminated at such time as they own less than certain specified percentages
of the shares of Common Stock then outstanding or in certain cases are no longer
an employee of the Holding Company. The designees of Mr. Cornstein are Messrs.
Cornstein and Kaplan; and Mr. Reiner is his own designee.


REGISTRATION RIGHTS AGREEMENT

     The Registration Rights Agreement grants certain registration rights to
certain Management Stockholders and other investors. Lee Investors may demand
registration under certain circumstances. The Registration Rights Agreement also
provides that Management Stockholders holding in the aggregate at least 20% of
the "Registrable Securities" then outstanding will have the right on one
occasion to require the Holding Company to file a registration statement with
the Commission covering all or a portion of their "Registrable Securities" in
certain circumstances. In addition, under the Registration Rights Agreement, if
the Holding Company proposes to register shares of Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), either for its own
account or for the account of others (other than a registration statement
relating solely to employee benefit plans), then each party to the Registration
Rights Agreement will have the right, subject to certain restrictions and
priorities, to request that the Holding Company register its shares of Common
Stock in connection with such registration. Under the Registration Rights
Agreement, the holders of "Registrable Securities", on the one hand, and the
Holding Company, on the other, agree to indemnify each other for certain
liabilities, including liabilities under the Securities Act, in connection with
any registration of shares subject to the Registration Rights Agreement.


STOCK REPURCHASES

     In July 2002, as part of the Holding Company's stock repurchase program,
the Holding Company repurchased 50,000 shares of Common Stock for $712,500 from
Thomas H. Lee and Warren C. Smith (then directors of Finlay) along with Thomas
H. Lee Equity Partners, L.P., and other affiliates. In addition, in April 2002,
as part of the Holding Company's stock repurchase program, the Holding Company
repurchased 526,562 shares of Common Stock for $5,792,000 from Equity-Linked
Investors-II, a partnership, the managing partner of the general partner of
which is Rohit M. Desai, a director of Finlay.


CERTAIN OTHER TRANSACTIONS

     Finlay has entered into indemnification agreements with each of Finlay's
directors and certain executive officers. The indemnification agreements
require, among other things, that Finlay indemnify its directors and executive
officers against certain liabilities and associated expenses arising from their
service as directors and executive officers of Finlay and reimburse certain
related legal and other expenses. In the event of a Change of Control (as
defined therein), Finlay will, upon request by an indemnitee under the
agreements, create and fund a trust for the benefit of such indemnitee
sufficient to satisfy reasonably anticipated claims for indemnification. Finlay
will also cover each director and certain executive officers under a directors
and officers liability policy maintained by Finlay in such amounts as the Board
of Directors of the Holding Company finds reasonable. Although the
indemnification agreements offer coverage similar to the provisions in the
Holding Company's Restated Certificate of Incorporation and the Delaware General
Corporation Law, they provide greater assurance to directors and officers that
indemnification will be available because, as contracts, they cannot be modified
unilaterally in the future by the Board of Directors or by the stockholders to
eliminate the rights they provide.

     For information relating to certain transactions involving members of
management or others, see "-- Compensation Committee Interlocks and Insider
Participation" and "-- Employment and Other Agreements and Change of Control
Arrangements" under the caption "Executive Compensation".



                                       43
<PAGE>


ITEM 14.  CONTROLS AND PROCEDURES
          -----------------------

        Within the 90-day period prior to the filing of this report, an
evaluation was carried out under the supervision and with the participation of
Finlay Jewelry's management, including the Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO"), of the effectiveness of Finlay Jewelry's
disclosure controls and procedures. Based on that evaluation, the CEO and CFO
have concluded that Finlay Jewelry's disclosure controls and procedures are
effective to ensure that information required to be disclosed by Finlay Jewelry
in reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in
Commission rules and forms. Subsequent to the date of their evaluation, there
were no significant changes in Finlay Jewelry's internal controls, or in other
factors that could significantly affect the internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.








                                       44


<PAGE>

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
          ---------------------------------------------------------------

(a)  Documents filed as part of this report:

     (1)  Financial Statements.

     See Financial Statements Index included in Item 8 of Part II of this Form
         10-K.

     (2)  Financial Statement Schedules. None.

     (3)  Exhibits.

     (Exhibit Number referenced to Item 601 of Regulation S-K).

<TABLE>
<CAPTION>


ITEM
NUMBER
------
<S>             <C>       <C>
 3.1               -        Certificate of Incorporation, as amended, of Finlay Jewelry (incorporated by
                            reference to Exhibit 3.1 of Form S-1 Registration Statement, Registration No. 33-59580).

 3.2               -        By-laws of Finlay Jewelry (incorporated by reference to Exhibit 4.1 filed as part of
                            the Current Report on Form 8-K filed by the Registrant on June 10, 1993).

 4.1               -        Article Fourth of the Restated Certificate of Incorporation and Articles II and VI of
                            the Bylaws (incorporated by reference to Exhibit 4.1 of Form S-1 Registration  Statement,
                            Registration No. 33-59380).

 4.2(a)            -        Indenture dated as of April 24, 1998 between Finlay Jewelry and Marine Midland Bank, as
                            Trustee, relating to Finlay Jewelry's 8-3/8% Senior Notes due May 1, 2008 issued by Finlay
                            Jewelry (including form of Senior Note) (incorporated by reference to Exhibit 4.1 filed as part
                            of the Current Report on Form 8-K filed by Finlay Jewelry on May 11, 1998).

 4.2(b)            -        First Supplemental Indenture dated as of August 8, 2002 among Finlay Jewelry and HSBC Bank USA
                            (formerly  known as Marine Midland Bank), as Trustee (incorporated by reference to Exhibit 4.1
                            filed as part of the  Quarterly Report on Form 10-Q for the period ended August 3, 2002, filed
                            by Finlay Jewelry on September 17, 2002).

 4.3(a)            -        Amended and Restated Stockholders' Agreement dated as of March 6, 1995 among the Holding
                            Company, David B. Cornstein, Arthur E. Reiner and certain other securityholders (incorporated
                            by reference to Exhibit 4.9 filed as part of the Annual Report on Form 10-K for the period
                            ended January 28, 1995 filed by the Company on April 12, 1995).

 4.3(b)            -        Omnibus Amendment to Registration Rights and Stockholders' Agreements (incorporated by
                            reference to Exhibit 10.10 filed as part of the Quarterly Report on Form 10-Q for the period
                            ended November 1, 1997 filed by Finlay Jewelry on December 16, 1997).

 4.4               -        Registration Rights Agreement dated as of May 26, 1993 among the Company, David B.
                            Cornstein and certain other securityholders (incorporated by reference to Exhibit 4.6 filed as
                            part of the Current Report on Form 8-K filed by the Company on June 10, 1993).

                                       45
<PAGE>



10.1               -        Form of Agreement and Certificate of Option Pursuant to the Long Term Incentive Plan of the
                            Holding Company (incorporated by reference to Exhibit 10.1 filed as part of the Quarterly
                            Report on Form 10-Q for the period ended July 31, 1993 filed by Finlay Jewelry on September 14,
                            1993).

10.2               -        The Holding Company's Retirement Income Plan as amended and restated February 2002
                            (incorporated  by reference to Exhibit 10.2 filed as part of the Annual Report on Form 10-K for
                            the period ended February 2, 2002 filed by Finlay Jewelry on April 29, 2002).

10.3               -        Executive Medical Benefits Plan of Finlay Jewelry and the Holding Company (incorporated by
                            reference to Exhibit 10.3 of Form S-1 Registration Statement, Registration No. 33-59380).

10.4(a)            -        Employment Agreement dated as of January 3, 1995 among the Holding Company, Finlay Jewelry and
                            Arthur E. Reiner (incorporated by reference to Exhibit 10.7(a) of Form S-1 Registration
                            Statement, Registration No. 33-88938).

10.4(b)            -        Amendment to Employment Agreement dated as of May 17, 1995 among the Holding Company, Finlay
                            Jewelry and Arthur E. Reiner (incorporated by reference to Exhibit 10.8(e) filed as part of the
                            Annual Report on Form 10-K for the period ended February 1, 1997 filed by Finlay Jewelry on
                            May 1, 1997).

10.4(c)            -        Amendment No. 2 to Employment Agreement dated as of March 5, 1997 among the Holding Company,
                            Finlay Jewelry and Arthur E. Reiner (incorporated by reference to Exhibit 10 filed as part of
                            the Quarterly Report on Form 10-Q for the period ended May 3, 1997 filed by Finlay Jewelry on
                            June 17, 1997).

10.4(d)            -        Amendment No. 3 to Employment Agreement dated July 1, 1997 among the Holding Company, Finlay
                            Jewelry and Arthur E. Reiner (incorporated by reference to Exhibit 10.6(g) filed as part of the
                            Annual Report on Form 10-K for the period ended January 31, 1998, filed by Finlay Jewelry on
                            March 24, 1998).

10.4(e)            -        Amendment No. 4 to Employment Agreement dated as of February 16, 2000 among the Holding
                            Company, Finlay Jewelry and Arthur E. Reiner (incorporated by reference to Exhibit 10.5(h)
                            filed as part of the Annual Report on Form 10-K for the period ended January 29, 2000 filed by
                            Finlay Jewelry on April 28, 2000).

10.4(f)            -        Amendment No. 5 to Employment Agreement dated as of November 29, 2000 among the Holding
                            Company, Finlay Jewelry and Arthur E. Reiner (incorporated by reference to Exhibit 10.5(f)
                            filed as part of the Annual Report on Form 10-K for the period ended February 3, 2001 filed by
                            Finlay Jewelry on April 30, 2001).

10.5               -        Employment Agreement dated as of April 18, 1997 between Joseph M. Melvin and Finlay Jewelry
                            (incorporated by reference to Exhibit 10.8 filed as part of the Annual Report on Form 10-K for
                            the period ended January 31, 1998, filed by Finlay Jewelry on March 24, 1998).

10.6               -        Tax Allocation Agreement dated as of November 1, 1992 between the Holding Company and Finlay
                            Jewelry (incorporated by reference to Exhibit 19.5 filed as part of the Quarterly Report on
                            Form 10-Q for the period ended May 1, 1993 filed by the Company on June 30, 1993).

10.7(a)            -        Management Agreement dated as of May 26, 1993 among the Holding Company, Finlay Jewelry and
                            Thomas H. Lee Company (incorporated by reference to Exhibit 28.2 filed as part of the Current
                            Report on Form 8-K filed by Finlay Jewelry on June 10, 1993).

                                       46
<PAGE>


10.7(b)            -        Amendment to Management Agreement dated as of January 21, 2002 among the Holding Company,
                            Finlay Jewelry and Thomas H. Lee Capital, LLC (incorporated by reference to Exhibit 10.9(b)
                            filed as part of the Annual Report on Form 10-K for the period ended February 2, 2002 filed by
                            Finlay Jewelry on April 29, 2002).

10.8(a)            -        Long Term Incentive Plan of the Company (incorporated by reference to Exhibit 19.5 filed as
                            part of the Quarterly Report on Form 10-Q for the period ended May 1, 1993 filed by Finlay
                            Jewelry on June 30, 1993).

10.8(b)            -        Amendment No. 1 to the Holding Company's Long Term Incentive Plan (incorporated by reference to
                            Exhibit 10.14(b) of the Form S-1 Registration Statement, Registration No. 33-88938).

10.8(c)            -        Amendment to the Holding Company's Long Term Incentive Plan (incorporated by reference to
                            Exhibit 10.11(c) filed as part of the Annual Report on Form 10-K for the period ended February
                            2, 2002 filed by Finlay Jewelry on April 29, 2002).

10.9               -        1997 Long Term Incentive Plan, as amended (incorporated by reference to Exhibit 10.12 filed as
                            part of the Annual Report on Form 10-K for the period ended February 2, 2002 filed by Finlay
                            Jewelry on April 29, 2002).

10.10              -        Second Amended and Restated Credit Agreement, dated as of January 22, 2003 among General
                            Electric, Finlay Jewelry, the Holding Company, General Electric Capital Corporation ("G.E. Capital"),
                            individually and in its capacity as administrative agent, Fleet Precious Metals, Inc., individually
                            and as documentation agent, and certain other banks and financial institutions.

10.11              -        Amended and Restated Guaranty, dated as of January 22, 2003, by Finlay Jewelry, Inc. ("FJI"),
                            Finlay Merchandising & Buying, Inc. ("Finlay Merchandising & Buying") and eFinlay, Inc. ("eFinlay").

10.12              -        Amended and Restated Security Agreement dated as of January 22, 2003, by and among Finlay
                            Jewelry, FJI, Finlay Merchandising & Buying, eFinlay and G.E. Capital, individually and as
                            agent.

10.13              -        Amended and Restated Pledge Agreement dated as of January 22, 2003, by and among Finlay Jewelry,
                            FJI, Finlay Merchandising & Buying, eFinlay and G.E. Capital, as agent.

10.14              -        Amended and Restated Trademark Security Agreement dated as of January 22, 2003 by Finlay
                            Jewelry, FJI, Finlay Merchandising & Buying, eFinlay and G.E. Capital, as agent.

10.15              -        Amended and Restated Patent Security Agreement dated as of January 22, 2003 by Finlay Jewelry,
                            FJI, Finlay Merchandising & Buying and eFinlay in favor of G.E. Capital, as agent.

10.16              -        Amended and Restated Copyright Security Agreement dated as of January  22,  2003 by Finlay
                            Jewelry, FJI, Finlay Merchandising & Buying and eFinlay in favor of G.E. Capital, as agent.

10.17              -        Second Amended and Restated Open-End Mortgage Deed and Security  Agreement from Finlay Jewelry
                            to G.E. Capital, dated February 20, 2003, effective as of January 22, 2003.

10.18              -        Form of Officer's and Director's Indemnification Agreement (incorporated by reference to
                            Exhibit 10.4 filed as part of the Quarterly Report on Form 10-Q for the period ended April 29,
                            1995 filed by Finlay Jewelry on June 3, 1995).

                                       47
<PAGE>
+

10.19(a)           -        Amended and Restated Gold Consignment Agreement dated as of March 30, 2001 (the "Amended and
                            Restated Gold Consignment Agreement") between Finlay Jewelry, eFinlay, Inc. ("eFinlay") and
                            Sovereign Bank (as successor to Fleet National Bank, f/k/a BankBoston, N.A., f/k/a The First
                            National Bank of Boston, as successor to Rhode Island Hospital Trust National Bank) ("Sovereign
                            Bank"), and the other parties which are or may become parties thereto (incorporated by
                            reference to Exhibit 10.1 filed as part of the Quarterly  Report on Form 10-Q for the period
                            ended May 5, 2001 filed by Finlay Jewelry on June 18, 2001).

10.19(b)           -        First Amendment to the Amended and Restated Gold Consignment Agreement (incorporated by
                            reference to Exhibit 10.17(b) filed as part of the Annual Report on Form 10-K for the period
                            ended February 2, 2002 filed by Finlay Jewelry on April 29, 2002).

10.19(c)           -        Second Amendment, dated September 30, 2002, to the Amended and Restated Gold Consignment
                            Agreement (incorporated by reference to Exhibit 10 filed as part of the Quarterly Report on
                            Form 10-Q for the period ended November 2, 2002 filed by Finlay Jewelry on December 13, 2002).

10.19(d)           -        Third Amendment, dated April 4, 2003, to the Amended and Restated Gold Consignment Agreement.

10.20              -        Amended and Restated Security Agreement dated as of March 30, 2001 between Finlay Jewelry,
                            eFinlay and Sovereign Bank, as agent (incorporated by reference to Exhibit 10.2 filed as part
                            of the Quarterly Report on Form 10-Q for the period ended May 5, 2001 filed by Finlay Jewelry
                            on June 18, 2001).

10.21              -        Amended and Restated Intercreditor Agreement dated as of March 30, 2001 between Sovereign Bank,
                            as agent, and GE Capital, as agent, and acknowledged by Finlay Jewelry and eFinlay
                            (incorporated by reference to Exhibit 10.3 filed as part of the Quarterly Report on Form 10-Q
                            for the period ended May 5, 2001 filed by Finlay Jewelry on June 18, 2001).

10.22              -        Letter Agreement, dated April 4, 2002, by and between Equity-Linked Investors-II and the
                            Holding Company (incorporated by reference to Exhibit 10.20 filed as part of the Annual Report
                            on Form 10-K for the period ended February 2, 2002 filed by Finlay Jewelry on April 29, 2002).

10.23              -        Letter Agreement dated July 12, 2002 by and between Thomas H. Lee Equity Partners, L.P., the
                            Holding Company and the other parties thereto.

21.1               -        Subsidiaries of Finlay Jewelry

99.1               -        Certification of principal executive officer and principal financial officer pursuant to
                            the Sarbanes-Oxley Act of 2002, Section 906.
</TABLE>


     (b) Reports on Form 8-K

     On April 1, 2003, Finlay Jewelry filed a Current Report on Form 8-K under
Item 5 to announce that on March 26, 2003, Thomas H. Lee and Warren C. Smith,
Jr. resigned from the Holding Company's Board of Directors and its subsidiaries,
including Finlay Jewelry, and that on March 27, 2003, Mr. Lee and Mr. Smith,
along with Thomas H. Lee Equity Partners, L.P. and other affiliates, sold all
their equity holdings in the Holding Company to a private investor.

                                       48
<PAGE>



     On April 18, 2003, Finlay Jewelry filed a Current Report on Form 8-K under
Item 12 to announce that the Holding Company had adopted new accounting guidance
for vendor allowances (EITF 02-16) retroactive to the beginning of fiscal 2002
and had changed its method of accounting for such allowances going forward. As a
result, the Holding Company has adjusted its reported earnings for the 2002
fiscal year to include a one-time, non-cash after-tax charge of $17.2 million,
which is classified as a "cumulative effect of a change in accounting
principle."


                                       49
<PAGE>



                                   SIGNATURES

         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

                                          Finlay Fine Jewelry Corporation

Date: May 1, 2003                         By:       /s/ ARTHUR E. REINER
                                                    --------------------
                                                      Arthur E. Reiner
                                                    Chairman of the Board

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED:

<TABLE>
<CAPTION>

                     NAME                                              TITLE                                DATE
                     ----                                              -----                                ----
<S>                                                 <C>                                                 <C>
             /s/ ARTHUR E. REINER                    Chairman of the Board,                               May 1, 2003
-----------------------------------------------      Chief Executive Officer and Director
               Arthur E. Reiner                      (Principal Executive Officer)


            /s/ BRUCE E. ZURLNICK                    Senior Vice President, Treasurer and                 May 1, 2003
-----------------------------------------------      Chief Financial Officer (Principal
              Bruce E. Zurlnick                      Financial and Accounting Officer)


            /s/ DAVID B. CORNSTEIN                   Director                                             May 1, 2003
-----------------------------------------------
              David B. Cornstein

            /s/ NORMAN S. MATTHEWS                   Director                                             May 1, 2003
-----------------------------------------------
              Norman S. Matthews

           /s/ JAMES MARTIN KAPLAN                   Director                                             May 1, 2003
-----------------------------------------------
             James Martin Kaplan

              /s/ ROHIT M. DESAI                     Director                                             May 1, 2003
-----------------------------------------------
                Rohit M. Desai

            /s/ HANNE M. MERRIMAN                    Director                                             May 1, 2003
-----------------------------------------------
              Hanne M. Merriman

            /s/ THOMAS M. MURNANE                    Director                                            May 1, 2003
-----------------------------------------------
              Thomas M. Murnane

            /s/ MICHAEL GOLDSTEIN                    Director                                             May 1, 2003
-----------------------------------------------
              Michael Goldstein

              /s/ JOHN D. KERIN                      Director                                             May 1, 2003
-----------------------------------------------
                John D. Kerin
</TABLE>


                                       50
<PAGE>


                                 CERTIFICATIONS



I, Arthur E. Reiner, certify that:

1. I have reviewed this annual report on Form 10-K of Finlay Fine Jewelry
Corporation:

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 1, 2003
                                           /s/ Arthur E. Reiner
                                           -----------------------------------
                                           Arthur E. Reiner
                                           Chairman and Chief Executive
                                           Officer

                                       51
<PAGE>



I, Bruce E. Zurlnick, certify that:

1. I have reviewed this annual report on Form 10-K of Finlay Fine Jewelry
Corporation:

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 1, 2003
                                         /s/ Bruce E. Zurlnick
                                         --------------------------------
                                         Bruce E. Zurlnick
                                         Senior Vice President, Treasurer
                                         and Chief Financial Officer

                                       52
<PAGE>



                         FINLAY FINE JEWELRY CORPORATION
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                            PAGE
                                                                                                            ----
<S>                                                                                                         <C>
FINLAY FINE JEWELRY CORPORATION

Independent Auditors' Report.................................................................................F-2

Previously Issued Report of Independent Public Accountants...................................................F-3

Consolidated Statements of Operations for the years ended February 1, 2003,
   February 2, 2002 and February 3, 2001.....................................................................F-4

Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002......................................F-5

Consolidated Statements of Changes in Stockholder's Equity and Comprehensive Income
   for the years ended February 1, 2003, February 2, 2002 and February 3, 2001...............................F-6

Consolidated Statements of Cash Flows for the years ended February 1, 2003,
   February 2, 2002 and February 3, 2001.....................................................................F-7

Notes to Consolidated Financial Statements...................................................................F-8
</TABLE>


                                      F-1
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors
    of Finlay Fine Jewelry Corporation

We have audited the accompanying consolidated balance sheet of Finlay Fine
Jewelry Corporation (a Delaware corporation) and subsidiaries as of February 1,
2003, and the related consolidated statements of operations, changes in
stockholder's equity and comprehensive income and cash flows for the fiscal year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The Company's financial statements for the fiscal
years ended February 2, 2002 and February 3, 2001, before the inclusion of the
transitional disclosures discussed in Note 5 with respect to Statement of
Financial Accounting Standards ("SFAS") No. 148, Accounting for Stock Based
Compensation - Transition and Disclosure and in Note 2 with respect to SFAS
No. 142, Goodwill and Other Intangible Assets, were audited by other auditors
who have ceased operations. Those auditors expressed an unqualified opinion on
those financial statements in their report dated March 20, 2002.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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 audit provides a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Finlay Fine Jewelry Corporation and
subsidiaries as of February 1, 2003, and the results of their operations and
their cash flows for the fiscal year then ended in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for goodwill and other intangible assets in
2002 to conform to SFAS No. 142.

As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for vendor allowances in 2002 to conform to
Emerging Issues Task Force Issue No. 02-16.

As discussed above, the Company's fiscal 2001 and 2000 consolidated financial
statements were audited by other auditors who have ceased operations. These
financial statements have been revised to include the transitional disclosures
required by SFAS No. 148 and SFAS No. 142. Our audit procedures with respect to
the transitional disclosures included in Notes 5 and 2 with respect to 2001 and
2000 included (1) comparing the amount of stock-based compensation expense to
the Company's underlying analysis obtained from management, (2) comparing the
previously reported net income to the previously issued financial statements and
the adjustments to reported net income representing stock based compensation and
amortization expense related to goodwill, (including any related tax effects)
recognized in those periods, to the Company's underlying analysis obtained from
management, and (3) testing the mathematical accuracy of the reconciliation of
adjusted or pro forma net income, as applicable, to reported net income. In our
opinion, the disclosures for 2001 and 2000 in Notes 5 and 2 are appropriate.
However, we were not engaged to audit, review, or apply any procedures to the
2001 and 2000 consolidated financial statements of the Company other than with
respect to such disclosures and reclassifications and, accordingly, we do not
express an opinion or any other form of assurance on the 2001 and 2000
consolidated financial statements taken as a whole.

                                                          DELOITTE & TOUCHE LLP
New York, New York
April 14, 2003

                                      F-2
<PAGE>


      The following report is a copy of a previously issued Report of
Independent Public Accountants. This report relates to prior years' financial
statements. This report has not been reissued by Arthur Andersen LLP. Arthur
Andersen reported on the 2001 and 2000 consolidated financial statements prior
to the transitional disclosures discussed in Notes 2 and 5.


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors
    of Finlay Fine Jewelry Corporation:

We have audited the accompanying consolidated balance sheets of Finlay Fine
Jewelry Corporation (a Delaware corporation) and subsidiaries as of February 3,
2001 and February 2, 2002, and the related consolidated statements of
operations, changes in stockholder's equity and cash flows for the fiscal years
ended January 29, 2000, February 3, 2001 and February 2, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits 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 financial position of Finlay Fine Jewelry Corporation
and subsidiaries as of February 3, 2001 and February 2, 2002, and the results of
their operations and their cash flows for the fiscal years ended January 29,
2000, February 3, 2001 and February 2, 2002, in conformity with accounting
principles generally accepted in the United States.


                                                           ARTHUR ANDERSEN LLP
New York, New York
March 20, 2002


                                      F-3
<PAGE>




                         FINLAY FINE JEWELRY CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                         YEAR ENDED
                                                                     ----------------------------------------------------
                                                                      FEBRUARY 1,       FEBRUARY 2,        FEBRUARY 3,
                                                                         2003               2002               2001
                                                                     --------------    ---------------    ---------------
<S>                                                                  <C>              <C>                 <C>
Sales...........................................................     $    930,709      $    952,789       $  1,000,120
Cost of sales...................................................          450,532           479,255            496,291
                                                                     --------------    ---------------    ---------------
    Gross margin................................................          480,177           473,534            503,829
Selling, general and administrative expenses....................          398,578           393,457            409,019
Credit associated with the sale and closure of Sonab............           (1,432)            -                   -
Depreciation and amortization...................................           17,566            20,089             17,549
                                                                     --------------    ---------------    ---------------
    Income from operations......................................           65,465            59,988             77,261
Interest expense, net...........................................           17,927            19,989             23,117
                                                                     --------------    ---------------    ---------------
    Income before income taxes and cumulative effect of
         accounting change......................................           47,538            39,999             54,144
Provision for income taxes......................................           18,510            16,672             22,715
                                                                     --------------    ---------------    ---------------
     Income before cumulative effect of accounting change.......           29,028            23,327             31,429
Cumulative effect of accounting change, net of tax..............           17,209              -                   -
                                                                     --------------    ---------------    ---------------
     Net income.................................................     $     11,819      $     23,327       $     31,429
                                                                     ==============    ===============    ===============
</TABLE>







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


                                      F-4
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                     FEBRUARY 1,        FEBRUARY 2,
                                                                                         2003              2002
                                                                                     -------------     --------------
<S>                                                                                  <C>              <C>
                                      ASSETS
Current assets:
  Cash and cash equivalents....................................................      $    68,485       $    49,222
  Accounts receivable - department stores......................................           19,985            17,505
  Other receivables............................................................           30,879            25,953
  Merchandise inventories......................................................          263,544           304,508
  Prepaid expenses and other...................................................            3,237             2,351
  Deferred income taxes........................................................            9,858              -
                                                                                     -------------     --------------
     Total current assets .....................................................          395,988           399,539
                                                                                     -------------     --------------
Fixed assets:
  Building, equipment, fixtures and leasehold improvements.....................          120,946           119,743
  Less - accumulated depreciation and amortization.............................           50,575            47,717
                                                                                     -------------     --------------
     Fixed assets, net.........................................................           70,371            72,026
                                                                                     -------------     --------------
Deferred charges and other assets, net.........................................           21,170            20,811
Goodwill.......................................................................           91,046            91,046
                                                                                     -------------     --------------
     Total assets..............................................................      $   578,575       $   583,422
                                                                                     =============     ==============

                       LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
  Accounts payable - trade.....................................................      $   113,275       $   132,156
  Accrued liabilities:
     Accrued salaries and benefits.............................................           17,734            19,369
     Accrued miscellaneous taxes...............................................            6,841             6,521
     Accrued interest..........................................................            3,733             3,597
     Deferred income...........................................................           10,493              -
     Other.....................................................................           14,450            13,496
  Income taxes payable.........................................................           50,035            44,771
  Deferred income taxes........................................................             -                3,001
  Due to parent................................................................            5,467             3,294
                                                                                     -------------     --------------
     Total current liabilities.................................................          222,028           226,205
Long-term debt.................................................................          150,000           150,000
Deferred income taxes..........................................................           18,527            13,399
Other non-current liabilities..................................................              204               222
                                                                                     -------------     --------------
     Total liabilities.........................................................          390,759           389,826
                                                                                     -------------     --------------
Stockholder's equity:
  Common Stock, par value $.01 per share; authorized 5,000 shares;
     issued and outstanding 1,000 shares.......................................            -                  -
  Additional paid-in capital...................................................           82,975            82,975
  Retained earnings............................................................          104,786           110,525
  Accumulated other comprehensive income.......................................               55                96
                                                                                     -------------     --------------
     Total stockholder's equity................................................          187,816           193,596
                                                                                     -------------     --------------
     Total liabilities and stockholder's equity................................      $   578,575       $   583,422
                                                                                     =============     ==============
</TABLE>


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


                                      F-5
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                            AND COMPREHENSIVE INCOME
                        (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>

                                         COMMON STOCK                                 ACCUMULATED
                                     ---------------------  ADDITIONAL    RETAINED       OTHER           TOTAL
                                       NUMBER                PAID- IN     EARNINGS    COMPREHENSIVE   STOCKHOLDER'S   COMPREHENSIVE
                                      OF SHARES    AMOUNT     CAPITAL     (DEFICIT)       INCOME         EQUITY           INCOME
                                     -----------  --------  -----------  -----------  -------------  --------------   -------------
<S>                                   <C>         <C>      <C>           <C>          <C>            <C>               <C>
Balance, January 29, 2000........       1,000     $   -      $ 82,975     $  74,051     $    -         $ 157,026
  Net income.....................         -           -           -          31,429          -            31,429        $ 31,429
                                                                                                                        --------
  Comprehensive income...........                                                                                       $ 31,429
                                                                                                                        ========
  Dividends on common stock......         -           -           -          (9,032)         -            (9,032)
                                       ------     -------    --------     ---------     ---------      ---------
Balance, February 3, 2001........       1,000         -        82,975        96,448          -           179,423
  Net income.....................         -           -           -          23,327          -            23,327        $ 23,327
  Fair value of gold forward
    contracts at February 4, 2001         -           -           -            -             24               24              24
  Change in fair value of gold
    forward contracts............         -           -           -            -             72               72              72
                                                                                                                        --------
  Comprehensive income...........                                                                                       $ 23,423
                                                                                                                        ========
  Dividends on common stock......         -           -           -          (9,250)         -            (9,250)
                                       ------     -------    --------     ---------     ---------      ---------
Balance, February 2, 2002........       1,000         -        82,975       110,525          96          193,596
  Net income.....................         -           -           -          11,819          -            11,819        $ 11,819
  Change in fair value of gold
    forward contracts ...........         -           -           -            -            (41)             (41)            (41)
                                                                                                                        --------
  Comprehensive income...........                                                                                       $ 11,778
                                                                                                                        ========
  Dividends on common stock......         -           -           -         (17,558)         -           (17,558)
                                       ------     -------    --------     ---------     ---------      ---------
Balance, February 1, 2003........       1,000     $   -      $ 82,975     $ 104,786     $    55        $ 187,816
                                       ======     =======    ========     =========     =========      =========

</TABLE>




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


                                      F-6
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                 YEAR ENDED
                                                                               -----------------------------------------------
                                                                               FEBRUARY 1,      FEBRUARY 2,      FEBRUARY 3,
                                                                                   2003            2002             2001
                                                                               -------------    ------------    --------------
<S>                                                                            <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income...............................................................     $   11,819       $   23,327      $   31,429
  Adjustments to reconcile net income to net cash provided
     from operating activities:
  Cumulative effect of accounting change ..................................         17,209            -                -
  Depreciation and amortization............................................         17,566           20,089          17,549
  Amortization of deferred financing costs ................................          1,040            1,025           1,013
  Credit associated with the sale and closure of Sonab ....................         (1,432)           -                -
  Deferred income taxes ...................................................          5,128            1,729           1,068
  Other, net...............................................................            255            2,606             470
  Changes in operating assets and liabilities:
     (Increase) decrease in accounts and other receivables.................         (7,406)          10,310          (9,165)
     (Increase) decrease in merchandise inventories........................         24,348           22,003         (30,892)
     (Increase) decrease in prepaid expenses and other.....................           (886)             530            (814)
     Increase (decrease) in accounts payable and accrued liabilities.......        (14,222)         (35,004)         23,508
     Increase (decrease) in deferred income taxes..........................         (1,146)             (96)          1,423
     Increase (decrease) in due to parent..................................            267           (3,883)         (1,134)
                                                                                -------------    ------------    --------------
        NET CASH PROVIDED FROM OPERATING ACTIVITIES........................         52,540           42,636          34,455
                                                                                -------------    ------------    --------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of equipment, fixtures and leasehold improvements..............        (12,489)         (13,850)        (14,120)
  Deferred charges and other, net..........................................         (3,261)          (4,347)         (4,022)
  Proceeds from sale of Sonab assets.......................................          -                  765           7,592
  Payment for purchase of J.B. Rudolph assets..............................          -                -             (20,605)
  Proceeds from sale of outlet assets......................................          -                -                 752
                                                                                -------------    ------------    --------------
        NET CASH USED IN INVESTING ACTIVITIES..............................        (15,750)         (17,432)        (30,403)
                                                                                -------------    ------------    --------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from revolving credit facility..................................        654,459          726,915         743,852
  Principal payments on revolving credit facility..........................       (654,459)        (726,915)       (743,852)
  Capitalized financing costs .............................................         (1,875)           -                -
  Payment of dividends.....................................................        (15,652)          (7,231)         (7,640)
                                                                                -------------    ------------    --------------
        NET CASH USED IN FINANCING ACTIVITIES..............................        (17,527)          (7,231)         (7,640)
                                                                                -------------    ------------    --------------
        EFFECT OF EXCHANGE RATE CHANGES ON CASH............................          -                -                  79
                                                                                -------------    ------------    --------------
        INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                            19,263           17,973          (3,509)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...............................         49,222           31,249          34,758
                                                                                -------------    ------------    --------------
CASH AND CASH EQUIVALENTS, END OF YEAR.....................................     $   68,485       $   49,222      $   31,249
                                                                                =============    ============    ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
  Interest paid............................................................     $   16,751       $   18,950      $   22,154
                                                                                =============    ============    ==============
  Income taxes paid........................................................     $    8,964       $   14,643      $    4,622
                                                                                =============    ============    ==============
</TABLE>



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


                                      F-7
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1--ORGANIZATION OF THE COMPANY AND SIGNIFICANT TRANSACTIONS

     Finlay Fine Jewelry Corporation, a Delaware corporation (together with its
wholly owned subsidiaries "Finlay Jewelry"), is a wholly owned subsidiary of
Finlay Enterprises, Inc. (the "Holding Company"). References to "Finlay" mean
collectively, the Holding Company and Finlay Jewelry. Finlay is a retailer of
fine jewelry products and operates leased fine jewelry departments in department
stores throughout the United States. All references herein to leased departments
refer to departments operated pursuant to license agreements or other
arrangements with host department stores.

     On January 22, 2003, Finlay Jewelry's revolving credit agreement with
General Electric Capital Corporation ("G.E. Capital") and certain other lenders
was amended and restated (the "Revolving Credit Agreement"). The Revolving
Credit Agreement, which matures in January 2008, provides Finlay Jewelry with a
senior secured revolving line of credit up to $225.0 million (the "Revolving
Credit Facility").


NOTE 2--SIGNIFICANT ACCOUNTING POLICIES

     CONSOLIDATION: The accompanying consolidated financial statements include
the accounts of Finlay Jewelry and its wholly owned subsidiaries. Intercompany
accounts and transactions have been eliminated in consolidation.

     USE OF ESTIMATES: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from those estimates.

     FISCAL YEAR: Finlay Jewelry's fiscal year ends on the Saturday closest to
January 31. References to 2003, 2002, 2001 and 2000 relate to the fiscal years
ended on January 31, 2004, February 1, 2003, February 2, 2002 and February 3,
2001. Each of the fiscal years includes 52 weeks except 2000, which includes 53
weeks.

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

     The cost to Finlay of gold merchandise sold on consignment, which typically
varies with the price of gold, is not fixed until the merchandise is sold.
Finlay, at times, enters into futures contracts, such as forwards, based upon
the anticipated sales of gold product in order to hedge against the risk of gold
price fluctuations. Such contracts typically have durations ranging from one to
nine months. Changes in the market value of futures contracts are accounted for
as an addition to, or reduction from, the inventory cost. For the years ended
February 1, 2003, February 2, 2002 and February 3, 2001, the gain/loss on open
futures contracts was not material. At both February 1, 2003 and February 2,
2002, Finlay Jewelry had several open positions in futures contracts for gold
totaling 4,000 fine troy ounces and 17,500 fine troy ounces, respectively,
valued at $1.4 million and $4.8 million, respectively. The fair value of gold
under such contracts was $1.5 million and $4.9 million at February 1, 2003 and
February 2, 2002, respectively.

                                      F-8
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

         HEDGING: Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended,
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. Under SFAS No. 133, all derivatives, whether designated in
hedging relationships or not, are required to be recorded on the balance sheet
at fair value. SFAS No. 133 defines requirements for designation and
documentation of hedging relationships, as well as ongoing effectiveness
assessments, which must be met in order to qualify for hedge accounting. For a
derivative that does not qualify as a hedge, changes in fair value would be
recorded in earnings immediately. Finlay Jewelry has designated its existing
derivative instruments, consisting of gold forward contracts, as cash flow
hedges. For derivative instruments designated as cash flow hedges, the effective
portion of the change in the fair value of the derivative is recorded in
accumulated other comprehensive income, a separate component of stockholder's
equity, and is reclassified into cost of sales when the offsetting effects of
the hedged transaction affects earnings. Changes in the fair value of the
derivative attributable to hedge ineffectiveness are recorded in earnings
immediately. Finlay Jewelry adopted SFAS No. 133 on February 4, 2001 and
recorded $24,000 as a cumulative transition adjustment (increasing other
comprehensive income). At February 1, 2003, the fair value of the gold forward
contracts resulted in the recognition of an asset of $93,600. The amount
recorded in accumulated other comprehensive income of $55,000, net of tax, is
expected to be reclassified into earnings during 2003.

         Finlay Jewelry has documented all relationships between hedging
instruments and hedged items, as well as its risk management objectives and
strategy for undertaking various hedge transactions. Finlay Jewelry also
assesses, both at the hedge's inception and on an ongoing basis, whether the
derivatives that are used in hedging transactions are highly effective in
offsetting changes in cash flows of hedged items. Finlay Jewelry believes that
the designated hedges will be highly effective and that the related hedge
accounting will not have a material impact on Finlay Jewelry's results of
operations.

     DEPRECIATION AND AMORTIZATION: Depreciation and amortization are computed
by the straight-line method over the estimated useful lives of the fixed assets
ranging from three to thirty-nine years.

      SOFTWARE DEVELOPMENT COSTS: Software development costs have been accounted
for in accordance with Statement of Position (the "SOP") No. 98-1, "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use". The
SOP states that software development costs that are incurred in the preliminary
project stage are expensed as incurred. Once the specified criteria of the SOP
have been met, internal and external direct costs incurred in developing or
obtaining computer software as well as related interest costs are capitalized.
Training and data conversion costs are expensed as incurred. In addition, costs
incurred for the routine operation and maintenance of management information
systems and software are expensed as incurred. Amortization is computed by the
straight-line method over the estimated useful lives of the software ranging
from three to seven years.

       Included in Deferred charges and other assets in the accompanying
Consolidated Balance Sheets at February 1, 2003 and February 2, 2002, are gross
capitalized software costs of $27,526,000 and $24,254,000, respectively, and
accumulated amortization of $10,300,000 and $6,564,000, respectively.

                                      F-9
<PAGE>



                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     GOODWILL: On February 3, 2002, Finlay Jewelry adopted SFAS No. 142,
"Goodwill and Other Intangible Assets". This Statement requires that goodwill no
longer be amortized over its estimated useful life but tested for impairment on
an annual basis. During the first quarter of 2002, a transitional goodwill
impairment test was performed and Finlay Jewelry determined that there was no
impairment of goodwill. Further, as required by SFAS No. 142, an annual
impairment test was completed at the end of fiscal 2002 and Finlay Jewelry
determined that there was no impairment. The following is a reconciliation of
reported Net income adjusted to reflect the impact of the discontinuance of
goodwill amortization for 2001 and 2000. Finlay Jewelry's actual 2002 Net income
is shown for comparative purposes.

<TABLE>
<CAPTION>

                                                                        FISCAL YEARS ENDED
                                                            --------------------------------------------
                                                            FEBRUARY 1,      FEBRUARY 2,     FEBRUARY 3,
                                                               2003             2002            2001
                                                            ------------    ------------     -----------
                                                                            (IN THOUSANDS)
<S>                                                         <C>             <C>              <C>
           NET INCOME:
           Reported net income ..........................   $   11,819       $  23,327       $  31,429
           Add: Goodwill amortization....................         -              3,753           3,711
           Less: Tax impact of deductible goodwill.......         -               (320)           (303)
                                                            ------------     ------------    -----------
           Adjusted net income...........................   $   11,819       $  26,760        $ 34,837
                                                            ============     ============    ===========
</TABLE>


     DEBT ISSUANCE COSTS: Debt issuance costs are amortized over the term of the
related debt agreements using the straight line method, which approximates that
of the effective interest method. Net deferred debt issuance costs totaled
$3,453,000 at February 1, 2003 and $2,788,000 at February 2, 2002. The debt
issuance costs are reflected as a component of Deferred charges and other
assets, net, in the accompanying Consolidated Balance Sheets. Amortization of
debt issuance costs for 2002, 2001 and 2000 totaled $1,022,000, $1,025,000 and
$1,013,000, respectively, and have been recorded as a component of Interest
expense, net, in the accompanying Consolidated Statements of Operations.

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

     COST OF SALES: Cost of sales includes the cost of merchandise sold, repair
expense, shipping, shrinkage and inventory losses. Buying and occupancy costs
such as lease fees are not included in Cost of sales and are reflected in
Selling, general and administrative expenses ("SG&A") in the accompanying
Consolidated Statements of Operations.

     ADVERTISING COSTS: All costs associated with advertising are expensed in
the month that the advertising takes place. For 2002, 2001 and 2000, gross
advertising expenses were $48,975,000, $53,029,000 and $59,434,000,
respectively, and are included in SG&A in the accompanying Consolidated
Statements of Operations.

     VENDOR ALLOWANCES: Finlay Jewelry receives allowances from its vendors
through a variety of programs and arrangements, including cooperative
advertising. The allowances are generally intended to offset Finlay Jewelry's
costs of promoting, advertising and selling the vendors' products in its
departments. Vendor allowances are recognized as a reduction of cost of sales or
SG&A when the purpose for which the vendor funds were intended to be used has
been fulfilled. Accordingly, a reduction or increase in vendor allowances has an
inverse impact on cost of sales and/or SG&A.

                                      F-10
<PAGE>



                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     In March 2003, the Financial Accounting Standards Board's ("FASB") Emerging
Issues Task Force ("EITF") finalized Issue No. 02-16, "Accounting by a Customer
(Including a Reseller) for Cash Consideration Received from a Vendor"("EITF
02-16"). EITF 02-16 addresses the accounting treatment for vendor allowances and
provides that cash consideration received from a vendor should be presumed to be
a reduction of the prices of the vendors' product and should therefore be shown
as a reduction in the purchase price of the merchandise. Further, these
allowances should be recognized as a reduction in cost of sales when the related
product is sold. To the extent that the cash consideration represents a
reimbursement of a specific, incremental and identifiable cost, then those
vendor allowances should be used to offset such costs.

     In accordance with EITF 02-16, Finlay Jewelry recorded a cumulative effect
of accounting change as of February 3, 2002, the date of adoption, that
decreased net income for 2002 by $17.2 million, net of tax. As of February 3,
2002, deferred vendor allowances totaled (i) $17,129,000 for owned merchandise,
and (ii) $12,306,000 for merchandise received on consignment. As of February 1,
2003, Finlay Jewelry's fiscal year end, deferred vendor allowances totaled (i)
$18,452,000 for owned merchandise, which is included as an offset to Merchandise
inventories on the 2002 Consolidated Balance Sheet, and (ii) $10,493,000 for
merchandise received on consignment, which is included as Deferred income on the
2002 Consolidated Balance Sheet. In 2002, this change resulted in the
reclassification of vendor allowances of $20.0 million, which had previously
been accounted for as a reduction to SG&A, to now reduce cost of sales and
consequently, increase gross margin. Finlay Jewelry's 2002 unaudited quarterly
financial data has been revised to reflect this change in accounting method
(refer to Note 10). The adoption of EITF 02-16 is not expected to have a
material impact on the financial position or results of operations of Finlay
Jewelry in 2003.

     During 2001 and 2000, Finlay Jewelry recorded its vendor allowances as an
offset to gross advertising expenses, which is included in SG&A on the
Consolidated Statements of Operations. For 2001 and 2000, the unaudited pro
forma impact of the adoption of EITF 02-16, as if it had occurred prior to 2000,
was to decrease cost of sales and increase SG&A by $20,374,000 and $23,665,000,
respectively. For both years, Net income would not have been materially
different (unaudited).

     CASH EQUIVALENTS: Finlay Jewelry considers cash on hand, deposits in banks
and deposits in money market funds as cash and cash equivalents.

     FAIR VALUE OF FINANCIAL INSTRUMENTS: Cash, accounts receivable, short-term
borrowings, accounts payable and accrued liabilities are reflected in the
consolidated financial statements at fair value due to the short-term maturity
of these instruments. Marketable securities are recorded in the consolidated
financial statements at current market value, which approximates cost. The fair
value of Finlay Jewelry's debt and off-balance sheet financial instruments are
disclosed in Note 4 and in Merchandise inventories above.

     STOCK-BASED COMPENSATION: In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure" which
became effective in 2002. This Statement amends SFAS No. 123 "Accounting for
Stock-Based Compensation", to provide alternative methods of transition for an
entity that voluntarily changes to the fair value method of accounting for
stock-based compensation. Finlay has elected to continue to recognize
stock-based compensation using the intrinsic value method and has incorporated
the additional disclosure requirements of SFAS No. 148. Pro forma net income is
disclosed in Note 5. Deferred stock-based compensation is amortized using the
straight-line method over the vesting period.

                                      F-11
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)


     ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS: SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets", which became
effective for Finlay Jewelry in 2002, addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
extends the reporting requirements to include reporting separately as
discontinued operations, components of an entity that have either been disposed
of or classified as held-for-sale. The adoption of SFAS No. 144 did not have a
material impact on the financial position or results of operations of Finlay
Jewelry.

     ACCOUNTING FOR COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES: In June
2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit
or Disposal Activities", which addresses financial accounting and reporting for
costs associated with exit or disposal activities. SFAS No. 146 requires that
liabilities for costs associated with exit or disposal activities be recognized
when the liabilities are incurred. This Statement also establishes fair value as
the objective for initial measurement of the liabilities. The provisions of SFAS
No. 146 are effective for exit or disposal activities that are initiated after
December 31, 2002. The adoption of SFAS No. 146 is not expected to have a
material impact on the financial position or results of operations of Finlay
Jewelry.

     ACCOUNTING STANDARD TO BE ADOPTED IN 2003: In April 2002, the FASB issued
SFAS No. 145, "Rescission of FASB Statement No. 4, 44, and 64, Amendment of FASB
No. 13, and Technical Corrections", which amends certain existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. Additionally, the
Statement provides that gains and losses from debt extinguishment are not
automatically shown as an extraordinary item on a company's statement of
operations. The provisions of SFAS No. 145 are effective for fiscal years
beginning after May 15, 2002. The adoption of SFAS No. 145 is not expected to
have a material impact on the financial position or results of operations of
Finlay Jewelry.

     SEASONALITY: A significant portion of Finlay's revenues are generated in
the fourth quarter due to the seasonality of the retail industry. As such,
results for interim periods are not indicative of annual results. Refer to Note
10 for unaudited quarterly financial data.


NOTE 3--MERCHANDISE INVENTORIES

Merchandise inventories consisted of the following:

<TABLE>
<CAPTION>

                                                                    FEBRUARY 1,            FEBRUARY 2,
                                                                       2003                    2002
                                                                  ----------------       -----------------
                                                                              (IN THOUSANDS)
<S>                                                               <C>                    <C>
Jewelry goods - rings, watches and other fine jewelry
    (first-in, first-out ("FIFO") basis)........................  $     275,339          $        314,473
Less:  Excess of FIFO cost over LIFO inventory value............         11,795                     9,965
                                                                  ----------------       -----------------
                                                                  $     263,544          $        304,508
                                                                  ================       =================
</TABLE>

                                      F-12
<PAGE>





                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 3--MERCHANDISE INVENTORIES (CONTINUED)

     In accordance with EITF 02-16, Merchandise inventories has been reduced by
$18.5 million as of February 1, 2003 to reflect the vendor allowances as a
reduction in the cost of the merchandise. The LIFO method had the effect of
decreasing income before income taxes in 2002, 2001 and 2000 by $2,342,000
(excluding a cumulative LIFO benefit of $512,000 relating to the adoption of
EITF 02-16), $3,783,000 and $1,801,000, respectively. Finlay determines its LIFO
inventory value by utilizing selected producer price indices published for
jewelry and watches by the Bureau of Labor Statistics.

     Approximately $359,676,000 and $359,729,000 at February 1, 2003 and
February 2, 2002, respectively, of merchandise received on consignment is not
included in Merchandise inventories and Accounts payable-trade in the
accompanying Consolidated Balance Sheets.

     Finlay Jewelry is party to an amended and restated gold consignment
agreement (as amended, the "Gold Consignment Agreement"), which enables Finlay
Jewelry to receive consignment merchandise by providing gold, or otherwise
making payment, to certain vendors. While the merchandise involved remains
consigned, title to the gold content of the merchandise transfers from the
vendors to the gold consignor.

     Effective September 30, 2002, Finlay Jewelry amended the Gold Consignment
Agreement to extend the term to July 31, 2005, and to permit Finlay Jewelry to
obtain up to the lesser of (i) 165,000 fine troy ounces or (ii) $50.0 million
worth of gold, subject to a formula as prescribed by the Gold Consignment
Agreement. At February 1, 2003 and February 2, 2002, amounts outstanding under
the Gold Consignment Agreement totaled 134,785 and 127,519 fine troy ounces,
respectively, valued at approximately $49.5 million and $36.0 million,
respectively. In the event this agreement is terminated, Finlay Jewelry will be
required to return or repurchase the outstanding gold at the prevailing gold
rate in effect on that date. For financial statement purposes, the consigned
gold is not included in Merchandise inventories on Finlay Jewelry's Consolidated
Balance Sheets and, therefore, no related liability has been recorded.

     Under the Gold Consignment Agreement, Finlay Jewelry is required to pay a
daily consignment fee on the dollar equivalent of the fine gold value of the
ounces of gold consigned thereunder. The daily consignment fee is based on a
floating rate which, as of February 1, 2003 and February 2, 2002, was
approximately 2.8% and 3.0%, respectively, per annum. In addition, Finlay is
required to pay a fee of 0.5% if the amount of gold consigned has a value equal
to or less than $12.0 million. Included in interest expense for the years ended
February 1, 2003, February 2, 2002 and February 3, 2001 are consignment fees of
$1,153,000, $1,228,000 and $979,000, respectively.

     In conjunction with the Gold Consignment Agreement, Finlay Jewelry granted
the gold consignor a first priority perfected lien on, and a security interest
in, specified gold jewelry of participating vendors approved under the Gold
Consignment Agreement and a lien on proceeds and products of such jewelry
subject to the terms of an intercreditor agreement between the gold consignor
and G.E. Capital.

     The Gold Consignment Agreement requires Finlay Jewelry to comply with
certain covenants, including restrictions on the incurrence of certain
indebtedness, the creation of liens, engaging in transactions with affiliates
and limitations on the payment of dividends. In addition, the Gold Consignment
Agreement also contains various financial covenants, including minimum earnings
and fixed charge coverage ratio requirements and certain maximum debt
limitations. Finlay Jewelry was in compliance with all of its covenants as of
and for the year ended February 1, 2003.

                                      F-13
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4--SHORT AND LONG-TERM DEBT

     The Holding Company and Finlay Jewelry are parties to the Revolving Credit
Agreement with G.E. Capital and the other lenders thereto which provides Finlay
Jewelry with a Revolving Credit Facility of up to $225.0 million. The Revolving
Credit Facility matures in January 2008, and allows borrowings based on an
advance rate of (i) up to 85% of eligible accounts receivable and (ii) up to 60%
of eligible owned inventory after taking into account such reserves or offsets
as G.E. Capital may deem appropriate (the "Borrowing Base"). Eligibility
criteria are established by G.E. Capital, which retains the right to adjust the
Borrowing Base in its reasonable judgement by revising standards of eligibility,
establishing reserves and/or increasing or decreasing from time to time the
advance rates (except that any increase in the borrowing base rate percentage
shall require the consent of other lenders). Finlay Jewelry is permitted to use
up to $30 million of the Revolving Credit Facility for the issuance of letters
of credit issued for the account of Finlay Jewelry. The outstanding revolving
credit balance and letter of credit balance under the Revolving Credit Facility
are required to be reduced each year to $50 million or less and $20 million or
less, respectively, for a 30 consecutive day period (the "Balance Reduction
Requirement"). Funds available under the Revolving Credit Agreement are utilized
to finance working capital needs.

     Amounts outstanding under the Revolving Credit Agreement bear interest at a
rate equal to, at Finlay's option, (i) the Index Rate (as defined) plus a margin
ranging from zero to 1.0% or (ii) adjusted Eurodollar rate plus a margin ranging
from 1.0% to 2.0%, in each case depending on the financial performance of
Finlay. "Index Rate" is defined as the higher of (i) the prime rate and (ii) the
Federal Funds Rate plus 50 basis points per annum. A letter of credit fee which
could range from 1.0% to 2.0%, per annum, depending on the financial performance
of Finlay, of the face amount of letters of credit guaranteed under the
Revolving Credit Agreement is payable monthly in arrears. An unused facility fee
on the average unused daily balance of the Revolving Credit Facility is payable
monthly in arrears equal to 0.375% per annum. Upon the occurrence (and during
the continuance) of an event of default under the Revolving Credit Agreement,
interest would accrue at a rate which is 2% in excess of the rate otherwise
applicable, and would be payable upon demand.

     The Revolving Credit Agreement is secured by a first priority perfected
security interest in all of Finlay Jewelry's (and any subsidiary's) present and
future tangible and intangible assets. The Revolving Credit Agreement contains
customary covenants, including limitations on or relating to capital
expenditures, liens, indebtedness, investments, mergers, acquisitions, affiliate
transactions, management compensation and the payment of dividends and other
restricted payments. The Revolving Credit Agreement also contains various
financial covenants, including minimum earnings and fixed charge coverage ratio
requirements and certain maximum debt limitations. Finlay was in compliance with
all of its covenants as of and for the year ended February 1, 2003.

     There were no amounts outstanding at February 1, 2003 or February 2, 2002
under the Revolving Credit Agreement. The maximum amounts outstanding under the
Revolving Credit Agreement during 2002, 2001 and 2000 were $111,356,000,
$125,231,000 and $155,559,000, respectively. The average amounts outstanding for
the same periods were $61,151,000, $80,753,000 and $96,612,000, respectively.
The weighted average interest rates were 3.9%, 5.5% and 8.6% for 2002, 2001 and
2000, respectively.

                                      F-14
<PAGE>






                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4--SHORT AND LONG-TERM DEBT (CONTINUED)

At February 1, 2003 and February 2, 2002, Finlay had letters of credit
outstanding totaling $7.3 million and $4.3 million, respectively, which
guarantee various trade activities. The contract amounts of the letters of
credit approximate their fair value.

     Long-term debt consisted of the following:

<TABLE>
<CAPTION>

                                                                         FEBRUARY 1,        FEBRUARY 2,
                                                                             2003              2002
                                                                         -------------     --------------
                                                                                 (IN THOUSANDS)
<S>                                                                     <C>               <C>
         Senior Notes (a).........................................       $    150,000      $    150,000
                                                                         =============     ==============
</TABLE>

---------------------
       (a) On April 24, 1998, Finlay Jewelry issued 83/8% Senior Notes due May
       1, 2008 (the "Senior Notes") with an aggregate principal amount of
       $150,000,000. Interest on the Senior Notes is payable semi-annually on
       May 1 and November 1 of each year, and commenced on November 1, 1998.
       Except in the case of certain equity offerings, the Senior Notes are not
       redeemable prior to May 1, 2003. Thereafter, the Senior Notes will be
       redeemable, in whole or in part, at the option of Finlay, at specified
       redemption prices plus accrued and unpaid interest, if any, to the date
       of the redemption. In the event of a Change of Control (as defined in the
       indenture relating to the Senior Notes (as amended, the "Senior Note
       Indenture")), each holder of the Senior Notes will have the right to
       require Finlay Jewelry to repurchase its Senior Notes at a purchase price
       equal to 101% of the principal amount thereof plus accrued and unpaid
       interest thereon to the repurchase date. The Senior Notes rank senior in
       right of payment to all subordinated indebtedness of Finlay Jewelry and
       pari passu in right of payment with all unsubordinated indebtedness of
       Finlay Jewelry. However, because the Revolving Credit Agreement is
       secured by a pledge of substantially all the assets of Finlay Jewelry,
       the Senior Notes are effectively subordinated to the borrowings under the
       Revolving Credit Agreement. The Senior Note Indenture contains
       restrictions relating to, among other things, the payment of dividends,
       the making of certain investments or other restricted payments, the
       incurrence of additional indebtedness, the creation of certain liens,
       entering into transactions with affiliates, the disposition of certain
       assets and engaging in mergers and consolidations.

       The fair value of the Senior Notes at February 1, 2003, determined based
       on market quotes, was approximately $140,438,000.

       On April 24, 1998, the Holding Company issued 9% Senior Debentures due
       May 1, 2008 (the "Senior Debentures") with an aggregate principal amount
       of $75,000,000. Interest on the Senior Debentures is payable
       semi-annually on May 1 and November 1 of each year, and commenced on
       November 1, 1998. Except in the case of certain equity offerings, the
       Senior Debentures are not redeemable prior to May 1, 2003. Thereafter,
       the Senior Debentures will be redeemable, in whole or in part, at the
       option of Finlay, at specified redemption prices plus accrued and unpaid
       interest, if any, to the date of the redemption. In the event of a Change
       of Control (as defined in the indenture relating to the Senior Debentures
       (as amended, the "Senior Debenture Indenture" and collectively, with the
       Senior Note Indenture, the "Senior Indentures")), each holder of the
       Senior Debentures will have the right to require the Holding Company to
       repurchase its Senior Debentures at a purchase price equal to 101% of the
       principal amount thereof plus accrued and unpaid interest thereon to the
       repurchase date. The Senior Debentures rank pari passu in right of
       payment with all unsubordinated indebtedness of the Holding Company and
       senior in right of payment to all subordinated indebtedness of the
       Holding Company. The Senior Debentures are secured by a first priority
       lien on and security interest in all of the issued and outstanding stock
       of Finlay Jewelry. However, the

                                      F-15
<PAGE>

                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 4--SHORT AND LONG-TERM DEBT (CONTINUED)

       operations of the Holding Company are conducted through Finlay Jewelry
       and, therefore, the Holding Company is dependent upon the cash flow of
       Finlay Jewelry to meet its obligations, including its obligations under
       the Senior Debentures. As a result, the Senior Debentures are effectively
       subordinated to all indebtedness and all other obligations of Finlay
       Jewelry. The Senior Debenture Indenture contains restrictions relating
       to, among other things, the payment of dividends, the making of certain
       investments or other restricted payments, the incurrence of additional
       indebtedness, the creation of certain liens, entering into transactions
       with affiliates, the disposition of certain assets and engaging in
       mergers and consolidations.

       The fair value of the Senior Debentures, determined based on market
       quotes, was approximately $67,500,000 at February 1, 2003.

     Finlay was in compliance with all of the provisions of the Senior
     Indentures as of and for the year ended February 1, 2003.

     The aggregate amounts of long-term debt payable in each of the five years
in the period ending February 1, 2008 and thereafter are as follows:

<TABLE>
<CAPTION>

                                                                           (IN THOUSANDS)
                                                                           ---------------
<S>                                                                         <C>
                2003................................................         $      -
                2004................................................                -
                2005................................................                -
                2006................................................                -
                2007................................................                -
                Thereafter..........................................             150,000
                                                                           ---------------
                                                                             $   150,000
                                                                           ===============
</TABLE>


     Interest expense for 2002, 2001 and 2000 was $18,015,000, $20,089,000 and
$23,229,000, respectively. Interest income for the same periods was $88,000,
$100,000 and $112,000, respectively.


NOTE 5--LONG TERM INCENTIVE PLANS AND OTHER

     The Holding Company's Long Term Incentive Plan (the "1993 Plan") permits
the Holding Company to grant to key employees of the Holding Company and its
subsidiaries, consultants and certain other persons, and directors of the
Holding Company (other than members of the Compensation Committee of the Holding
Company's Board of Directors), the following: (i) stock options; (ii) stock
appreciation rights in tandem with stock options; (iii) limited stock
appreciation rights in tandem with stock options; (iv) restricted or
nonrestricted stock awards subject to such terms and conditions as the
Compensation Committee shall determine; (v) performance units which are based
upon attainment of performance goals during a period of not less than two nor
more than five years and which may be settled in cash or in the Holding
Company's common stock, par value $.01 per share ("Common Stock"), at the
discretion of the Compensation Committee; or (vi) any combination of the
foregoing. Under the 1993 Plan, the Holding Company may grant stock options
which are either incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or non-incentive
stock options. As of February 1, 2003, an aggregate of 732,596 shares of the
Holding Company's Common Stock has been reserved for issuance pursuant to the
1993 Plan, of which a total of 455,320 shares are subject to options granted to
certain senior management, key employees and a director. The exercise prices of
such

                                      F-16
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5--LONG TERM INCENTIVE PLANS AND OTHER (CONTINUED)

options range from $7.23 per share to $16.50 per share.

     On March 6, 1997, the Board of Directors of the Holding Company adopted the
1997 Long Term Incentive Plan (the "1997 Plan"), which was approved by the
Holding Company's stockholders in June 1997. The 1997 Plan, which is similar to
the 1993 Plan, is intended as a successor to the 1993 Plan and provides for the
grant of the same types of awards as are currently available under the 1993
Plan. Of the 1,850,000 shares of the Holding Company's Common Stock that have
been reserved for issuance pursuant to the 1997 Plan, a total of 1,135,015
shares, as of February 1, 2003, are subject to options granted to certain senior
management, key employees and directors. The exercise prices of such options
range from $7.05 per share to $24.31 per share.

     Finlay has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". As permitted by SFAS No. 123, Finlay
elected to continue to account for stock-based compensation using the intrinsic
value method. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans. Had the fair value method of accounting been
applied to the Holding Company's stock option plans, which requires recognition
of compensation cost ratably over the vesting period of the stock options, Net
income would be as follows:

<TABLE>
<CAPTION>

                                                                                FISCAL YEAR ENDED
                                                                   --------------------------------------------
                                                                   FEBRUARY 1,       FEBRUARY       FEBRUARY 3,
                                                                      2003            2, 2002           2001
                                                                   ------------     ------------    -----------
                                                                                   (IN THOUSANDS)
<S>                                                               <C>              <C>             <C>
           NET INCOME:
           Reported net income...........................          $   11,819       $  23,327       $  31,429
           Less: Stock-based compensation determined
                    under the fair value method, net of tax              (675)           (716)         (2,060)
                                                                   ------------     ------------    -----------
           Pro forma net income...........................         $   11,144       $  22,611       $  29,369
                                                                   ============     ============    ===========
</TABLE>


     The fair value of options granted in 2002, 2001 and 2000 was estimated
using the Black-Scholes option-pricing model based on the weighted average
market price at the grant date of $12.01 in 2002, $7.48 in 2001 and $12.75 in
2000 and the following weighted average assumptions: risk free interest rate of
4.73%, 4.62% and 6.80% for 2002, 2001 and 2000, respectively, expected life of
seven years for each of 2002, 2001 and 2000 and volatility of 56.56% for 2002,
51.13% for 2001 and 49.48% for 2000. The weighted average fair value of options
granted in 2002, 2001 and 2000 was $4.33, $2.57 and $5.22, respectively.

     The following summarizes the transactions pursuant to the Holding Company's
1993 Plan and 1997 Plan for 2002, 2001 and 2000:

<TABLE>
<CAPTION>

                                                  2002                          2001                            2000
                                       ---------------------------    --------------------------     ---------------------------
                                       NUMBER OF       WTD. AVG.      NUMBER OF      WTD. AVG.        NUMBER OF      WTD. AVG.
                                        OPTIONS        EX. PRICE       OPTIONS       EX. PRICE         OPTIONS       EX. PRICE
                                       -----------     -----------    -----------    -----------     ------------    -----------
<S>                                    <C>            <C>             <C>            <C>             <C>            <C>
Outstanding at beginning of year...     1,650,035      $    11.26      1,361,036     $    12.10       1,138,400      $     9.79
Granted............................        35,000           12.01        324,000           7.48         272,100           12.75
Exercised..........................       (87,627)           8.04        (14,967)          8.13         (10,633)           7.94
Forfeited..........................        (7,073)          10.78        (20,034)          9.84         (38,831)          13.73
                                       -----------     -----------    -----------    -----------     ------------    -----------
Outstanding at end of year.........     1,590,335      $    11.46      1,650,035     $    11.26       1,361,036      $    12.10
                                       ===========     ===========    ===========    ===========     ============    ===========
Exercisable at end of year.........     1,078,482      $    12.27        973,421     $    12.22         880,282      $    11.89
</TABLE>


                                      F-17
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5--LONG TERM INCENTIVE PLANS AND OTHER (CONTINUED)

     The options outstanding at February 1, 2003 have exercise prices between
$7.05 and $24.31, with a weighted average exercise price of $11.46 and a
weighted average remaining contractual life of 5.22 years. Options generally
vest in five years and expire in ten years from their dates of grant.

     On December 1, 2000, the Holding Company announced that its Board of
Directors had approved a stock repurchase program to acquire up to $20 million
of outstanding Common Stock. The Holding Company may, at the discretion of
management, purchase its Common Stock, from time to time, through September 29,
2003. The extent and timing of repurchases will depend upon general business and
market conditions, stock prices, availability under the Revolving Credit
Facility, compliance with certain restrictive covenants and its cash position
and requirements going forward. The repurchase program may be modified, extended
or terminated by the Board of Directors at any time. During 2002, the Holding
Company repurchased 733,612 shares for $8,426,000 including (i) the repurchase
of 526,562 shares for $5,792,000 from a partnership, the managing partner of the
general partner of which is also a director of Finlay and (ii) the repurchase of
an aggregate 50,000 shares for $712,500 from a partnership and a trust
affiliated with a former director of Finlay and certain other persons affiliated
therewith. During 2001 and 2000, the Holding Company repurchased a total of
599,330 shares for $5,367,000.

     On February 4, 2001, an executive officer of Finlay was issued 100,000
shares of Common Stock of the Holding Company, subject to restrictions
("Restricted Stock"), pursuant to a restricted stock agreement. The Restricted
Stock becomes fully vested after four years of continuous employment by Finlay
and is accounted for as a component of the Holding Company's stockholders'
equity.


NOTE 6--LEASE AGREEMENTS

     Finlay conducts all of its operations as leased departments in department
stores. All of these leases, as well as rentals for office space and equipment,
are accounted for as operating leases. A substantial number of such operating
leases expire on various dates through 2008.

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

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

                                      F-18
<PAGE>



                         FINLAY FINE JEWELRY CORPORATION
                    NOTES TO CONSOLIDATED FINANCIAL STATEMENT


NOTE 6--LEASE AGREEMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
                                                                       FISCAL YEAR ENDED
                                                         -----------------------------------------------
                                                          FEBRUARY 1,       FEBRUARY       FEBRUARY 3,
                                                             2003            2, 2002           2001
                                                         --------------    ------------    -------------
<S>                                                     <C>               <C>             <C>
           Minimum fees..............................    $     2,129       $    10,1514    $    15,8514
           Contingent fees...........................        152,233            147,633         149,245
                                                         --------------    ------------    -------------
                Total................................    $   154,362       $    157,784    $    165,096
                                                         ==============    ============    =============
</TABLE>


     Future minimum payments under noncancellable operating leases having
initial or remaining noncancellable lease terms in excess of one year are as
follows as of February 1, 2003:

<TABLE>
<CAPTION>

                                                                             (IN THOUSANDS)
                                                                             --------------
<S>                                                                          <C>
                  2003.................................................       $    1,974
                  2004.................................................            1,995
                  2005.................................................            1,930
                  2006.................................................            1,917
                  2007.................................................            1,917
                  Thereafter...........................................            1,278
                                                                             --------------
                       Total minimum payments required.................        $  11,011
                                                                             ==============
</TABLE>


NOTE 7--PROFIT SHARING PLAN

     Finlay maintains a defined contribution profit-sharing plan to provide
retirement benefits for all personnel. This plan provides for company matching
contributions of $0.25 for each $1.00 of employee contribution, up to 5% of the
employee's salary, as limited by the Code, which begin to vest upon the
completion of two years of employment and accrues at the rate of 20% per year.
Additionally, Finlay contributes 2% of the employees' earnings annually, as
limited by the Code, which begin to vest upon the completion of three years of
employment and accrues at the rate of 20% per year. Finlay's contributions
totaled $2,011,000, $1,856,000 and $1,989,000 for 2002, 2001 and 2000,
respectively.


NOTE 8--INCOME TAXES

     For income tax reporting purposes, Finlay Jewelry has an October 31 year
end. Finlay Jewelry files a consolidated Federal income tax return with its
wholly owned subsidiaries and its parent, the Holding Company. Finlay Jewelry's
provision for income taxes and deferred tax assets and liabilities was
calculated as if Finlay Jewelry filed its tax return on a stand-alone basis.

     Deferred income taxes at year end reflect the impact of temporary
differences between amounts of assets and liabilities for financial and tax
reporting purposes.

                                      F-19
<PAGE>

                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8--INCOME TAXES (CONTINUED)

Deferred tax assets and liabilities at year end are as follows:

<TABLE>
<CAPTION>
                                                                                        FEBRUARY 1,      FEBRUARY 2,
                                                                                           2003              2002
                                                                                        ------------     -------------
                                                                                               (IN THOUSANDS)
<S>                                                                                    <C>                <C>
Deferred Tax Assets
  Vendor allowances..............................................................         $  11,722        $     -
  Uniform inventory capitalization...............................................             3,790            4,024
  Expenses not currently deductible..............................................             3,008            1,731
  AMT credit.....................................................................               566              566
                                                                                        ------------     -------------
                                                                                             19,086            6,321
    Valuation allowance..........................................................               100              100
                                                                                        ------------     -------------
     Total current...............................................................            18,986            6,221
                                                                                        ------------     -------------
  Deferred financing costs-non-current...........................................               126              139
                                                                                        ------------     -------------
     Total non-current...........................................................               126              139
                                                                                        ------------     -------------
        Total deferred tax assets................................................            19,112            6,360
                                                                                        ------------     -------------
Deferred Tax Liabilities
  LIFO inventory valuation.......................................................             9,128            9,222
                                                                                        ------------     -------------
     Total current...............................................................             9,128            9,222
                                                                                        ------------     -------------
Depreciation and amortization....................................................            18,653           13,538
                                                                                        ------------     -------------
     Total non-current...........................................................            18,653           13,538
                                                                                        -----------      -------------
        Total deferred tax liabilities...........................................            27,781           22,760
                                                                                        ------------     -------------
          Net deferred income tax liabilities....................................       $     8,669      $    16,400
                                                                                        ============     =============
     Net current deferred income tax (assets) liabilities........................       $    (9,858)     $     3,001
     Net non-current deferred income tax liabilities.............................            18,527           13,399
                                                                                        ------------     -------------
          Net deferred income tax liabilities....................................       $     8,669       $   16,400
                                                                                        ============     =============
</TABLE>

The components of income tax expense, before the cumulative effect of accounting
change, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                      FISCAL YEAR ENDED
                                                         ---------------------------------------------
                                                         FEBRUARY 1,      FEBRUARY 2,     FEBRUARY 3,
                                                             2003            2002            2001
                                                         -------------    ------------    ------------
<S>                                                      <C>             <C>             <C>
           Current taxes.............................      $ 14,528       $   15,042      $   20,224
           Deferred taxes............................         3,982            1,630           2,491
                                                         -------------    ------------    ------------
           Income tax expense........................      $ 18,510       $   16,672      $   22,715
                                                         =============    ============    ============
</TABLE>

     A reconciliation of the income tax provision computed by applying the
federal statutory rate to Income before income taxes to the Provision for income
taxes on the accompanying Consolidated Statements of Operations is as follows
(in thousands):

<TABLE>
<CAPTION>
                                                                      FISCAL YEAR ENDED
                                                         ---------------------------------------------
                                                         FEBRUARY 1,       FEBRUARY        FEBRUARY
                                                             2003           2, 2002         3, 2001
                                                         -------------    ------------    ------------
<S>                                                     <C>              <C>             <C>
     Federal Statutory provision....................     $    16,638      $    13,999     $    18,950
     State tax, net of federal benefit..............           1,650            1,467           2,566
     Non-deductible amortization....................             -              1,037           1,037
     Other..........................................             222              169             162
                                                         -------------    ------------    ------------
     Provision for income taxes.....................     $    18,510      $    16,672     $    22,715
                                                         =============    ============    ============
</TABLE>

                                      F-20
<PAGE>

                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8--INCOME TAXES (CONTINUED)

     In 2002, Finlay Jewelry recorded an income tax benefit of $11,713,000 in
connection with the cumulative effect of accounting change.

     At October 31, 2002, Finlay Jewelry had a net operating loss ("NOL")
carryforward for tax purposes of approximately $1,600,000 which expires in 2005.
At October 31, 2002, Finlay Jewelry also had Alternative Minimum Tax Credit
carryovers of $566,000 which may be used indefinitely to reduce federal income
taxes. SFAS No. 109 "Accounting for Income Taxes," requires that the tax benefit
of such NOLs and tax credits be recorded as an asset to the extent that
management assesses the utilization to be "more likely than not". As the
accompanying Consolidated Financial Statements include profits earned after the
tax year end at October 31 (the profit of the year-end holiday season), for
financial reporting purposes only, the NOL carryforward has been absorbed in
full and no NOL carryforward exists as of February 1, 2003. Management
determined at February 1, 2003 that, based upon Finlay Jewelry's history of
operating results and its expectations for the future, no additional valuation
allowance is warranted.


NOTE 9--COMMITMENTS AND CONTINGENCIES

     Finlay Jewelry, from time to time, is involved in litigation concerning its
business affairs. Management believes that the resolution of all pending
litigation will not have a material adverse effect on the consolidated financial
statements.

     Finlay has an employment agreement with one senior executive which provides
for a minimum salary level as well as incentive compensation based on meeting
specific financial goals. Such agreement has a remaining term of two years and
has a remaining aggregate minimum value of $1,975,000 as of February 1, 2003.

     The Revolving Credit Agreement, the Gold Consignment Agreement and the
Senior Note Indenture currently restrict annual distributions from Finlay
Jewelry to the Holding Company to 0.25% of Finlay Jewelry's net sales for the
preceding fiscal year and also allow distributions to the Holding Company to
enable it to make interest payments on the Senior Debentures. Other dividends
and distributions, including those required to fund stock or bond repurchases,
are subject to Finlay's satisfaction of certain restrictive covenants. During
2002, dividends of $17,558,000 were declared by Finlay Jewelry and $15,652,000
was distributed to the Holding Company. During 2001, dividends of $9,250,000
were declared by Finlay Jewelry and $7,231,000 was distributed to the Holding
Company. During 2000, dividends of $9,032,000 were declared by Finlay Jewelry
and $7,640,000 was distributed to the Holding Company.

     Finlay Jewelry's concentration of credit risk consists principally of
accounts receivable. Over the past three years, approximately 70% of Finlay's
sales were from operations in the May Department Stores Company ("May") and
departments operated in store groups owned by Federated Department Stores
("Federated"), of which approximately 47% and 23% represented Finlay's sales in
May and Federated, respectively. Finlay Jewelry believes that the risk
associated with these receivables, other than those from department store groups
indicated above, would not have a material adverse effect on Finlay Jewelry's
financial position or results of operations.

     Finlay Jewelry has not provided any third-party financial guarantees as of
February 1, 2003.

                                      F-21
<PAGE>


                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 10--QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following table summarizes the quarterly financial data for 2002 and
2001 (dollars in thousands). In accordance with SFAS No. 3, "Reporting
Accounting Changes in Interim Financial Statements", the 2002 quarterly
financial data has been revised to reflect Finlay Jewelry's retroactive adoption
of EITF 02-16 to the beginning of 2002.

<TABLE>
<CAPTION>

                                                                     FISCAL YEAR ENDED FEBRUARY 1, 2003
                                                      ------------------------------------------------------------------
                                                         FIRST            SECOND            THIRD            FOURTH
                                                        QUARTER           QUARTER          QUARTER         QUARTER (a)
                                                      ------------     --------------    ------------     --------------
<S>                                                  <C>               <C>              <C>               <C>
  As Revised:
  -----------
  Sales..........................................     $   187,365       $  187,130       $   168,359      $   387,855
  Gross margin...................................          98,156           95,962            87,897          198,162
  Selling, general and administrative
      expenses...................................          87,835           86,518            82,852          141,373
  Income from operations.........................           5,964            5,007               658           53,836
  Income (loss) before cumulative effect
      of accounting change.......................           1,190              447            (2,173)          29,564
  Cumulative effect of accounting change,
      net of tax.................................         (17,209)              -               -                -
  Net income (loss)..............................         (16,019)             447            (2,173)          29,564
</TABLE>


<TABLE>
<CAPTION>

                                                                 FISCAL YEAR ENDED FEBRUARY 1, 2003
                                                      -----------------------------------------------
                                                         FIRST            SECOND            THIRD
                                                        QUARTER           QUARTER          QUARTER
                                                      ------------     --------------    ------------
<S>                                                  <C>               <C>              <C>
  As Previously Reported:
  -----------------------
  Sales..........................................     $   187,365       $  187,130       $   168,359
  Gross margin...................................          93,991           91,810            84,157
  Selling, general and administrative
      expenses...................................          84,258           81,911            78,850
  Income from operations.........................           5,376            5,462               920
  Net income (loss)..............................             840              718            (2,017)
</TABLE>


<TABLE>
<CAPTION>

                                                                     FISCAL YEAR ENDED FEBRUARY 2, 2002
                                                      ------------------------------------------------------------------
                                                         FIRST            SECOND            THIRD            FOURTH
                                                        QUARTER           QUARTER          QUARTER           QUARTER
                                                      ------------     --------------    ------------     --------------
<S>                                                  <C>               <C>               <C>               <C>
  Sales..........................................     $   193,249       $ 196,167         $  175,292        $ 388,081
  Gross margin...................................          98,368          97,687             87,612          189,867
  Net income (loss)..............................            (482)            153             (2,123)          25,779
</TABLE>

-----------------
(a)  Net income in the fourth quarter includes a credit for the Company's
     revision of its original estimate for closure expenses associated with the
     sale and closure of Sonab in the amount of $852,000, net of tax. Refer to
     Note 13.


                                      F-22
<PAGE>



                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11--JAY B. RUDOLPH, INC. ACQUISITION

     On April 3, 2000, Finlay completed the acquisition of certain assets of Jay
B. Rudolph, Inc. ("J.B. Rudolph") for $20.6 million, consisting primarily of
inventory of approximately $16.3 million and fixed assets of approximately $4.0
million. By acquiring J.B. Rudolph (the "J.B. Rudolph Acquisition"), Finlay
added 57 departments and also added new host store relationships with
Bloomingdale's and Dayton's and Hudson's (both now operating as Marshall
Field's). Finlay financed the acquisition of J.B. Rudolph with borrowings under
the Revolving Credit Agreement. The J.B. Rudolph Acquisition was accounted for
as a purchase, and, accordingly, the operating results of the former J.B.
Rudolph departments have been included in Finlay Jewelry's consolidated
financial statements since the date of acquisition. Finlay Jewelry recorded
goodwill of $1.7 million.

     For the year ended February 3, 2001, unaudited pro forma sales and net
income were $1,010,911 and $27,009, respectively. The pro forma information is
provided for informational purposes only and was prepared assuming the J.B.
Rudolph Acquisition occurred at the beginning of 2000. It is based on historical
information, as well as certain assumptions and estimates, and does not
necessarily reflect the actual results that would have occurred nor is it
necessarily indicative of future results of operations of the combined company.


NOTE 12--STORE GROUP CLOSINGS

     On February 8, 2001, Federated announced its plans to close its Stern's
division in which Finlay operated 23 departments. Finlay closed the majority of
the Stern's departments during the second quarter of 2001 and, as a result,
recorded a charge of approximately $1.0 million related to the write-off of
fixed assets and employee severance. During 2001, Federated acquired the Liberty
House department store chain. In 2001, Finlay recorded a charge of approximately
$150,000 related to the write-off of fixed assets and employee severance. During
2002, sales were reduced by approximately $31.0 million compared to the prior
year as a result of the closing of Stern's, Liberty House and another smaller
host store group.


NOTE 13--SALE AND CLOSURE OF SONAB

     During 1998, Societe Nouvelle d' Achat de Bijouterie - S.O.N.A.B.
("Sonab"), Finlay Jewelry's European leased jewelry department subsidiary, began
to experience lower sales trends due to the transition from a promotional
pricing strategy to an everyday low price strategy. This change was made as a
result of Sonab reassessing its pricing policy following certain local French
court decisions. The adverse impact of such change continued through 1999. As a
result of the foregoing, on January 3, 2000, Sonab sold the majority of its
assets for approximately $9.9 million. After the sale, the buyer operated more
than 80 locations previously included in Sonab's 130-location base in France.
The remaining departments were closed.

                                      F-23
<PAGE>







                         FINLAY FINE JEWELRY CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 13--SALE AND CLOSURE OF SONAB (CONTINUED)


     Finlay Jewelry recorded a pre-tax charge in the fourth quarter of 1999 of
$28.6 million for the write-down of assets for disposition and related closure
expenses. The pre-tax components of the charge, the related income tax effects
and the net cash portion of the charge are as follows (dollars in millions):

<TABLE>
<CAPTION>
<S>                                                                                           <C>
       Costs associated with the write-down of inventory for liquidation................        $    7.8
       Costs associated with the write off of undepreciated fixed assets................             1.5
       Realization of foreign exchange losses...........................................             9.2
       Payroll and severance costs......................................................             5.0
       Other close-down costs (a).......................................................             5.1
                                                                                                ----------

       Sub-total........................................................................            28.6
       Income tax benefit...............................................................           (11.6)
                                                                                                ----------

       Net after tax....................................................................            17.0
       Non cash--foreign exchange losses above...........................................           (9.2)
                                                                                                ----------

       Net cash portion of charge.......................................................        $    7.8
                                                                                                ==========
</TABLE>

--------------
(a)  Including transfer of inventory, furniture removal, main office costs
     during close-down period, lease termination costs, litigation and
     professional fees.

     All of Sonab's employees, excluding those that were hired by the buyer,
were involuntarily terminated, including sales associates, supervisors and
corporate personnel. As of February 1, 2003, Finlay Jewelry's exit plan has been
completed with the exception of certain employee litigation and other legal
matters. During the fourth quarter of 2002, Finlay Jewelry revised its original
estimate of closure expenses to reflect its remaining liability and, as a
result, recorded a credit of $1.4 million. To date, Finlay Jewelry has charged a
total of $26.4 million against its revised estimate of $27.2 million. Finlay
Jewelry does not believe future operating results will be materially impacted by
any remaining payments.

                                      F-24