Reeds Jewelers (RJI) SC TO-T Third party tender offer statement

PROJECT SPARKLE	CONFIDENTIAL
11.26.03

Exhibit (c) (i)

VALUATION ANALYSIS

This presentation and its analyses are only for the use of Alan Zimmer, and are not intended to, nor should they be, relied upon by any other party, including shareholders of Reeds Jewelers, Inc. The consent of Capitalink is required prior to the disclosure to any third party of this presentation, its analyses, or of the assessments made by Capitalink. These materials are based solely on information contained in publicly available documents and certain other information provided to Capitalink by management. Capitalink has not attempted to investigate or verify the accuracy or completeness of such publicly available information or other information provided to Capitalink. Capitalink has relied upon the accuracy and completeness of such publicly available information and other information supplied to Capitalink. The preparation of these materials was completed on November 25, 2003 based on information publicly available or supplied to Capitalink through such date. Capitalink is not obligated to its analyses to reflect any information that becomes publicly available or that is provided to Capitalink after such date.

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PROJECT SPARKLE	CONFIDENTIAL
TABLE OF CONTENTS

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION ANALYSIS
V	APPENDIX

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PROJECT SPARKLE	CONFIDENTIAL
GLOSSARY OF TERMS

EBIT	Earnings before interest and taxes
EBITDA	Earnings before interest, taxes, depreciation and amortization
EPS	Earnings per share
EV	Enterprise value
FY	Fiscal year
ITM	In the money
LTM	Latest twelve months
MV	Market value
MRQ	Most recent quarter
SEC	Securities and Exchange Commission
TIC	Total invested capital
WACC	Weighted average cost of capital

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PROJECT SPARKLE	CONFIDENTIAL
INTRODUCTION

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION
V	APPENDIX

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PROJECT SPARKLE	CONFIDENTIAL
INTRODUCTION

• Alan Zimmer, a controlling shareholder of Reeds Jewelers, Inc. (“Reeds” or the “Company”) has retained Capitalink, L.C. (“Capitalink”) as financial advisor and to prepare a financial analysis to determine a range of indicated values for the Company (the “Analysis”).

• The Company’s common stock is publicly traded on the American Stock Exchange market under the symbol “RJI”, and as of November 10, 2003, there were 8,476,372 shares of the Company’s common stock outstanding.

• The closing price of the Company’s stock on November 25, 2003 (date presentation materials completed) was $1.10.

• Zimmer is the President and Chief Executive Officer of the Company and beneficially owns 2,029,690 shares of common stock or approximately 23.95% of the Company’s issued and outstanding common stock. In addition, Zimmer, combined with the other directors of the Company have a combined holding of 7,461,670 shares or approximately 88.03% of the issued and outstanding common stock.

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PROJECT SPARKLE	CONFIDENTIAL
INTRODUCTION - SCOPE OF ENGAGEMENT

• For purposes of rendering the Analysis, Capitalink has:

• Reviewed publicly available financial information and other data with respect to the Company, including the Annual Report on Form 10-K for the fiscal year ended February 28, 2003, the Quarterly Report on Form 10-Q for the six months ended August 31, 2003, and the Proxy Statement filed May 29, 2003 on Schedule 14A.

• Reviewed draft financial results for the months ended September and October 2003.

• Reviewed certain publicly available information concerning the trading of, and the trading market for, the common stock of the Company.

• Reviewed and analyzed the Company’s projected unlevered free cash flows and prepared discounted cash flows.

• Reviewed and analyzed certain financial characteristics of companies that were deemed to have characteristics comparable to those of the Company.

• Reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed to have characteristics comparable to those of the Company.

• Reviewed and analyzed recent acquisition premiums paid in going-private transactions involving a minority stock acquisition.

• Reviewed and analyzed the Company’s adjusted net book value.

• Reviewed and discussed with representatives of the management of the Company certain financial and operating information furnished by them, including financial analyses with respect to the business, operations and prospects of the Company.

• Considered the historical financial results and present financial condition of the Company.

• Performed such other analyses and examinations as were deemed appropriate.

• The Analysis is necessarily based upon market, economic and other conditions, as they exist on, and could be evaluated as of November 25, 2003. Accordingly, although subsequent developments may affect the Analysis, Capitalink does not assume any obligation to update, review or reaffirm the Analysis.

• Capitalink has relied upon and assumed the accuracy and completeness of all of the financial and other information that was used by it without assuming any responsibility for any independent verification of any such information and has further relied upon the assurances of Company management that it is not aware of

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PROJECT SPARKLE	CONFIDENTIAL
INTRODUCTION - SCOPE OF ENGAGEMENT

any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial projections utilized, Capitalink assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such projections provide a reasonable basis upon which it could make its analysis.

• Capitalink has not made a physical inspection of the properties and facilities of the Company and has not made or obtained any evaluations or appraisals of the assets and liabilities (contingent or otherwise) of the Company.

• The Analysis is based on assumptions regarding future earnings potential and/or certain assets values that may or may not materialize. Therefore, the actual results achieved in the future will vary from the assumptions utilized in the Analysis, and the variations may be material. Adjusted or projected statements may not anticipate the economic, socioeconomic, political, market or legal factors that may impact the operations of the Company.

• The Analysis is for the use and benefit of the Zimmer and is not intended to be and does not constitute a recommendation to any shareholder of the Company as to whether such shareholder should take any action, such as voting on any matter or tendering any shares, in connection with any possible transaction contemplated. Capitalink does not express any opinion as to the underlying valuation or future performance of the Company or the price at which the Company’s common stock would trade at any time in the future.

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PROJECT SPARKLE CONFIDENTIAL

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION
V	APPENDIX

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY OVERVIEW

• Reeds operates 91 premier specialty retail jewelry stores in enclosed regional malls located principally in the Southeast and Midwest of the United States, under the names Reeds Jewelers, Mills Jewelers and Reeds Jewelers Outlet. The Company was incorporated in 1984 under the laws of North Carolina as part of a reorganization whereby a number of affiliated corporations under common ownership became subsidiaries of the Company.

• The Company offers a wide selection of merchandise, including diamond rings and jewelry, gold jewelry and chains, gemstone rings, watches and other fine jewelry. Most of the diamonds sold by the Company are one carat or less in size, while it’s selection of gold jewelry is primarily 14 karat. For the year ended February 28, 2003, the Company’s sales consisted of 59.4% diamonds and precious gems, 15.2% watches, 7.2% semi-precious gems and 6.6% gold jewelry.

• Approximately 91% of the products sold by the Company are purchased through a centralized merchandising department, which provide a continuing source of product supply, consistent quality control, and competitive pricing. The average price of a piece of merchandise sold from the Company’s basic merchandise mix in FY2003 was $271.

• The Company’s stores range in size from approximately 500 to 2,100 square feet of selling space with an average of 1,150 per store. The stores are designed to invite customers into a well-lit and attractive setting where typically more than 2,200 items are offered for sale.

• All of the Company’s stores are located in mall locations. The Company believes consumer shopping patterns are moving away from malls to free-standing mass merchandisers and big box specialty retailers and the internet. In line with these trends, the Company has plans to open up a free-standing store in Mayfaire, a new urban lifestyle community in North Carolina and continue promotion of their website, www.reeds.com.

• The Company’s business is highly seasonal, with the fourth fiscal quarter (December to February), which includes the major part of the Christmas selling season, producing the highest sales. Over the last three fiscal years, the fourth fiscal quarter generated on average 38.9% of total net sales.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY OVERVIEW

• The retail jewelry industry is highly competitive and fragmented, with a large number of independent jewelry retailers. According to National Jeweler, a trade publication, the Company is the tenth largest retail jewelry chain in the United States, based on the number of locations. However, other publicly held jewelry chains are substantially larger and compete directly with the Company in a number of markets. The Company competes with Zales in 82% of its locations, with Kay Jewelers in 77%, with Friedman’s in 48% and with Whitehall Jewellers in 40% of its locations.

• The malls in which the Company has stores have an average of 5.4 specialty retail jewelers, with as few as two and as many as eleven in any single mall. Management estimates that its market share among specialty jewelers in the malls in which it operates to be approximately 14.8%. Although the Company considers its primary competition to be other specialty jewelers in the malls in which it operates, it also competes for customers in various markets with department stores, discount stores, direct mail suppliers, television shopping networks and merchants on the Internet.

• The Company believes the retail jewelry industry competes primarily on the basis of reputation, value, service, location and fashion. Success is substantially dependent on the experience, training, and enthusiasm of sales personnel and the ability to respond quickly to the level of consumer demand for particular items of merchandise. The Company seeks to maintain and increase its market position by aggressively promoting competitive prices and value, by offering quality products and services and by employing superior inventory replenishment and management information systems.

• As of February 28, 2003, the Company had approximately 685 full-time equivalent employees of which 117 were employed in the corporate headquarters and the remaining 568 were employed in the stores. Approximately 78.9% of all employees are full time, with the remainder working part-time (required for the holiday shopping seasons).

• All of the Company’s stores are leased, including the Company’s corporate headquarters. Each store is generally operated under ten year lease agreements with monthly payments of five to seven percent of net sales, subject to minimum payments. The Company does own a property in Wilmington, North Carolina, which is currently marketed for sale. Expected proceeds from the sale range of $400,000 to $600,000.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY OVERVIEW

• On February 28, 2002, the Company entered into a seven-year agreement with Alliance Data Systems Corporation (“ADS”) to outsource its private label credit card and included the sale of substantially all of the Company’s accounts receivable portfolio for approximately $42.5 million. $6.4 million of the purchase price is contingent on the performance of the portfolio. The Company will be eligible to receive one-third of the contingent portion after February 28, 2005 based on the audited financial performance of the Company. The balance may be received in ten years with the second automatic renewal of the private label credit card program agreement with the purchaser.

• Capitalink noted several general factors to be considered in connection with the status of Reeds as a publicly traded company:

• The Company’s common stock historically has extremely limited trading volume and provided limited liquidity for the Company’s shareholders.

• The size of the Company’s float is small (estimated to be 1,014,702 shares).

• The Company has not realized the benefits of public company status (i.e., ability to raise capital, use of stock as currency in acquisitions), but incurs the increased expenses necessary to comply with reporting requirements and other public company obligations.

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PROJECT SPARKLE CONFIDENTIAL

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION
V	APPENDIX

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY FINANCIAL PERFORMANCE

• Capitalink reviewed the Company’s historical financial data as derived from the Company’s public filings for the four years ended February 28, 2002 and the six months ended August 31, 2003. The Company’s financial information was normalized to remove restructuring expenses and discontinued operations, including the sale of their Credit Operations to ADS. By adjusting for these items, Capitalink was able to derive normalized historical revenues and earnings for the Company.

• Revenues for the Company have steadily declined from approximately $120.9 million in FY2000 to approximately $101.0 million for the LTM ended August 31, 2003. The gradual deterioration of the Company’s revenue is due to rising competition in the industry, the closure of underperforming stores, and the decline in the United States economy after the events of 9/11.

• Over the past four fiscal years, the Company’s gross margin has fallen from approximately 51% in FY2000 to approximately 48% for the LTM ended August 31, 2003. The decline in gross margins reflects the increased promotional activity by the Company due to increased competitive pressures and management’s intent to rapidly mark down slower-moving merchandise to improve inventory turn and free up working capital.

• The Company’s EBITDA fell significantly from a high of approximately $10.0 million in FY2000 to approximately $1.7 million for the LTM period August 31, 2003. As with revenue, the fall in EBITDA was primarily dependent on the United States economy, resulting in falling expenditure on discretionary items such as jewelry, rising bad debt expenses and rising personnel and lease expenses.

• The sale of the Company’s credit operations and related accounts receivable portfolio to ADS significantly reduced the Company’s working capital requirements from a high of approximately $77.9 million in FY2000 to approximately $33.3 million as of August 31, 2003. With the sale, the Company was able to reduce its interest bearing debt obligations from a high of approximately $64.6 million in FY2001 to approximately $24.7 million as of August 31, 2003. The Company has a revolving credit agreement, which is collateralized by substantially all of the Company’s assets and permits borrowings of up to $30 million through February 28, 2005.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY FINANCIAL PERFORMANCE

• During FY2002, the Company recorded approximately $6.0 million in restructuring costs related to the closure of 24 under performing stores, costs associated with buying out store leases, store closing costs, and the loss on the sale or abandonment of leasehold improvements and furniture and fixtures. The restructuring charge also includes the severance costs associated with reducing its corporate office personnel by approximately 20% and its store personnel by approximately 17%.

• The Company’s net worth has also fallen significantly in line with the deterioration of the Company’s cash flow and restructuring charges. Over the last four years, the Company’s net book value per share has fallen from a high of $5.31 per share to $2.86 per share as at August 31, 2003.

• The rise in the Company’s inventory days outstanding also reflect the level of excess and obsolete inventory on hand, in part due to the significant number of store closures. The inventory days outstanding as of August 31, 2003 is skewed higher due to the build up of inventories for the holiday selling season.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY FINANCIAL PERFORMANCE

Summary Financial Data

($ in thousands, except per share)

	as of & for years ended the last day of February,												LTM August 31, 2003
	2000			2001			2002			2003
Financial Data(1)
Revenue	$	120,861		$	120,037		$	113,449		$	102,011		$	101,084
Gross Profit	$	61,453		$	58,843		$	53,358		$	49,421		$	48,658
Normalized EBIT	$	6,632		$	1,849		$	(3,247	)	$	(270	)	$	(727	)
Normalized EBITDA	$	10,023		$	5,719		$	550		$	2,180		$	1,729
Normalized Net Income (Loss)	$	3,861		$	67		$	(3,570	)	$	(1,079	)	$	(2,681	)
Normalized Basic EPS	$	0.46		$	0.01		$	(0.42	)	$	(0.13	)	$	(0.32	)
Net Working Capital	$	77,855		$	85,181		$	30,148		$	33,550		$	33,383
Total Interest Bearing Debt	$	53,204		$	64,606		$	18,388		$	21,452		$	24,667
Total Liabilities	$	76,367		$	85,405		$	42,292		$	37,868		$	43,918
Net Worth	$	44,970		$	45,032		$	29,656		$	28,151		$	24,220
Net Book Value per Share	$	5.31		$	5.31		$	3.50		$	3.32		$	2.86
Margin Analysis
Gross Profit Margin		50.8	%		49.0	%		47.0	%		48.4	%		48.1	%
Normalized EBIT		5.5	%		1.5	%		-2.9	%		-0.3	%		-0.7	%
Normalized EBITDA		8.3	%		4.8	%		0.5	%		2.1	%		1.7	%
Normalized Net Income (Loss)		3.2	%		0.1	%		-3.1	%		-1.1	%		-2.7	%
Financial Strength Analysis
Quick Ratio		2.5			3.0			0.4			0.3			0.3
Current Ratio		4.6			5.7			2.3			3.7			3.1
Total Liabilities to Net Worth		169.8	%		189.7	%		142.6	%		134.5	%		309.5	%
Total Interest Bearing Debt to Total Capitalization		118.3	%		143.5	%		62.0	%		76.2	%		101.8	%
Total Interest Bearing Debt to EBITDA		5.3			11.3			33.4			9.8			14.3
Efficiency and Return Analysis
Days Sales Outstanding		na			151.8			81.8			3.6			6.7
Days Inventory Outstanding		na			282.7			282.1			298.4			323.1
Days Payable Outstanding		na			40.6			47.9			43.9			44.3
Normalized EBIT to Net Worth		na			4.1	%		-8.7	%		-0.9	%		-2.8	%
Normalized EBITDA to Average Assets		na			4.5	%		0.5	%		3.2	%		2.5	%
Normalized EBITDA to Net Worth		na			12.7	%		1.5	%		7.5	%		6.7	%
Normalized Net Income to Average Assets		na			0.1	%		-3.5	%		-1.6	%		-3.9	%

⁽¹⁾ Normalized to remove restructuring expenses and discontinued operations.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY FINANCIAL PERFORMANCE

Selected Financial Graphs

($ in thousands)

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY FINANCIAL PERFORMANCE

Selected Financial Graphs – Continued

($ in thousands)

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

• Capitalink reviewed the daily closing market price and trading volume of the Company’s common stock over the period commencing November 25, 2002 through November 25, 2003.

• Capitalink compared the daily closing market price performance of the Company’s common stock for such period to both the Comparable Companies (as defined below) and the Russell 3000 Index.

• Capitalink calculated total trading volumes at various closing price ranges of the Company’s common stock. In addition, the number of trading days, and the respective percentages, at certain trading volumes, was set forth.

• Capitalink noted the following characteristics of the Company’s common stock:

• During the twelve months ended November 25, 2003 the Company’s share price has ranged from as high as $1.35 to as low as $0.91. The Company’s common stock closed at $1.10 on November 25, 2003.

• The Company’s stock has experienced extremely limited liquidity with the average and median daily number of shares traded equal to 556 and 0 respectively. It was further noted that there was no volume on 176 trading days or approximately 69.6% of the available trading days. The Company’s daily trading volume exceeded 9,000 shares only once over the last twelve months.

• Capitalink noted that during the twelve months ended November 25, 2003, the Company’s common stock increased 4.8%, while the Comparable Companies index increased 46.3% and the Russell 3000 Index increased 16.0%.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

Sources of information: Commodity Systems, Inc.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

⁽¹⁾ Reflects the market cap weighted prices of the comparable companies utilized in the Comparable Company Analysis.

Sources of information: Commodity Systems, Inc.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

Sources of information: Commodity Systems, Inc.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

Sources of information: Commodity Systems, Inc.

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PROJECT SPARKLE	CONFIDENTIAL
COMPANY MARKET PERFORMANCE

Sources of information: Commodity Systems, Inc.

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PROJECT SPARKLE CONFIDENTIAL

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION
V	APPENDIX

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS - METHODOLOGIES

• Based upon a review of the Company’s historical financial data, projections, and certain other qualitative data, Capitalink utilized several valuation methodologies to determine a range of values for the Company.

• Capitalink did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support its range of value.

• Capitalink did not place any particular reliance or weight on any individual analysis, but instead concluded that the analyses, taken as a whole, supported its determination. Accordingly, the analyses must be considered as a whole and selecting portions of analyses or the factors considered, without considering all analyses and factors collectively, could create an incomplete and incorrect view of the process underlying the preparation of the Analysis.

• The financial reviews and analyses include information presented in tabular format. In order to fully understand Capitalink’s financial review and analyses, the tables must be read together with the text of the presentation. The tables alone are not a complete description of the financial review and analyses and considering the tables alone could create a misleading or incomplete view of Capitalink’s financial review and analyses.

• The methodologies utilized by Capitalink included:

• A review of the historical financial information of the Company.

• A review and comparison of the trading of, and the trading market for, the common stock of the Company, the Comparable Companies and a general market index.

• A review of a discounted cash flow analysis of the Company, with sensitivity analyses based on a range of assumptions.

• A review and comparison of trading multiples for deemed comparable publicly-traded companies for the Company.

• A review and comparison of transaction multiples for target companies that are deemed comparable to the Company.

• A review and comparison of the premiums paid in recent going private involving minority purchase acquisitions.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS - METHODOLOGIES

• A review and determination of the Company’s adjusted net book value analysis.

• Instruction 2 to Item 1014 of SEC Regulation MA refers to factors that are important in determining the fairness of a transaction to unaffiliated security holders and the weight, if any, that should be given to them in a particular context will vary. The factors will include, among others, whether the consideration offered to unaffiliated security holders constitutes fair value in relation to:

i) Current market prices

ii) Historical market prices

iii) Net book value

iv) Going concern value

v) Liquidation value

vi) Purchase prices paid in previous purchases

vii) Any report, opinion or appraisal

viii) Firm offers of which the subject company or affiliate is aware made by any unaffiliated persons during the past two years.

• Capitalink noted that the Analysis addresses factors (i) through (iv). Capitalink has been advised that management is not aware of any relevant information as relates to factors (vi) and (viii). In addition, based upon discussions with management, Capitalink determined that a liquidation analysis (factor (v)) would not derive an indicated value in excess of net book value and therefore such analysis was not warranted.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS - SUMMARY

(1) Please reference the appropriate analysis for further discussion and sources of information.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS - SUMMARY

Indicated Reference Range Summary

($ in thousands, except per share)

Methodology(1)	Statistic		Selected Multiple Range					Indicated EV Value					Indicated Equity Value					Indicated Share Price
Discounted Cash Flow Analysis
Revenue Terminal Multiple								$	41,999	–	$	46,833	$	13,826	–	$	18,660	$	1.62	–	$	2.19
EBITDA Terminal Multiple								$	40,151	–	$	44,946	$	11,978	–	$	16,773	$	1.41	–	$	1.97
Perpetual Growth Terminal Value								$	38,020	–	$	50,324	$	9,847	–	$	22,151	$	1.16	–	$	2.60
Indicated Reference Range																		$	1.40	–	$	2.26
Comparable Company Analysis
Market Value as a Multiple of:
Net Tangible Equity (8/31/03)	$	24,220	0.5	x	–	1.0	x						$	12,110	–	$	24,220	$	1.42	–	$	2.85
Enterprise Value as Multiple of:
LTM Revenue (8/31/03)	$	101,084	0.40	x	–	0.45	x	$	40,434	–	$	45,488	$	16,333	–	$	21,387	$	1.92	–	$	2.51
NFY Revenue (2/28/04)	$	109,188	0.35	x	–	0.40	x	$	38,216	–	$	43,675	$	14,115	–	$	19,574	$	1.66	–	$	2.30
Average EBITDA (FY2000-LTM Aug 2003)	$	4,040	7.8	x	–	8.8	x	$	31,441	–	$	35,481	$	7,340	–	$	11,380	$	0.86	–	$	1.34
Indicated Reference Range																		$	1.47	–	$	2.25
Comparable Transactions Analysis
Market Value as a Multiple of:											��
Net Common Equity (8/31/03)	$	24,220	0.6	x	–	1.0	x						$	14,532	–	$	24,220	$	1.71	–	$	2.85
Enterprise Value as Multiple of:
LTM Revenue (8/31/03)	$	101,084	0.44	x	–	0.50	x	$	44,309	–	$	50,542	$	20,208	–	$	26,441	$	2.37	–	$	3.11
Average EBITDA (FY2000-LTM Aug 2003)	$	4,040	6.5	x	–	9.0	x	$	26,228	–	$	36,360	$	2,127	–	$	12,259	$	0.25	–	$	1.44
Indicated Reference Range																		$	1.44	–	$	2.46
Acquisition Premiums Analysis
Prior One Day	$	1.10	37.3	%	–	57.2	%											$	1.51	–	$	1.73
Prior Five Day	$	1.10	41.0	%	–	66.2	%											$	1.55	–	$	1.83
Prior 30 Day	$	1.13	40.8	%	–	63.5	%											$	1.59	–	$	1.85
Indicated Reference Range																		$	1.55	–	$	1.80
Net Book Value Analysis
Adjusted Net Book Value (10/31/03)	$	1.94

⁽¹⁾ Please reference the appropriate analysis for further discussion and sources of information.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

• The discounted cash flow analysis estimates value based upon a company’s projected future free cash flow discounted at a rate reflecting risks inherent in its business and capital structure. Unlevered free cash flow represents the amount of cash generated and available for principal, interest and dividend payments after providing for ongoing business operations.

• While the discounted cash flow analysis is the most scientific of the methodologies, it is dependent on projections and is further dependent on numerous industry-specific and macroeconomic factors.

• Capitalink utilized the forecasts provided by Company management, which show a gradual increase in revenue between 2004 and 2008 from approximately $101.9 million to approximately $130.2 million. For the forecast period, the Company projects an increase in EBITDA from approximately $3.8 million for FY2004, to approximately $6.5 million for FY2008. This represents an increase in the Company’s EBITDA margin from 3.7% to 5.0%.

• In order to arrive at a present value, Capitalink utilized discount rates ranging from 17.5% to 18.5%. This was based on an estimated WACC of 18.0% (based on the Company’s 24.9% estimated cost of equity and 5.3% weighted average cost of debt).

• Capitalink presented a range of terminal values at the end of the forecast period by applying a range of multiples to the FY2008 projected revenue and EBITDA.

• In addition, Capitalink presented a perpetual growth scenario whereby ranges of growth rates were applied to the FY2008 free cash flow in order to determine a terminal value, rather than multiples.

• In each of the scenarios noted above, a range of enterprise values was derived for the Company’s business.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

• The results of the discounted cash flow analysis under the three terminal value scenarios were as follows:

• Utilizing the revenue terminal scenario (range of 0.40 times to 0.45 times), Capitalink calculated a range of indicated enterprise values from $42.0 million to $46.8 million.

• Utilizing the EBITDA terminal scenario (range of 7.5 times to 8.5 times), Capitalink calculated a range of indicated enterprise values from $40.1 million to $44.9 million.

• Utilizing a perpetual growth scenario (growth rates of 11.5% to 12.5%), Capitalink calculated a range of indicated enterprise values from $38.0 million to $50.3 million.

• The total enterprise values above were then reduced by the Company’s net debt of $28.2 million as of October 31, 2003 (which includes $28.6 million in interest bearing debt and approximately $413,000 in cash on hand and from the assumed exercise of ITM options) to arrive at an equity value range.

• The equity value range was then divided by the total common stock equivalents of 8.512 million, which includes ITM options, to obtain a range of indicated common stock shares prices of between $1.40 and $2.26.

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PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

Indicated Reference Range

($ in thousands, except per share)

	Selected Range
	Low - High					Indicated EV Value					Indicated Equity Value (1)				Indicated Share Price (2)
LTM Revenue Terminal Multiple	0.40	x	-	0.45	x	$	41,999	-	$	46,833	$	13,826	$	18,660	$	1.62	-	$	2.19
LTM EBITDA Terminal Multiple	7.50	x	-	8.50	x	$	40,151	-	$	44,946	$	11,978	$	16,773	$	1.41	-	$	1.97
Perpetual Growth Method	11.50	%	-	12.50	%	$	38,020	-	$	50,324	$	9,847	$	22,151	$	1.16	-	$	2.60
Indicated Reference Range															$	1.40	-	$	2.26

⁽¹⁾ Adjusted for $28,173 estimated net debt as of October 31, 2003, which includes cash from in the money options/warrants outstanding.

⁽²⁾ Based upon and assumes 8,512 shares and in the money options/warrants outstanding.

Page 31

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

Estimated Ranges

($ in thousands, except per share)

Discount Rate	Estimated Range of Enterprise Values										Estimated Range of Equity Values										Estimated Range of Equity Values Per Share
Revenue Terminal Value Analysis
	0.400x		0.413x		0.425x		0.438x		0.450x		0.40x		0.41x		0.43x		0.44x		0.45x		0.40x		0.41x		0.43x		0.44x		0.45x
17.5%	$	42,875	$	43,864	$	44,854	$	45,844	$	46,833	$	14,702	$	15,691	$	16,681	$	17,671	$	18,660	$	1.73	$	1.84	$	1.96	$	2.08	$	2.19
17.8%	$	42,653	$	43,636	$	44,619	$	45,603	$	46,586	$	14,480	$	15,463	$	16,446	$	17,430	$	18,413	$	1.70	$	1.82	$	1.93	$	2.05	$	2.16
18.0%	$	42,433	$	43,410	$	44,387	$	45,364	$	46,341	$	14,260	$	15,237	$	16,214	$	17,191	$	18,168	$	1.68	$	1.79	$	1.90	$	2.02	$	2.13
18.3%	$	42,215	$	43,186	$	44,156	$	45,127	$	46,097	$	14,042	$	15,013	$	15,983	$	16,954	$	17,924	$	1.65	$	1.76	$	1.88	$	1.99	$	2.11
18.5%	$	41,999	$	42,964	$	43,928	$	44,892	$	45,856	$	13,826	$	14,791	$	15,755	$	16,719	$	17,683	$	1.62	$	1.74	$	1.85	$	1.96	$	2.08
				Average	$	44,389								Average	$	16,216								Average	$	1.91

EBITDA Terminal Value Analysis
	7.50x		7.75x		8.00x		8.25x		8.50x		7.50x		7.75x		8.00x		8.25x		8.50x		7.50x		7.75x		8.00x		8.25x		8.50x
17.5%	$	40,977	$	41,969	$	42,962	$	43,954	$	44,946	$	12,804	$	13,796	$	14,789	$	15,781	$	16,773	$	1.50	$	1.62	$	1.74	$	1.85	$	1.97
17.8%	$	40,768	$	41,753	$	42,739	$	43,725	$	44,711	$	12,595	$	13,580	$	14,566	$	15,552	$	16,538	$	1.48	$	1.60	$	1.71	$	1.83	$	1.94
18.0%	$	40,560	$	41,540	$	42,519	$	43,499	$	44,478	$	12,387	$	13,367	$	14,346	$	15,326	$	16,305	$	1.46	$	1.57	$	1.69	$	1.80	$	1.92
18.3%	$	40,354	$	41,328	$	42,301	$	43,274	$	44,247	$	12,181	$	13,155	$	14,128	$	15,101	$	16,074	$	1.43	$	1.55	$	1.66	$	1.77	$	1.89
18.5%	$	40,151	$	41,117	$	42,084	$	43,051	$	44,018	$	11,978	$	12,944	$	13,911	$	14,878	$	15,845	$	1.41	$	1.52	$	1.63	$	1.75	$	1.86
				Average	$	42,521								Average	$	14,348								Average	$	1.69

Perpetual Growth Terminal Value Analysis
	11.50%		11.75%		12.00%		12.25%		12.50%		11.50%		11.75%		12.00%		12.25%		12.50%		11.50%		11.75%		12.00%		12.25%		12.50%
17.5%	$	43,387	$	44,895	$	46,540	$	48,342	$	50,324	$	15,214	$	16,722	$	18,367	$	20,169	$	22,151	$	1.79	$	1.96	$	2.16	$	2.37	$	2.60
17.8%	$	41,883	$	43,266	$	44,769	$	46,408	$	48,203	$	13,710	$	15,093	$	16,596	$	18,235	$	20,030	$	1.61	$	1.77	$	1.95	$	2.14	$	2.35
18.0%	$	40,496	$	41,767	$	43,145	$	44,642	$	46,276	$	12,323	$	13,594	$	14,972	$	16,469	$	18,103	$	1.45	$	1.60	$	1.76	$	1.93	$	2.13
18.3%	$	39,212	$	40,385	$	41,652	$	43,025	$	44,517	$	11,039	$	12,212	$	13,479	$	14,852	$	16,344	$	1.30	$	1.43	$	1.58	$	1.74	$	1.92
18.5%	$	38,020	$	39,105	$	40,275	$	41,537	$	42,905	$	9,847	$	10,932	$	12,102	$	13,364	$	14,732	$	1.16	$	1.28	$	1.42	$	1.57	$	1.73
				Average	$	43,399								Average	$	15,226								Average	$	1.79

All Discounted amounts have been calculated utilizing a mid-year convention.

Sources of information: Company financials, projections and management.

Page 32

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

Free Cash Flow Projections

($ in thousands)

	Actual/Estimated						Projected
	FYE Feb-03			9 ME Nov-03			3 ME Feb-04		FYE Feb 29
									2004		2005			2006			2007			2008
Free Cash Flows
Revenue	$	102,011		$	60,011		$	41,946	$	101,957	$	109,188		$	115,847		$	122,841		$	130,182
Cost of Goods Sold		52,590			31,454			21,555		53,009		55,794			58,735			61,912			65,352
Gross Margin		49,421			28,557			20,391		48,948		53,394			57,112			60,929			64,830
Operating Expenses		47,241			31,517			13,641		45,158		49,345			52,581			55,387			58,303
EBITDA		2,180			(2,960	)		6,750		3,790		4,049			4,531			5,542			6,527
Deprec. & Amort.		2,450			1,782			568		2,350		2,370			2,308			2,319			2,238
EBIT		(270	)		(4,742	)		6,182		1,440		1,679			2,223			3,223			4,289
Income Taxes		—			—			—		—		1,500			—			1,169			1,587
Unlevered After-tax Income		(270	)		(4,742	)		6,182		1,440		179			2,223			2,054			2,702
Add: Deprec. & Amort.		2,450			1,782			568		2,350		2,370			2,308			2,319			2,238
Add: Change in Net WC		(3,827	)		(2,138	)		2,538		400		(1,049	)		(293	)		(856	)		(2,919	)
Less: Capital Expenditures		696			500			500		1,000		1,500			2,000			2,000			2,000
Unlevered Free Cash Flows	$	(2,343	)	$	(5,598	)	$	8,788	$	3,190	$	—		$	2,238		$	1,517		$	21

	Actual FYE Feb-03		Projected
			FYE Feb 29
			2004		2005		2006		2007		2008
Growth Analysis
Revenue	na		-0.1	%	7.1	%	6.1	%	6.0	%	6.0	%
Cost of Goods Sold	na		0.8	%	5.3	%	5.3	%	5.4	%	5.6	%
Gross Margin	na		-1.0	%	9.1	%	7.0	%	6.7	%	6.4	%
Operating Expenses	na		-4.4	%	9.3	%	6.6	%	5.3	%	5.3	%
EBITDA	na		73.9	%	6.8	%	11.9	%	22.3	%	17.8	%
Deprec. & Amort.	na		-4.1	%	0.9	%	-2.6	%	0.5	%	-3.5	%
EBIT	na		na		16.6	%	32.4	%	45.0	%	33.1	%
Income Taxes	na		na		na		-100.0	%	na		35.7	%
Unlevered After-tax Income	na		na		-87.6	%	1141.9	%	-7.6	%	31.6	%
Add: Deprec. & Amort.	na		-4.1	%	0.9	%	-2.6	%	0.5	%	-3.5	%
Add: Change in Net WC	na		na		-362.3	%	na		na		na
Less: Capital Expenditures	na		43.7	%	50.0	%	33.3	%	0.0	%	0.0	%
Unlevered Free Cash Flows	na		na		-100.0	%	na		-32.2	%	-98.6	%
Profitability Analysis
Gross Margin	48.4	%	48.0	%	48.9	%	49.3	%	49.6	%	49.8	%
EBITDA	2.1	%	3.7	%	3.7	%	3.9	%	4.5	%	5.0	%
EBIT	-0.3	%	1.4	%	1.5	%	1.9	%	2.6	%	3.3	%
Unlevered After-tax Income	-0.3	%	1.4	%	0.2	%	1.9	%	1.7	%	2.1	%

Sources of information: Company financials, projections and management.

Page 33

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

Working Capital and Income Tax

($ in thousands)

	Actual/ Estimated						Projected
	FYE Feb-03			9 ME Nov-03			3 ME Feb-04			FYE Feb 29
										2005			2006			2007			2008
Non-Cash Working Capital Assumptions
AR Days Outstanding		0			na			0			0			0			0			0
A/R - % Sales		0.0	%		na			0.1	%		0.1	%		0.1	%		0.1	%		0.1	%
Days Inventory Outs.		289			na			282			281			273			268			267
Inv - % CGS		79.2	%		na			77.3	%		76.9	%		74.7	%		73.4	%		73.1	%
Prepay & Other - % CGS & Op E		3.5	%		na			3.1	%		2.9	%		2.7	%		2.6	%		2.5	%
AP Days Outstanding		44			na			42			42			42			42			41
A/P - % CGS & Op Exp		12.0	%		na			11.6	%		11.6	%		11.6	%		11.6	%		11.2	%
Non-Cash Net Working Capital
Accounts Receivable	$	7		$	110		$	110		$	110		$	110		$	110		$	110
Inventory		41,637			50,798			41,000			42,912			43,904			45,460			47,798
Prepayments		3,497			4,055			3,055			3,055			3,055			3,055			3,055
Accounts Payable		11,944			19,628			11,368			12,231			12,930			13,630			13,905
Non-Cash Net WC	$	33,197		$	35,335		$	32,797		$	33,846		$	34,139		$	34,995		$	37,058
Change in Non-Cash Net WC	$	(3,827	)	$	(2,138	)	$	2,538		$	(1,049	)	$	(293	)	$	(856	)	$	(2,919	)

	Actual/ Estimated						Projected
	FYE Feb-03			9 ME Nov-03			3 ME Feb-04			FYE Feb 29
										2005			2006			2007			2008
Income Tax Expense and Assumptions
Statutory Tax Rate		37.0	%		37.0	%		37.0	%		37.0	%		37.0	%		37.0	%		37.0	%
Effective Tax Rate		0.0	%		0.0	%		0.0	%		89.3	%		0.0	%		36.3	%		37.0	%
EBT		(270	)		(4,742	)		6,182			1,679			2,223			3,223			4,289
Tax Expense	$	(100	)	$	(1,755	)	$	2,287		$	2,121		$	823		$	1,193		$	1,587
NOL Usage		100			1,755			(2,287	)		(621	)		(823	)		(23	)		—
Income Tax Expense	$	—		$	—		$	—		$	1,500		$	—		$	1,169		$	1,587
Ending NOL Balance	$	3,362		$	5,117		$	2,829		$	846		$	23		$	—		$	—

Sources of information: Company financials, projections and management.

Page 34

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – DISCOUNTED CASH FLOW ANALYSIS

Cost of Capital, Net Debt & Stock Equivalents

($ in thousands, except per share)

Cost of Equity

Riskless(1)
20 year treasury coupon (Rf)	5.1	%
Risk(2)
Equity risk premium (EP)	7.0	%
Industry risk premium (IP)	1.6	%
Size Premium (SP)	9.2	%
Company Specific
Poor Historical Track Record	2.0	%
	24.9	%

Cost of Debt
Type of Debt	Nominal Rate		Amount		% of Debt		Weighted Cost of Debt
Revolving Line of Credit	5.00	%	$	26,007	91.0	%	4.5	%
Related Party Loan 1	10.00	%		1,750	6.1	%	0.6	%
Related Party Loan 2	4.00	%		829	2.9	%	0.1	%
			$	28,586	100.0	%	5.3	%

Weighted Average Cost of Capital
	Shares Outs. (in thousands)	Stock Price 25-Nov-03		Market Value			% of Total Capital		Industry Avg. % of Total Capital (3)		Nominal Rate		Effective Tax Rate		Cost of Capital		Weighted Cost of Capital
Debt				$	28,586		75.4	%	32.0	%	5.3	%	37.0	%	3.3	%	1.1	%
Equity	8,476	$	1.1000		9,324	��	24.6	%	68.0	%	24.9	%			24.9	%	16.9	%
				$	37,910		100.0	%	100.0	%							18.0	%

Net Debt

	Preliminary as of 31-Oct-03
Debt & Other Obligations
Interest Bearing Debt	$	28,586
Minority Interests		—
Preferred Stock		—
		28,586
Less Cash
Cash on Hand		359
Assumed cash from exercise of options		54
Assumed cash from Other		—
		413
Net Debt	$	28,173

Common Stock Equivalents

			as of 31-Oct-03
Common Stock Equivalents (in thousands)
Common Stock Outstanding			8,476
Stock issued re Other			—
			8,476
	Exercise $
Options in the money(4): Plan 1	$	1.50	36
Plan 2	$	—	—
			36
Total Common Stock Equivalents			8,512

⁽¹⁾ As reported by the Federal Reserve Board on a daily basis as of November 24, 2003.

⁽²⁾ Sourced from the Ibbotson SBBI Valuation Edition 2003 Yearbook. Industry risk premium based on SIC 5944 (Jewelry Stores).

⁽³⁾ Sourced from Ibbotson 2003 Cost of Capital Yearbook, based on average composite debt to total capital ratio for SIC 5944

⁽⁴⁾ Options in the money includes all options and warrants with an exercise price less than or equal to $2.00 per share.

Sources of information: Company financials, projections & management, Ibbotson 2003 SBBI and Federal Reserve Board.

Page 35

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

• The selected comparable company analysis compares the trading multiples of the Company with those of other publicly traded companies that are similar with respect to business and revenue model, operating sector, size and target customer base.

• Capitalink located five companies that it deemed comparable to the Company with respect to their industry sector and market served (the “Comparable Companies”). All are involved in the operation of jewelry stores in the United States and operate under the SIC code 5944.

• Reeds is significantly smaller than all of the Comparable Companies. As of November 25, 2003, the enterprise values for the Comparable Companies ranged from approximately $3.6 billion to approximately $72.9 million and revenue ranged from approximately $2.5 billion to approximately $111.9 million. In comparison, Reeds had an enterprise value and LTM revenue of approximately $33.5 million and approximately $101.1 million, respectively.

• In terms of number of stores, average store size, and average sales per store, Reeds is smaller than the average of the Comparable Companies. Reeds has a total of 91 stores compared with the mean and median of the Comparable Companies of 1,000 and 697, respectively. The Company’s stores are also smaller in size with 1,150 square feet, compared with a mean of 1,849 and a store weighted average of 1,319 square feet for the Comparable Companies. Average sales per store and average price per transaction for Reeds is approximately $1.0 million compared with a mean of $1.6 million for the Comparable Companies. However, the average price per transaction of $280 for Reeds is slightly above the median of the Comparable Companies of $263.

• Capitalink noted that of the Comparable Companies, Friedmans and Whitehall Jewellers were the most comparable in terms of size and operating model. However, Friedmans is currently under-going a SEC fraud investigation that has negatively impacted their share price and has announced it will need to restate its historical results to reflect increases in allowances for doubtful accounts.

Page 36

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

• Multiples utilizing market value and enterprise value were used. The difference between the two is as follows:

• Market value equals price per share times number of shares outstanding,

• Enterprise value equals market value plus interest bearing debt, preferred stock and minority interest, less cash and equivalents.

• Market values were used to calculate multiples of EPS, common equity, and net tangible common equity, while enterprise values were used to calculate multiples of LTM revenue, LTM EBIT, LTM EBITDA, and total assets. For comparison purposes, all operating profits including EBITDA were normalized to exclude unusual and extraordinary expenses or income.

• The comparable company analysis generated a wide range of multiples:

• Based on market value, the mean LTM EPS multiple and common equity multiple was 12.8 times and 1.5 times, respectively.

• Based on enterprise value, the mean LTM revenue and LTM EBITDA multiple was 0.82 times and 8.0 times respectively, compared with an LTM revenue multiple of 0.33 times and EBITDA multiple of 19.4 times for the Company. The high EBITDA multiple reflects the Company’s historically low LTM EBITDA of $1.7 million.

• Capitalink noted that the EBITDA margin for the Company of 1.7% for the LTM period ended August 31, 2003 was lower than all of the Comparable Companies, the mean and media of which was 7.9% and 9.6%, respectively. Given the volatility in the Company’s EBITDA, Capitalink also calculated the average EBITDA from FY2000 to LTM August 2003 to be approximately $4.0 million.

• Capitalink noted that the Company’s debt to total invested capital ratio of 73.7% is higher than any of the Comparable Companies (the mean and median of which was 39.7% and 36.3%, respectively).

• Capitalink determined a range of indicated values for the Company by selecting a range of valuation multiples based on the Comparable Companies, and applying them to the Company’s net tangible equity, LTM revenue, NFY Revenue and average EBITDA (from FY2000 to LTM August 2003).

Page 37

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

• Capitalink expects the Company’s valuation multiples to be below the average of the Comparable Companies due to the smaller size of the Company (which limits the ability of the Company to gain economies of scale advantages with respect to corporate costs and supply costs) and the poor historical performance of the Company relative to most of the Comparable Companies.

• Capitalink selected an appropriate multiple range for the Company as follows:

• 0.5 times to 1.0 times net tangible equity.

• 0.40 times to 0.50 times LTM revenue.

• 0.35 times to 0.40 times NFY revenue.

• 7.8 times to 8.8 times average EBITDA.

• Based on the selected multiple ranges, and taking into account net debt of approximately $24.1 million and common stock equivalents of 8.512 million shares as of August 31, 2003, Capitalink calculated a range of indicated equity values per share of between $1.47 and $2.25.

• An analysis of publicly-traded comparable companies is not mathematical; rather it involves complex consideration and judgments concerning differences in financial and operating characteristics of the Comparable Companies and other factors that could affect the public trading of the Comparable Companies.

Page 38

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Indicated Reference Range

($ in thousands, except per share)

			Selected Multiple Range
	Statistic		Low		-	High		Indicated EV Value					Indicated E quity Value(1)					Indicated Share Price(2)
Market Value Multiple
Net Tangible Equity (8/31/03)	$	24,220	0.5	x	-	1.0	x						$	12,110	-	$	24,220	$	1.42	-	$	2.85
Total Enterprise Value (EV) Multiple
LTM Revenue (8/31/03)	$	101,084	0.40	x	-	0.45	x	$	40,434	-	$	45,488	$	16,333	-	$	21,387	$	1.92	-	$	2.51
NFY Revenue (2/28/04)	$	109,188	0.35	x	-	0.40	x	$	38,216	-	$	43,675	$	14,115	-	$	19,574	$	1.66	-	$	2.30
Average EBITDA (FY2000-LTM Aug 2003)	$	4,040	7.8	x	-	8.8	x	$	31,441	-	$	35,481	$	7,340	-	$	11,380	$	0.86	-	$	1.34
Indicated Reference Range																		$	1.47	-	$	2.25

⁽¹⁾ Adjusted for $24,101 net debt as of August 31, 2003, which includes cash from in the money options/warrants outstanding.

⁽²⁾ Based upon and assumes 8,512 shares and in the money options/warrants outstanding.

Page 39

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Valuation Multiples

($ in thousands, except per share data)

															MV as a Multiple of								EV as a Multiple of										5 Yr EPS Growth Proj(3)
Company	Ticker	Stock Price 25-Nov-03		% Below/ Above 52-week High-Low					Market Value MV		Total Invested Capital TIC(1)		Enterprise Value EV(2)		EPS(3)				Common Equity		Net Tang Com Eq		Revenue(3)				LTM EBIT		LTM EBITDA		Total Assets
															LTM		Est CFY						LTM		Est CFY
Signet Group PLC	SIGY	$	53.250	10.3	%	–	78.7	%	$	3,050,693	$	3,686,160	$	3,636,089	15.0	x	14.0	x	2.6	x	2.7	x	1.43	x	na		10.8	x	9.1	x	2.0	x	10.0	%
Zale Corp	ZLC		55.170	1.6	%	–	94.6	%		1,512,155		1,696,555		1,661,282	18.6		14.9		2.3		2.7		0.75		0.73		10.6		7.8		1.3		13.9	%
Friedmans Inc	FRM		6.390	63.5	%	–	26.5	%		120,228		247,425		247,139	4.6		4.6		0.4		0.4		0.53		0.53		6.0		4.6		0.5		15.0	%
Whitehall Jewellers	JWL		10.820	18.3	%	–	37.0	%		153,806		240,821		239,422	na		14.1		1.4		1.4		0.72		0.66		22.3		10.7		0.8		20.0	%
Mayor’s Jewelers	MYR		0.720	26.5	%	–	323.5	%		14,118		74,019		72,943	na		na		0.7		0.7		0.65		na		na		na		0.7		na
						High			$	3,050,693	$	3,686,160	$	3,636,089	18.6	x	14.9	x	2.6	x	2.7	x	1.43	x	0.73	x	22.3	x	10.7	x	2.0	x	20.0	%
						Mean				970,200		1,188,996		1,171,375	12.8		11.9		1.5		1.6		0.82		0.64		12.4		8.0		1.0		14.7	%
						Median				153,806		247,425		247,139	15.0		14.0		1.4		1.4		0.72		0.66		10.7		8.5		0.8		14.4	%
						Low				14,118		74,019		72,943	4.6		4.6		0.4		0.4		0.53		0.53		6.0		4.6		0.5		10.0	%
Reeds Jewelers	RJI	$	1.100	18.5	%	–	20.9	%	$	9,324	$	33,991	$	33,479	na		na		0.4	x	0.4	x	0.33	x	0.33	x	na		19.4	x	0.5	x	na

⁽¹⁾ Total Invested Capital equals Market Value plus total debt, preferred stock, and minority interests.

⁽²⁾ Enterprise Value equals Market Value plus total debt, preferred stock, and minority interests, less cash.

⁽³⁾ Sources of estimates: Multex Estimates and other various securities analysts’ estimates and reports.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 40

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Margin and Other Analyses

($ in thousands)

		LTM(1)																							as of Latest Available Filing
Company		Revenue		as Percentage of Revenue												Return on				Accts Receivable Turnover		Inventory Turnover		Days Sales Outstanding	Current Ratio	Total Debt to TIC		Total Debt to EBITDA		Latest FY Revenue Growth
				Gross Margin		S G & A		Operating Margin		EBITDA		EBIT		Net Income		Average Assets		Average Common Eq
Signet Group PLC		$	2,537,866	16.9	%	3.6	%	13.3	%	15.7	%	13.3	%	8.0	%	11.0	%	18.3	%	4.9	x	2.4	x	74.7	4.0	17.5	%	1.6	x	8.3	%
Zale Corp			2,212,241	50.2	%	40.3	%	7.4	%	9.6	%	7.1	%	4.3	%	6.9	%	12.0	%	na		1.4		na	2.5	11.1	%	0.9		0.9	%
Friedmans Inc			462,758	47.7	%	36.0	%	9.0	%	11.6	%	9.0	%	5.8	%	5.6	%	9.1	%	2.8		1.7		128.7	5.7	51.5	%	2.4		6.1	%
Whitehall Jewellers			332,087	36.6	%	33.4	%	3.2	%	6.8	%	3.2	%	1.1	%	1.4	%	3.3	%	339.9		1.0		1.1	1.3	36.3	%	3.9		0.6	%
Mayor’s Jewelers			111,910	38.1	%	42.4	%	-7.1	%	-4.4	%	-7.1	%	-10.4	%	-10.8	%	-49.8	%	18.9		0.8		19.4	1.6	82.1	%	na		-26.3	%
	High	$	2,537,866	50.2	%	42.4	%	13.3	%	15.7	%	13.3	%	8.0	%	11.0	%	18.3	%	339.9	x	2.4	x	128.7	5.7	82.1	%	3.9	x	8.3	%
	Mean		1,131,372	37.9	%	31.2	%	5.1	%	7.9	%	5.1	%	1.8	%	2.8	%	-1.4	%	91.6		1.5		55.9	3.0	39.7	%	2.2		-2.1	%
	Median		462,758	38.1	%	36.0	%	7.4	%	9.6	%	7.1	%	4.3	%	5.6	%	9.1	%	11.9		1.4		47.0	2.5	36.3	%	2.0		0.9	%
	Low		111,910	16.9	%	3.6	%	-7.1	%	-4.4	%	-7.1	%	-10.4	%	-10.8	%	-49.8	%	2.8		0.8		1.1	1.3	11.1	%	0.9		-26.3	%
Reeds Jewelers		$	101,084	48.1	%	46.4	%	-0.7	%	1.7	%	-0.7	%	-2.7	%	-4.0	%	-10.2	%	53.9	x	1.2	x	6.8	3.1	73.7	%	14.3	x	-10.1	%

⁽¹⁾ May exclude special items, such as extraordinary and non-recurring expenses. See individual company overviews for details of exclusions, if any.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 41

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Store Comparisons

($ in thousands)

Company (1)	No. of Stores	Avg. Store Size (Sq ft)	Average Sales Per Store		Average Price Per Transaction		Type of Products
Signet Group PLC
US - Kay	676	1,444	$	1,490	$	242	Low end diamonds, gold, gemstones, watches.
US - Regional	307	1,444		1,558		265	Low to medium end diamonds, gold, gemstones, watches.
US - Jared	67	5,800		4,310		558	Medium to high end daimonds, golds, watches
UK - H. Samuels	418	1,124		1,090		53	Low end diamonds, gold, gemstones, watches.
UK - Ernest Jones	192	851		1,658		209	Low to medium end diamonds, gold, gemstones, watches.
Total/Average	1,660	1,471		1,535		208
Zale Corporation
Zales	851	1,654		1,356		282	Low to medium end diamonds, gold, gemstones, watches.
Gordon’s	287	1,444		1,084		355	Low to High end diamonds, gold, gemstones.
Bailey Banks Biddle	116	3,593		2,702		916	High end watches, jewelry, gemstones
People’s Jewelers	167	1,586		878		177	Low end diamonds, gold, gemstones, watches, wedding items.
Piercing Pagoda	813	192		322		27	Low end gold jewelrey sold through small kiosks.
Total/Average	2234	1,191		979		224
Friedmans Inc	697	1,500		664		na	Low end diamonds, gold, gemstones, watches.
Whitehall Jewellers	383	870		929		302	Low to medium end diamonds, gold, gemstones, watches.
Mayor’s Jewelers	28	4,213		3,997		1,360	High end watches, jewelry and gifts.
High	2,234	4,213	$	3,997	$	1,360
Simple Mean	1,000	1,849		1,621		523
Store Weighted Average	582	1,319		1,133		200
Median	697	1,471		979		263
Low	28	870		664		208
Reeds Jewelers	92	1,150	$	1,099	$	280	Low to medium end diamonds, gold, gemstones, watches.

⁽¹⁾ Derived from latest available SEC Edgar filings for each company and management estimates.

Source: SEC Edgar filings & Company management.

Page 42

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Income Statement Review

($ in thousands, except per share data)

		Revenue				EBITDA (1)						EBIT(1)						Net Income (1)						EPS(1)						Latest Available 10-Q	Latest Available 10-K
Company		LTM		Latest 10-K		LTM			Latest 10-K			LTM			Latest 10-K			LTM			Latest 10-K			LTM			Latest 10-K
Signet Group PLC		$	2,537,866	$	2,460,240	$	398,488		$	388,620		$	336,827		$	330,786		$	201,983		$	197,217		$	3.54		$	3.46		31-Jul-03	1-Feb-03
Zale Corp			2,212,241		2,212,241		213,467			213,467			157,314			157,314			95,655			95,655			2.96			2.96		31-Jul-03	31-Jul-03
Friedmans Inc			462,758		436,069		53,884			47,047			41,460			35,707			26,657			23,167			1.39			1.35		28-Jun-03	28-Sep-02
Whitehall Jewellers			332,087		341,037		22,426			31,553			10,726			20,337			3,805			9,907			0.25			0.68		31-Jul-03	31-Jan-03
Mayor’s Jewelers			111,910		118,391		(4,894	)		(14,068	)		(7,987	)		(18,245	)		(11,591	)		(23,022	)		(0.59	)		(1.18	)	27-Sep-03	29-Mar-03
	High	$	2,537,866	$	2,460,240	$	398,488		$	388,620		$	336,827		$	330,786		$	201,983		$	197,217		$	3.54		$	3.46
	Mean		1,131,372		1,113,596		136,674			133,324			107,668			105,180			63,302			60,585			1.51			1.45
	Median		462,758		436,069		53,884			47,047			41,460			35,707			26,657			23,167			1.39			1.35
	Low		111,910		118,391		(4,894	)		(14,068	)		(7,987	)		(18,245	)		(11,591	)		(23,022	)		(0.59	)		(1.18	)
Reeds Jewelers		$	101,084	$	102,011	$	1,729		$	2,180		$	(727	)	$	(270	)	$	(2,681	)	$	(1,079	)	$	(0.32	)	$	(0.13	)	31-Aug-03	28-Feb-03

⁽¹⁾ May exclude special items, such as extraordinary and non-recurring expenses. See individual company overviews for details of exclusions, if any.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 43

PROJECT SPARKLE	CONFIDENTIAL
ALUATION ANALYSIS – SELECTED COMPARABLE COMPANY ANALYSIS

Balance Sheet Review

($ in thousands)

		As of Latest Available Filing																						Latest Available Filing
Company		Cash & Mrkt Sec		Accounts Receivables		Inventory		Total Current Assets		PPE, net		Intangibles, net		Total Assets		Total Current Liabilities		Total Debt		Total Common Eq		Net Tangible Common Eq
Signet Group PLC		$	50,071	$	508,921	$	905,464	$	1,464,456	$	345,828	$	31,717	$	1,842,001	$	367,724	$	635,467	$	1,166,928	$	1,135,211	31-Jul-03
Zale Corp			35,273		—		798,761		886,484		266,167		82,199		1,294,106		354,041		184,400		652,323		570,124	31-Jul-03
Friedmans Inc			286		176,433		153,134		346,911		52,947		5,022		496,176		61,274		127,197		305,756		300,734	28-Jun-03
Whitehall Jewellers			1,399		333		206,149		216,683		63,604		5,662		286,730		165,719		87,015		113,154		107,492	31-Jul-03
Mayor’s Jewelers			1,076		5,314		87,386		95,530		14,704		—		111,098		61,160		59,901		19,189		19,189	27-Sep-03
	High	$	50,071	$	508,921	$	905,464	$	1,464,456	$	345,828	$	82,199	$	1,842,001	$	367,724	$	635,467	$	1,166,928	$	1,135,211
	Mean		17,621		138,200		430,179		602,013		148,650		24,920		806,022		201,984		218,796		451,470		426,550
	Median		1,399		5,314		206,149		346,911		63,604		5,662		496,176		165,719		127,197		305,756		300,734
	Low		286		—		87,386		95,530		14,704		—		111,098		61,160		59,901		19,189		19,189
Reeds Jewelers		$	512	$	2,332	$	44,458	$	49,316	$	9,844	$	—	$	68,138	$	15,933	$	24,667	$	24,220	$	24,220	31-Aug-03

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 44

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – COMPARABLE TRANSACTIONS ANALYSIS

• The comparable transaction analysis involves a review of merger, acquisition and asset purchase transactions involving target companies that are in related industries to the Company.

• The comparable transaction analysis generally provides the widest range of value due to the varying importance of an acquisition to a buyer (i.e., a strategic buyer willing to pay more than a financial buyer) in addition to the potential differences in the transaction process (i.e., competitiveness among potential buyers).

• Information is typically not disclosed for transactions involving a private seller, even when the buyer is a public company, unless the acquisition is deemed to be “material” for the acquirer. As a result, the selected comparable transaction analysis is limited to transactions involving the acquisition of a public company, or substantially all of its assets, or the acquisition of a large private company, or substantially all of its assets, by a public company.

• Capitalink located seven transactions announced since February 2000 involving target companies in related industries to the Company (the “Comparable Transactions”) and for which detail financial information was available. Target companies were involved in the operation of jewelry and/or watch stores and were generally classified under the SIC code 5944.

• Based on the information disclosed with respect to the targets in the each of the Comparable Transactions, Capitalink calculated and compared enterprise values as multiples of LTM revenue and LTM EBITDA and market value or price paid as a multiple of net common equity.

• A review of the analysis indicates mean enterprise value multiples to LTM revenue of 0.65 times and price paid to net common equity of 1.5 times. Only one of the transactions provided information on EBITDA of which the multiple was 6.5 times.

• Capitalink determined a range of indicated equity values for the Company by selecting a range of valuation multiples based on the Comparable Transactions, and applying them to the Company’s net common equity, LTM revenue and average EBITDA (from FY2000 to LTM Aug 2003).

Page 45

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – COMPARABLE TRANSACTIONS ANALYSIS

• As with the Comparable Company analysis, the Company’s unique characteristics, smaller size and poor historical performance would suggest Reeds be valued below the average of the Comparable Transaction multiples.

• Therefore taking into account those factors, Capitalink selected an appropriate multiple range for the Company as follows:

• Between 0.60 times and 1.0 times net common equity.

• Between 0.44 times and 0.50 times LTM revenue.

• Between 6.5 times and 9.0 times average EBITDA.

• Based on the selected multiple ranges, and taking into account net debt of approximately $24.1 million and common stock equivalents of 8.512 million shares as of August 31, 2003, Capitalink calculated a range of indicated equity values per share of between $1.44 and $2.46.

• None of the Comparable Transactions are identical to the Proposed Transaction. Accordingly, an analysis of comparable business combinations is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the Comparable Transactions and other factors that could affect the respective acquisition values.

Page 46

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – COMPARABLE TRANSACTIONS ANALYSIS

Indicated Reference Range

($ in thousands, except per share)

			Selected Multiple Range
	Statistic		Low	-	High	Indicated EV Value					Indicated Equity Value(1)					Indicated Share Price (2)
Market Value as a Multiple of:
Net Common Equity (8/31/03)	$	24,220	0.6x	-	1.0x						$	14,532	-	$	24,220	$	1.71	-	$	2.85
Total Enterprise Value (EV) Multiple
LTM Revenue (8/31/03)	$	101,084	0.44x	-	0.50x	$	44,309	-	$	50,542	$	20,208	-	$	26,441	$	2.37	-	$	3.11
Average EBITDA (FY2000-LTM Aug 2003)	$	4,040	6.5x	-	9.0x	$	26,228	-	$	36,360	$	2,127	-	$	12,259	$	0.25	-	$	1.44
Indicated Reference Range																$	1.44	-	$	2.46

⁽¹⁾ Adjusted for $24,101 net debt as of August 31, 2003, which includes cash from in the money options/warrants outstanding.

⁽²⁾ Based upon and assumes 8,512 shares and in the money options/warrants outstanding.

Page 47

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – COMPARABLE TRANSACTIONS ANALYSIS

Comparable Transaction Review

($ in millions)

									MRQ Net Common Equity		Total Price Paid (1) TPP		Total Invested Capital (2) TIC		Enterprise Value (2) EV		TPP Multiple of Net Common Equity
Announced Date	Closing Date			TTM															EV Multiple of
		Acquiror	Target/Transaction Description	Revenue		EBITDA													Revenue		EBITDA
12-Aug-02	28-Oct-02	Tiffany & Co.(NYSE: TIF)	Little Switzerland Acquired remaining 55% for $22.5M	$	59.62	$	(1.95	)	$	1.16	$	22.52	$	26.82	$	47.92	na		0.80x		na
31-Jul-02	20-Aug-02	Henry Birks & Sons	Mayors Jewelers Inc Acquired 72% stake of fine jeweler in SE		155.86		(18.20	)		52.72		15.00		65.44		68.32	0.3		0.44		na
10-Apr-01	4-May-01	Tiffany & Co. (NYSE: TIF)	Little Switzerland Acquired 45% stake at $9.0 million.		56.30		(5.20	)		17.00		20.00		30.20		29.00	1.2		0.52		na
11-Aug-00	20-Sep-00	Zale Corp (NYSE: ZLC)	Piercing Pagoda, Inc Operates specialty jewelry kiosk stores		280.72		33.73			65.56		197.55		220.12		218.98	3.0		0.78		6.5
1-Jun-00	1-Jun-00	Signet Group PLC	Marks & Morgan Jewelers, Inc Retails Jewelry		158.10		—			—		115.00		160.00		160.00	na		1.01		na
4-May-00	7-Jun-00	Sunglass Hut International	Watch World International, Inc Retails Watches		42.00		—			—		30.00		30.00		30.00	na		0.71		na
10-Feb-00	4-Apr-00	Finlay Enterprises(NASD: FNLY)	Jay B. Rudolph  57 fine jewelery stores		84.00		—			—		23.00		23.00		23.00	na		0.27		na
										High	$	197.55	$	220.12	$	218.98	3.0	x	1.01	x	6.5	x
										Mean		60.44		79.37		82.46	1.5		0.65		6.5
										Median		23.00		30.20		47.92	1.2		0.71		6.5
										Low		15.00		23.00		23.00	0.3		0.27		6.5

⁽¹⁾ Total Price Paid equals common equity value of interest acquired, with exception of Little Switzerland, where number is total implied price paid for 100% based on 45% stake acquired for $9.0 million.

⁽²⁾ Enterprise Value equals Total Price Paid plus total debt, preferred stock, and minority interests, less cash.

Sources of information: SEC Edgar Filings, Press Releases, CapitalIQ, Multex, Mergerstat, Thomson Financial, & Done Deals.

Page 48

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – ACQUISITIONS PREMIUMS PAID ANALYSIS

• The acquisition premiums analysis involves the examination of the acquisition premiums derived in other transactions where a minority interest of a public company was acquired. Capitalink reviewed the one-day, five-day and 30-day premiums for all minority interest transactions where:

• The transaction was announced on or after January 2001,

• The transaction value is less than or equal to $25.0 million,

• The acquiring party previously had more than 50% shareholding in the target company, and

• The target company is based in the United States.

• Capitalink reviewed approximately 46 transactions that met these criteria and calculated the mean and median of the acquisition premiums. They were 57.2% and 37.3%, for the one day premium, 66.2% and 41.0% for the five day premium and 63.5% and 40.8% for the 30 day premium.

• Based on the premiums paid in the scenario set forth above, Capitalink derived an indicated range of per share market values for the Company using the prior one-day, five-day and 30-day share price as of November 25, 2003.

• Based on the selected multiple ranges, Capitalink calculated a range of indicated equity values per share of between $1.55 to $1.80.

Page 49

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – ACQUISITIONS PREMIUMS PAID ANALYSIS

Indicated Reference Range

			Selected Range
	Statistic		Low		-	High		Indicated Share Price
Acquisitions Premiums Paid(1)
Prior One Day	$	1.10	37.3	%	-	57.2	%	$	1.51	-	$	1.73
Prior 5 Day	$	1.10	41.0	%	-	66.2	%	$	1.55	-	$	1.83
Prior 30 Day	$	1.13	40.8	%	-	63.5	%	$	1.59	-	$	1.85
Indicated Reference Range								$	1.55	-	$	1.80

⁽¹⁾ Includes acquisitions by controlling shareholder (>50%) of minority interests from January 2001 with deal value < $25 million. Acquisitions at a discount (negative premiums) have been excluded.

Sources of information: Commodity Systems, Inc. and Mergerstat, Inc.

Page 50

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – ACQUISITIONS PREMIUMS PAID ANALYSIS

Acquisition Premiums Review⁽¹⁾

Announc. Date	Seller	Buyer	Previous Ownership Percentage		Percentage Sought		Premiums
							1 Day		5 Day		30 Day
30-Oct-03	Bausch & Lomb Inc (RayBan Sun Optics India Ltd)	Luxottica Group SpA	44.00	%	20.00	%	86.03	%	94.56	%	92.76	%
9-Sep-03	ON Command Corp	Liberty Media Corp	74.00	%	26.00	%	125.23	%	125.23	%	93.37	%
21-Aug-03	Joule Inc	Private Group Led By Wellman	72.00	%	28.00	%	3.85	%	3.85	%	25.00	%
14-Aug-03	TDS Informationstechnologie AG	General Atlantic Partners LLC	26.59	%	44.41	%	na		na		17.50	%
13-Jun-03	Atalanta/Sosnoff Capital Corp	Private Group Led By Management of Atalanta/Sosnof	82.69	%	17.31	%	0.36	%	6.65	%	12.50	%
29-May-03	BCT International Inc	Phoenix Group of Florida Inc	52.50	%	47.50	%	117.39	%	102.02	%	113.90	%
16-May-03	Wolohan Lumber Co	Private Group Led By Management of Wolohan Lumber	51.20	%	48.80	%	10.41	%	8.75	%	9.57	%
5-May-03	Westerbeke Corp	Westerbeke Acquisition Corp	56.20	%	43.80	%	65.75	%	65.75	%	71.43	%
5-May-03	Atlantic Data Services Inc	Private Group Led by Management of Atlantic Data	65.06	%	34.94	%	1.01	%	2.04	%	14.50	%
5-May-03	Semele Group Inc	Private Group Led by Management of Semele Group Inc	53.08	%	46.92	%	25.00	%	25.00	%	21.21	%
29-Apr-03	RWD Technologies Inc	Research Park Acquisition Inc	66.00	%	34.00	%	128.26	%	147.06	%	156.10	%
27-Mar-03	DSI Toys Inc	DSI Acquisition Inc	73.28	%	26.72	%	11.90	%	8.05	%	na
26-Mar-03	InvestorsBancorp Inc	Private Group Led by Management of InvestorsBancor	61.80	%	38.20	%	na		4.80	%	9.65	%
24-Mar-03	Judge Group Inc	Private Group Led by Management of Judge Group Inc	60.00	%	40.00	%	17.14	%	12.33	%	29.13	%
6-Feb-03	deltathree Inc	Atarey Hasharon Chevra Lepituach Vehashkaot Benadl	71.00	%	29.00	%	37.25	%	27.27	%	48.94	%
3-Feb-03	9278 Communications Inc	NTSE Holding Corp	54.20	%	45.80	%	185.71	%	257.14	%	150.00	%
29-Jan-03	DSI Toys Inc	Mvii Llc	55.20	%	44.80	%	na		na		15.79	%
22-Nov-02	Unimark Group Inc (The)	M&M Nominee LLC	62.50	%	37.50	%	132.14	%	160.00	%	66.67	%
19-Nov-02	MDI Entertainment Inc	Scientific Games Corp	66.00	%	34.00	%	27.27	%	40.00	%	53.85	%
13-Nov-02	Media Source Inc	Private Group Led By Davis	65.90	%	34.10	%	12.44	%	45.16	%	36.36	%
19-Sep-02	WJ Communications Inc	Fox Paine & Co LLC	65.50	%	34.50	%	0.92	%	na		29.41	%
13-Aug-02	Oriole Homes Corp	Levy Group (The)	60.10	%	39.90	%	63.33	%	63.33	%	29.29	%
13-Aug-02	R-B Rubber Products Inc	Dash Multi-Corp Inc	70.00	%	30.00	%	83.01	%	69.70	%	95.80	%
5-Aug-02	Sandata Technologies Inc	Sandata Acquisition Corp	74.40	%	25.60	%	282.00	%	516.13	%	180.88	%
12-Jun-02	Swiss Army Brands Inc	Victorinox AG	66.90	%	33.10	%	41.73	%	42.63	%	40.85	%
16-May-02	Electric Lightwave Inc	Citizens Communications Co	85.00	%	15.00	%	105.88	%	79.49	%	55.56	%
16-May-02	Balanced Care Corp	IPC Advisors Sarl	53.30	%	46.70	%	150.00	%	177.78	%	127.27	%
10-Apr-02	PartsBase Inc	Private Group Led by Robert A Hammond Jr	65.00	%	35.00	%	95.83	%	95.83	%	95.83	%
3-Apr-02	CBNY Investment Services Corp	Private Group Led By CBNY Investment Services Mgmt	73.60	%	26.40	%	1.30	%	1.00	%	1.00	%
28-Mar-02	Shibazaki Seisakusho Ltd	Alcoa Inc	50.50	%	20.30	%	30.87	%	28.09	%	44.71	%
14-Mar-02	Konover Property Trust	Prometheus Southeast Retail Trust	66.00	%	34.00	%	20.00	%	20.00	%	24.26	%
11-Mar-02	Hawker Pacific Aerospace	Deutsche Lufthansa AG	72.70	%	27.30	%	2.20	%	3.50	%	51.16	%
6-Mar-02	CAA AG	Harman International Industries Inc	78.15	%	21.85	%	0.44	%	27.50	%	12.50	%
22-Jan-02	Rottlund Co Inc (The)	Private Group Led by David and Bernard Rotter	71.40	%	28.60	%	18.06	%	29.79	%	46.63	%
16-Nov-01	Ugly Duckling Corp	Private Group led by Ernest C Garcia II	61.00	%	39.00	%	41.77	%	42.91	%	30.74	%
18-Sep-01	Organic Inc	Seneca Investments LLC	80.90	%	19.10	%	13.79	%	17.86	%	37.50	%
22-Aug-01	HomeServices.Com Inc	Berkshire Hathaway Inc	83.50	%	16.50	%	38.78	%	40.50	%	66.67	%
14-Aug-01	National Home Centers Inc	Private Group Led By Dwain A Newman	63.49	%	36.51	%	21.74	%	17.65	%	35.92	%
3-Aug-01	Lincoln Snacks Co	Lincoln Snacks Acquisition Corp	89.80	%	10.20	%	12.90	%	16.67	%	27.27	%
6-Jun-01	HIS Sportswear AG	VF Corp	85.00	%	15.00	%	18.48	%	46.72	%	32.09	%
30-Apr-01	STV Group Inc	Private Group Led By ESOP Of STV Group Inc	62.81	%	37.19	%	97.37	%	110.28	%	80.00	%
27-Apr-01	Pierre Foods Inc	PF Management Inc	63.00	%	37.00	%	101.61	%	62.34	%	121.24	%
2-Apr-01	Milestone Properties Inc	Concord Assets Group Inc	68.80	%	31.20	%	40.96	%	40.96	%	40.96	%
27-Mar-01	Hahn Automotive Warehouse Inc	Private Group Led By Futerman	64.00	%	36.00	%	33.33	%	33.33	%	9.89	%
9-Feb-01	Marketing Specialists Corp	Private Group Led By Richmont Capital Partners I	83.20	%	16.80	%	98.41	%	66.67	%	468.18	%
24-Jan-01	Firecom Inc	Private Group Led By Mendez	68.80	%	31.20	%	59.09	%	59.09	%	34.62	%
					High		282.0	%	516.1	%	468.2	%
					Mean		57.2	%	66.2	%	63.5	%
					Median		37.3	%	41.0	%	40.8	%
					Low		0.4	%	1.0	%	1.0	%

⁽¹⁾ Includes acquisitions by controlling shareholder (>50%) of minority interests from January 2001 with deal value < $25 million. Acquisitions at a discount (negative premiums) have been excluded.

Sources of information: Mergerstat, Inc.

Page 51

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – ADJUSTED NET BOOK VALUE ANALYSIS

• Capitalink performed an adjusted book value analysis, based upon a going concern premise, to determine the value of the Company assuming all of its assets were valued at market value. Under historical cost accounting most assets in the Company’s financial statements are generally not reflected at market value, but reflect historical acquisition costs.

• For the purposes of this analysis, based upon discussions with Company management and utilizing the Company’s balance sheet as of October 31, 2003, the following adjustments to market value were assumed:

• Inventory adjustment to reflect market value of slow moving inventory.

• Deferred tax asset adjustment to reflect assumed tax net operating loss adjustment.

• Contingent purchase holdback adjustment to reflect the present value of the expected future cash flow.

• The results of the analysis indicate that as of October 31, 2003, the Company’s net book value per share decreases from $2.67 to an adjusted net book value per share of $1.94.

Page 52

PROJECT SPARKLE	CONFIDENTIAL
VALUATION ANALYSIS – ADJUSTED NET BOOK VALUE ANALYSIS

Adjusted Net Book Value Analysis as of October 31, 2003

($ in thousands)

			Market Adjusted Value
	Unadjusted Book Value		Adjs(1)			Notes	Adjusted
Current Assets:
Cash & Equivalents	$	359	$	—			$	359
Accounts Receivable, net		2,097		—				2,097
Inventory		51,448		(900	)	a		50,548
Other Current Assets		1,951		—				1,951
Total Current Assets		55,855		(900	)			54,955
Long Term Assets:
Net Property, Plant & Equipment		9,510		—				9,510
Deferred Tax Asset		3,095		(1,500	)	b		1,595
Intangible Assets		—		—				—
Contingent Purchase Holdback		5,474		(3,777	)	c		1,697
Other		362		—				362
Total Long Term Assets		18,441		(5,277	)			13,164
Total Assets	$	74,296	$	(6,177	)		$	68,119

Explanation of Notes:

a Assumed market adjustment for slow-moving inventory.

b Estimated tax adjustment.

c Present value adjustment for payment received in 8 years using Company’s WACC.

			Market Adjusted Value
	Unadjusted Book Value		Adjs(1)			Notes	Adjusted
Current Liabilities:
Accounts Payable		15,961		—				15,961
Accrued Compensation		1,312		—				1,312
Accured Expenses		2,464		—				2,464
Current Portion of LT Debt		17		—				17
Total Current Liabilities		19,754		—				19,754
Long Term Liabilities
Revolving Credit Note		25,990		—				25,990
Notes Payable to Affiliate		2,579		—				2,579
Deferred Income Taxes		3,104						3,104
Other Long Term		216		—				216
Total Long Term Liabilities		31,889		—				31,889
Contingent Liabilities Other		—		—				—
Total Contingent Liabilities		—		—				—
Total Liabilities		51,643		—				51,643
Net Book Value	$	22,653	$	(6,177	)		$	16,476
Number Outstanding Shares as of October 31, 2003				8,476
Net Book Value Per Share	$	2.67
Indicated Value, per share							$	1.94

⁽¹⁾ Adjustments determined in discussions with Company Management.

Sources of information: Company financials and management

Page 53

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX

I	INTRODUCTION
II	COMPANY OVERVIEW
III	COMPANY FINANCIAL & MARKET PERFORMANCE
IV	VALUATION
V	APPENDIX

Page 54

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX TABLE OF CONTENTS

COMPANY FINANCIAL DATA

COMPARABLE COMPANY DATA

Page 55

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Normalized Comparative Summary Income Statements

($ in thousands except per share)

	for years ended the last day of February,												for the 6 months ended August 31,						LTM August 31, 2003
	2000			2001			2002			2003			2002			2003
Revenue	$	120,861		$	120,037		$	113,449		$	102,011		$	39,972		$	39,045		$	101,084
Cost of Revenue		59,408			61,194			60,091			52,590			20,072			19,908			52,426
Gross Profit		61,453			58,843			53,358			49,421			19,900			19,137			48,658
Selling, General & Admin		51,430			53,134			52,808			47,241			21,335			21,023			46,929
Depreciation & Amortization		3,391			3,860			3,797			2,450			1,195			1,201			2,456
Total Operating Expenses		54,821			56,994			56,605			49,691			22,530			22,224			49,385
Operating Income (Loss)		6,632			1,849			(3,247	)		(270	)		(2,630	)		(3,087	)		(727	)
Interest Income (Expense)		(966	)		(1,749	)		(1,871	)		(1,443	)		(711	)		(620	)		(1,352	)
Pre-tax Income (Loss)		5,666			100			(5,118	)		(1,713	)		(3,341	)		(3,707	)		(2,079	)
Income Tax (Benefit)		1,805			33			(1,548	)		(634	)		(1,236	)		—			602
Normalized Net Income	$	3,861		$	67		$	(3,570	)	$	(1,079	)	$	(2,105	)	$	(3,707	)	$	(2,681	)
Normalized EBIT	$	6,632		$	1,849		$	(3,247	)	$	(270	)	$	(2,630	)	$	(3,087	)	$	(727	)
Total Depreciation & Amortization	$	3,391		$	3,870		$	3,797		$	2,450		$	1,195		$	1,201		$	2,456
Normalized EBITDA	$	10,023		$	5,719		$	550		$	2,180		$	(1,435	)	$	(1,886	)	$	1,729
Capital Expenditures, net of Disposals (CAPEX, net)	$	5,397		$	6,967		$	2,792		$	696		$	555		$	139		$	280
Normalized EBITDA - CAPEX	$	4,626		$	(1,248	)	$	(2,242	)	$	1,484		$	(1,990	)	$	(2,025	)	$	1,449
Earnings per Share
Basic Normalized EPS	$	0.46		$	0.01		$	(0.42	)	$	(0.13	)	$	(0.25	)	$	(0.44	)	$	(0.32	)
Basic Reported EPS	$	0.57		$	0.01		$	(1.81	)	$	(0.18	)	$	(0.29	)	$	(0.46	)	$	(0.35	)
Weighted Average Shares Outstanding (thousands)		8,476			8,476			8,476			8,476			8,476			8,476
Diluted Normalized EPS	$	0.46		$	0.01		$	(0.42	)	$	(0.13	)	$	(0.25	)	$	(0.44	)	$	(0.32	)
Diluted Reported EPS	$	0.57		$	0.01		$	(1.81	)	$	(0.18	)	$	(0.29	)	$	(0.46	)	$	(0.35	)
Weighted Average Shares Outstanding (thousands)		8,480			8,477			8,476			8,476			8,476			8,476
Normalizing Reconciliation
Restructuring/Goodwill Impairment	$	—		$	—		$	(17,067	)	$	(270	)	$	(270	)	$	—		$	—
Other Unusual (Expense) Gain Items		—			—			—			—			—			—			—
Income Tax Shelter (Charge) from Unusual Items		—			—			5,163			100			100			—			—
Unusual (Expense) Gain Items, net of Taxes		—			—			(11,904	)		(170	)		(170	)		—			—
Accounting Changes, net of Taxes		—			—			—			—			—			—			—
Discontinued Operations, net of Taxes		941			(5	)		98			(256	)		(153	)		(224	)		(327	)
Extraordinary Items, net of Taxes		—			—			—			—			—			—			—
Total Reconciling Items, net of Taxes	$	941		$	(5	)	$	(11,806	)	$	(426	)	$	(323	)	$	(224	)	$	(327	)
Reported Income Tax (Benefit)	$	1,805		$	33		$	(6,711	)	$	(734	)	$	(1,336	)	$	—		$	602
Reported Net Income (Loss)	$	4,802		$	62		$	(15,376	)	$	(1,505	)	$	(2,428	)	$	(3,931	)	$	(3,008	)

Sources of information: Company financial statements and management

Page 56

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Normalized Common Sized Summary Income Statements

	for years ended the last day of February,								for the 6 months ended August 31,				LTM August 31, 2003
	2000		2001		2002		2003		2002		2003
Revenue	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Cost of Revenue	49.2	%	51.0	%	53.0	%	51.6	%	50.2	%	51.0	%	51.9	%
Gross Profit	50.8	%	49.0	%	47.0	%	48.4	%	49.8	%	49.0	%	48.1	%
Selling, General & Admin	42.6	%	44.3	%	46.5	%	46.3	%	53.4	%	53.8	%	46.4	%
Depreciation & Amortization	2.8	%	3.2	%	3.3	%	2.4	%	3.0	%	3.1	%	2.4	%
Total Operating Expenses	45.4	%	47.5	%	49.9	%	48.7	%	56.4	%	56.9	%	48.9	%
Operating Income (Loss)	5.5	%	1.5	%	-2.9	%	-0.3	%	-6.6	%	-7.9	%	-0.7	%
Interest Income (Expense)	-0.8	%	-1.5	%	-1.6	%	-1.4	%	-1.8	%	-1.6	%	-1.3	%
Pre-tax Income (Loss)	4.7	%	0.1	%	-4.5	%	-1.7	%	-8.4	%	-9.5	%	-2.1	%
Income Tax (Benefit)	1.5	%	0.0	%	-1.4	%	-0.6	%	-3.1	%	0.0	%	0.6	%
Normalized Net Income	3.2	%	0.1	%	-3.1	%	-1.1	%	-5.3	%	-9.5	%	-2.7	%
Normalized EBIT	5.5	%	1.5	%	-2.9	%	-0.3	%	-6.6	%	-7.9	%	-0.7	%
Total Depreciation & Amortization	2.8	%	3.2	%	3.3	%	2.4	%	3.0	%	3.1	%	2.4	%
Normalized EBITDA	8.3	%	4.8	%	0.5	%	2.1	%	-3.6	%	-4.8	%	1.7	%
Capital Expenditures, net of Disposals (CAPEX, net)	4.5	%	5.8	%	2.5	%	0.7	%	1.4	%	0.4	%	0.3	%
Normalized EBITDA - CAPEX	3.8	%	-1.0	%	-2.0	%	1.5	%	-5.0	%	-5.2	%	1.4	%
Normalizing Reconciliation
Restructuring/Goodwill Impairment	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Other Unusual (Expense) Gain Items	0.0	%	0.0	%	-15.0	%	-0.3	%	-0.7	%	0.0	%	0.0	%
Income Tax Shelter (Charge) from Unusual Items	0.0	%	0.0	%	4.6	%	0.1	%	0.2	%	0.0	%	0.0	%
Unusual (Expense) Gain Items, net of Taxes	0.0	%	0.0	%	-10.5	%	-0.2	%	-0.4	%	0.0	%	0.0	%
Accounting Changes, net of Taxes	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Discontinued Operations, net of Taxes	0.8	%	0.0	%	0.1	%	-0.3	%	-0.4	%	-0.6	%	-0.3	%
Extraordinary Items, net of Taxes	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Total Reconciling Items, net of Taxes	0.8	%	0.0	%	-10.4	%	-0.4	%	-0.8	%	-0.6	%	-0.3	%
Reported Income Tax (Benefit)	1.5	%	0.0	%	-5.9	%	-0.7	%	-3.3	%	0.0	%	0.6	%
Reported Net Income (Loss)	4.0	%	0.1	%	-13.6	%	-1.5	%	-6.1	%	-10.1	%	-3.0	%

Sources of information: Company financial statements and management

Page 57

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Comparative Summary Balance Sheets

($ in thousands, except per share)

	as of February 28,												as of August 31,
Assets	2000			2001			2002			2003			2002			2003
Current Assets
Cash & Equivalents	$	895		$	685		$	809		$	384		$	353		$	512
Accounts Receivable		49,655			50,199			621			1,418			1,397			2,332
Inventory		46,253			48,552			44,337			41,637			48,362			44,458
Deferred Income Taxes		2,249			2,194			—			1,327			—			1,181
Prepaid & Other		486			1,622			7,430			1,063			2,992			833
Total Current Assets		99,538			103,252			53,197			45,829			53,104			49,316
Property & Equipment		34,349			37,840			29,919			29,285			29,437			29,527
Less Accumulated Depreciation		(19,305	)		(19,662	)		(17,765	)		(18,843	)		(18,316	)		(19,683	)
Property & Equipment, net		15,044			18,178			12,154			10,442			11,121			9,844
Intangible Assets, net		5,849			5,403			—			—			—			—
Contingent Purchase Holdback		—			—			5,474			5,474			5,474			5,474
Other Assets		906			3,604			1,123			4,274			1,051			3,504
	$	121,337		$	130,437		$	71,948		$	66,019		$	70,750		$	68,138
Liabilities & Stockholders’ Equity
Current Liabilities
Accounts Payable	$	12,855		$	13,418		$	17,233		$	7,385		$	12,558		$	12,140
Accrued Expenses		2,712			2,348			3,805			3,167			2,383			2,628
Accrued Compensation		3,569			2,305			2,011			1,727			1,267			1,165
Other		2,547			—			—			—			—			—
Total Current Liabilities		21,683			18,071			23,049			12,279			16,208			15,933
Long Term Interest Bearing Debt		52,359			63,761			15,809			18,873			23,880			22,088
Long Term Interest Bearing Debt, Affiliates		845			845			2,579			2,579			2,579			2,579
Deferred Income Taxes		1,267			2,517			—			3,292			—			3,105
Other Long Term		213			211			855			845			855			213
Total Liabilities		76,367			85,405			42,292			37,868			43,522			43,918
Stockholders’ Equity
Common Stock		847			847			847			847			847			847
Paid in Capital		10,560			10,560			10,560			10,560			10,560			10,560
Accumulated Earnings (Deficit)		33,563			33,625			18,249			16,744			15,821			12,813
Total Stockholders’ Equity		44,970			45,032			29,656			28,151			27,228			24,220
	$	121,337		$	130,437		$	71,948		$	66,019		$	70,750		$	68,138
Net Working Capital	$	77,855		$	85,181		$	30,148		$	33,550		$	36,896		$	33,383
Common Shares Outstanding (thousands)		8,476			8,476			8,476			8,476			8,476			8,476
Book Value per Share	$	5.31		$	5.31		$	3.50		$	3.32		$	3.21		$	2.86
Tangible Book Value Per Share	$	4.62		$	4.68		$	3.50		$	3.32		$	3.21		$	2.86

Sources of information: Company financial statements and management

Page 58

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Common Sized Summary Balance Sheets

	as of February 28,								as of August 31,
Assets	2000		2001		2002		2003		2002		2003
Current Assets
Cash & Equivalents	0.7	%	0.5	%	1.1	%	0.6	%	0.5	%	0.8	%
Accounts Receivable	40.9	%	38.5	%	0.9	%	2.1	%	2.0	%	3.4	%
Inventory	38.1	%	37.2	%	61.6	%	63.1	%	68.4	%	65.2	%
Deferred Income Taxes	1.9	%	1.7	%	0.0	%	2.0	%	0.0	%	1.7	%
Prepaid & Other	0.4	%	1.2	%	10.3	%	1.6	%	4.2	%	1.2	%
Total Current Assets	82.0	%	79.2	%	73.9	%	69.4	%	75.1	%	72.4	%
Property & Equipment	28.3	%	29.0	%	41.6	%	44.4	%	41.6	%	43.3	%
Less Accumulated Depreciation	-15.9	%	-15.1	%	-24.7	%	-28.5	%	-25.9	%	-28.9	%
Property & Equipment, net	12.4	%	13.9	%	16.9	%	15.8	%	15.7	%	14.4	%
Intangible Assets, net	4.8	%	4.1	%	0.0	%	0.0	%	0.0	%	0.0	%
Contingent Purchase Holdback	0.0	%	0.0	%	7.6	%	8.3	%	7.7	%	8.0	%
Other Assets	0.7	%	2.8	%	1.6	%	6.5	%	1.5	%	5.1	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Liabilities & Stockholders’ Equity
Current Liabilities
Accounts Payable	10.6	%	10.3	%	24.0	%	11.2	%	17.7	%	17.8	%
Accrued Expenses	2.2	%	1.8	%	5.3	%	4.8	%	3.4	%	3.9	%
Accrued Compensation	2.9	%	1.8	%	2.8	%	2.6	%	1.8	%	1.7	%
Other	2.1	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Total Current Liabilities	17.9	%	13.9	%	32.0	%	18.6	%	22.9	%	23.4	%
Long Term Interest Bearing Debt	43.2	%	48.9	%	22.0	%	28.6	%	33.8	%	32.4	%
Long Term Interest Bearing Debt, Affiliates	0.7	%	0.6	%	3.6	%	3.9	%	3.6	%	3.8	%
Deferred Income Taxes	1.0	%	1.9	%	0.0	%	5.0	%	0.0	%	4.6	%
Other Long Term	0.2	%	0.2	%	1.2	%	1.3	%	1.2	%	0.3	%
Total Liabilities	62.9	%	65.5	%	58.8	%	57.4	%	61.5	%	64.5	%
Stockholders’ Equity
Common Stock	0.7	%	0.6	%	1.2	%	1.3	%	1.2	%	1.2	%
Paid in Capital	8.7	%	8.1	%	14.7	%	16.0	%	14.9	%	15.5	%
Accumulated Earnings (Deficit)	27.7	%	25.8	%	25.4	%	25.4	%	22.4	%	18.8	%
Treasury Stock & Stock Receivable	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%	0.0	%
Total Stockholders’ Equity	37.1	%	34.5	%	41.2	%	42.6	%	38.5	%	35.5	%
	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%
Net Working Capital	64.2	%	65.3	%	41.9	%	50.8	%	52.1	%	49.0	%

Sources of information: Company financial statements and management

Page 59

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Comparative Financial Analysis

($ in thousands, except per share)

													as of & for the 6 months ended						as of & for LTM August 31, 2003
	as of & for years ended the last day of February,												August 31,
	2000			2001			2002			2003			2002			2003
Financial Review
Revenue	$	120,861		$	120,037		$	113,449		$	102,011		$	39,972		$	39,045		$	101,084
Gross Profit	$	61,453		$	58,843		$	53,358		$	49,421		$	19,900		$	19,137		$	48,658
Total Operating Expenses	$	54,821		$	56,994		$	56,605		$	49,691		$	22,530		$	22,224		$	49,385
Operating Income	$	6,632		$	1,849		$	(3,247	)	$	(270	)	$	(2,630	)	$	(3,087	)	$	(727	)
Pre-tax Income (Loss)	$	5,666		$	100		$	(5,118	)	$	(1,713	)	$	(3,341	)	$	(3,707	)	$	(2,079	)
Normalized Net Income (Loss)	$	3,861		$	67		$	(3,570	)	$	(1,079	)	$	(2,105	)	$	(3,707	)	$	(2,681	)
Normalized EBIT	$	6,632		$	1,849		$	(3,247	)	$	(270	)	$	(2,630	)	$	(3,087	)	$	(727	)
Normalized EBITDA	$	10,023		$	5,719		$	550		$	2,180		$	(1,435	)	$	(1,886	)	$	1,729
Normalized Basic EPS	$	0.46		$	0.01		$	(0.42	)	$	(0.13	)	$	(0.25	)	$	(0.44	)	$	(0.32	)
Normalized Diluted EPS	$	0.46		$	0.01		$	(0.42	)	$	(0.13	)	$	(0.25	)	$	(0.44	)	$	(0.32	)
Total Assets	$	121,337		$	130,437		$	71,948		$	66,019		$	70,750		$	68,138		$	68,138
Net Worth	$	44,970		$	45,032		$	29,656		$	28,151		$	27,228		$	24,220		$	24,220
Tangible Net Worth	$	39,121		$	39,629		$	29,656		$	28,151		$	27,228		$	24,220		$	24,220
Total Interest Bearing Debt	$	53,204		$	64,606		$	18,388		$	21,452		$	26,459		$	24,667		$	24,667
Net Interest Bearing Debt	$	52,309		$	63,921		$	17,579		$	21,068		$	26,106		$	24,155		$	24,155
Total Capitalization	$	98,174		$	109,638		$	48,044		$	49,603		$	53,687		$	48,887		$	48,887
Financial Strength
Quick Ratio		2.5			3.0			0.4			0.3			0.3			0.3			0.3
Current Ratio		4.6			5.7			2.3			3.7			3.3			3.1			3.1
Total Liabilities to Net Worth		169.8	%		189.7	%		142.6	%		134.5	%		159.8	%		181.3	%		181.3	%
Total Interest Bearing Debt to Net Worth		118.3	%		143.5	%		62.0	%		76.2	%		97.2	%		101.8	%		101.8	%
Total Interest Bearing Debt to Total Capitalization		54.2	%		58.9	%		38.3	%		43.2	%		49.3	%		50.5	%		50.5	%
Net Interest Bearing Debt to Total Capitalization		53.3	%		58.3	%		36.6	%		42.5	%		48.6	%		49.4	%		49.4	%
Interest Expense to Interest Bearing Debt		1.8	%		2.7	%		10.2	%		6.7	%		2.7	%		2.5	%		5.5	%
Total Interest Bearing Debt to Normalized EBITDA		5.3			11.3			33.4			9.8			na			na			14.3
Normalized EBITDA to Interest Expense		10.4			3.3			0.3			1.5			na			na			1.3
Normalized EBITDA-CAPEX, net to Interest Exp.		4.8			(0.7	)		(1.2	)		1.0			na			na			1.1
Effectiveness and Efficiency
Accounts Receivable Turnover		na			2.4			4.5			100.1			39.6			20.8			54.2
Inventory Turnover		na			1.3			1.3			1.2			0.4			0.5			1.1
Asset Turnover		na			1.0			1.1			1.5			0.6			0.6			1.5
Days Sales Outstanding		na			151.8			81.8			3.6			4.6			8.8			6.7
Days Inventory Outstanding		na			282.7			282.1			298.4			424.9			397.9			323.1
Days Payable Outstanding		na			40.6			47.9			43.9			64.3			42.6			44.3
Normalized EBIT to Average Assets		na			1.5	%		-3.2	%		-0.4	%		na			na			-1.0	%
Normalized EBIT to Net Worth		na			4.1	%		-8.7	%		-0.9	%		na			na			-2.8	%
Normalized EBITDA to Average Assets		na			4.5	%		0.5	%		3.2	%		na			na			2.5	%
Normalized EBITDA to Net Worth		na			12.7	%		1.5	%		7.5	%		na			na			6.7	%
Normalized Net Income to Average Assets		na			0.1	%		-3.5	%		-1.6	%		na			na			-3.9	%
Normalized Net Income to Net Worth		na			0.1	%		-9.6	%		-3.7	%		na			na			-10.4	%

Sources of information: Company financial statements and management

Page 60

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPANY FINANCIAL DATA

Comparative Financial Analysis Continued

($ in thousands, except per share)

	as of & for years ended the last day of February,								as of & for the 6 months ended August 31,				as of & for LTM August 31, 2003
	2000		2001		2002		2003		2002		2003
Profitability Ratios (as % of Revenue)
Gross Profit Margin	50.8	%	49.0	%	47.0	%	48.4	%	49.8	%	49.0	%	48.1	%
SG&A	42.6	%	44.3	%	46.5	%	46.3	%	53.4	%	53.8	%	46.4	%
Total Operating Expenses	45.4	%	47.5	%	49.9	%	48.7	%	56.4	%	56.9	%	48.9	%
Operating Income	5.5	%	1.5	%	-2.9	%	-0.3	%	-6.6	%	-7.9	%	-0.7	%
Pre-tax Income (Loss)	4.7	%	0.1	%	-4.5	%	-1.7	%	-8.4	%	-9.5	%	-2.1	%
Normalized Net Income (Loss)	3.2	%	0.1	%	-3.1	%	-1.1	%	-5.3	%	-9.5	%	-2.7	%
Normalized EBIT	5.5	%	1.5	%	-2.9	%	-0.3	%	-6.6	%	-7.9	%	-0.7	%
Normalized EBITDA	8.3	%	4.8	%	0.5	%	2.1	%	-3.6	%	-4.8	%	1.7	%
Growth Rates
Revenue	na		-0.7	%	-5.5	%	-10.1	%	na		-2.3	%	-0.9	%
Gross Profit	na		-4.2	%	-9.3	%	-7.4	%	na		-3.8	%	-1.5	%
Operating Income	na		-72.1	%	-275.6	%	na		na		na		na
Pre-tax Income (Loss)	na		-98.2	%	-5218.0	%	na		na		na		na
Normalized Net Income (Loss)	na		-98.3	%	-5428.0	%	na		na		na		na
Normalized EBIT	na		-72.1	%	-275.6	%	na		na		na		na
Normalized EBITDA	na		-42.9	%	-90.4	%	296.4	%	na		na		-20.7	%
Normalized Basic EPS	na		-97.8	%	-4300.0	%	na		na		na		na
Normalized Diluted EPS	na		-97.8	%	-4300.0	%	na		na		na		na
Total Assets	na		7.5	%	-44.8	%	-8.2	%	na		-3.7	%	3.2	%
Net Worth	na		0.1	%	-34.1	%	-5.1	%	na		-11.0	%	-14.0	%
Tangible Net Worth	na		1.3	%	-25.2	%	-5.1	%	na		-11.0	%	-14.0	%
CAPEX, net	na		29.1	%	-59.9	%	-75.1	%	na		-75.0	%	-59.8	%
Cumulative Average Growth Rate (CAGR) Statistics
Revenue	na		-0.7	%	-3.1	%	-5.5	%	na		na		na
Gross Profit	na		-4.2	%	-6.8	%	-7.0	%	na		na		na
Operating Income	na		-72.1	%	na		na		na		na		na
Pre-tax Income (Loss)	na		-98.2	%	na		na		na		na		na
Normalized Net Income (Loss)	na		-98.3	%	na		na		na		na		na
Normalized EBIT	na		-72.1	%	na		na		na		na		na
Normalized EBITDA	na		-42.9	%	-76.6	%	-39.9	%	na		na		na
Normalized Basic EPS	na		-97.8	%	na		na		na		na		na
Normalized Diluted EPS	na		-97.8	%	na		na		na		na		na
Total Assets	na		7.5	%	-23.0	%	-18.4	%	na		na		na
Net Worth	na		0.1	%	-18.8	%	-14.5	%	na		na		na
Tangible Net Worth	na		1.3	%	-12.9	%	-10.4	%	na		na		na
CAPEX, net	na		29.1	%	-28.1	%	-49.5	%	na		na		na
Depreciation & Capital Spending
Depreciation to CAPEX, net	62.8	%	55.5	%	136.0	%	352.0	%	215.3	%	864.0	%	877.1	%
CAPEX, net to Revenue	4.5	%	5.8	%	2.5	%	0.7	%	1.4	%	0.4	%	0.3	%

Sources of information: Company financial statements and management

Page 61

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Signet Group PLC Overview ($ in thousands, except per share)

Company Information

Name	Signet Group PLC	Address	Zenith House, The Hyde
Symbol	SIGY	City, State Zip	London, EN NW9 6
Latest Fiscal YE	1-Feb-03	Telephone	(870) 909-0301
Latest Rprt Per	31-Jul-03	Website	signetgroupplc.com

Market Information

As of Date		25-Nov-03	Market Cap	$	3,050,693
Exchange		NASD	Total Invested Capital (TIC)	$	3,686,160
Stock Price	$	53.25	Enterprise Value (EV)	$	3,636,089
52 Week High	$	59.34
52 Week Low	$	29.80	Insider Ownership		21.00	%
Avg. Daily Volume (000’s)		2	Institutional
Beta		1.11	% Owned		na
Shares Outstanding (000’s)		57,290	Number of Institutions		na

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	1.20	x	1.45	x	1.43	x
EBIT	9.06	x	10.94	x	10.80	x
EBITDA	7.66	x	9.25	x	9.12	x
Normalized Net Income	15.10	x	18.25	x	18.00	x
Basic Normalized EPS	15.04	x	na		na
Projected
Feb-04 Mean Revenue	na		na		na
Jan-05 Mean Revenue	na		na		na
Feb-04 Mean EBITDA	na		na		na
Jan-05 Mean EBITDA	na		na		na
Feb-04 Mean EPS	14.01	x	na		na
Jan-05 Mean EPS	12.92	x	na		na
Most Recent Filing
Assets	1.66	x	2.00	x	1.97	x
Common Equity	2.61	x	na		na
Tangible Common Equity	2.69	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue	EBITDA	EPS
February-04	—	na	na	$	3.80
January-05	—	na	na	$	4.12
LT Growth	—	na	na		10.00	%

Income and Cashflow Statement Data

	LTM Jul-03			Six Months Ended						Fiscal Years Ended
				Jul-03			Jul-02			Feb-03			Feb-02
Revenue	$	2,537,866		$	1,074,514		$	996,888		$	2,460,240		$	2,272,464
Cost of Revenue		2,108,933			987,735			916,150			2,037,348			1,898,352
Gross Profit		428,933			86,779			80,738			422,892			374,112
Selling, General & Administrative		92,106			—			—			92,106			85,104
Depreciation & Amortization		—			—			—			—			—
Operating Income		336,827			86,779			80,738			330,786			289,008
Interest Income / (Expense), net		(23,824	)		(9,821	)		(11,242	)		(25,245	)		(25,776	)
Other Income / (Expense), net		—			—			—			—			—
Pre-tax Income		313,003			76,958			69,496			305,541			263,232
Taxes		111,020			27,370			24,674			108,324			90,864
After-tax Income		201,983			49,588			44,822			197,217			172,368
Minority Interest		—			—			—			—			—
Equity in Affiliates		—			—			—			—			—
Normalized Net Income		201,983			49,588			44,822			197,217			172,368
Preferred Dividends		—			—			—			—			—
Normalized Net Income to Common	$	201,983		$	49,588		$	44,822		$	197,217		$	172,368
Normalized EBIT	$	336,827		$	86,779		$	80,738		$	330,786		$	289,008
Depreciation & Amortization	$	61,661		$	30,107		$	26,280		$	57,834		$	49,968
Normalized EBITDA	$	398,488		$	116,886		$	107,018		$	388,620		$	338,976
CAPEX	$	76,747		$	38,479		$	35,478		$	73,746		$	87,408
EBITDA - CAPEX	$	321,741		$	78,407		$	71,540		$	314,874		$	251,568
GAAP Operating Cash Flow	$	279,844		$	116,564		$	115,486		$	278,766		$	270,720
Basic Reported Weighted Avg Shares Out (000’s)					57,167			56,987			57,023			56,340
Basic Normalized EPS	$	3.54		$	0.87		$	0.79		$	3.46		$	3.06
Basic Reported EPS	$	3.54		$	0.87		$	0.79		$	3.46		$	3.06
Diluted Reported Weighted Avg Shares Out (000’s)					57,563			57,633			57,570			57,357
Diluted Normalized EPS	$	3.51		$	0.86		$	0.78		$	3.43		$	3.01
Diluted Reported EPS	$	3.51		$	0.86		$	0.78		$	3.43		$	3.01
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	—		$	—		$	—		$	—		$	—
Other Unusual (Expense) Gain Items		—			—			—			—			—
Tax Shelter (Charge) on Unusual Items		—			—			—			—			—
Unusual (Exp) Gain Items, net of Taxes		—			—			—			—			—
Accounting Changes, net of Taxes		—			—			—			—			—
Discontinued Operations, net of Taxes		—			—			—			—			—
Extraordinary Items, net of Taxes		—			—			—			—			—
Total Reconciling Items, net of Taxes	$	—		$	—		$	—		$	—		$	—
Reported Income Tax (Benefit)	$	111,020		$	27,370		$	24,674		$	108,324		$	90,864
Reported Net Income (Loss)	$	201,983		$	49,588		$	44,822		$	197,217		$	172,368
Revenue Breakdown
Net Sales	$	2,537,866		$	1,074,514		$	996,888		$	2,460,240		$	2,272,464
Other		—			—			—			—			—
	$	2,537,866		$	1,074,514		$	996,888		$	2,460,240		$	2,272,464
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 62

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Signet Group PLC Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Jul-03			Feb-03			Feb-02
Cash & Mkt Securities	$	50,071		$	136,476		$	95,760
Accounts Receivable		508,921			529,227			548,208
Inventory		905,464			825,435			799,920
Other Current Assets		—			—			—
Total Current Assets		1,464,456			1,491,138			1,443,888
PPE, net		345,828			314,415			308,304
Intangibles, net		31,717			30,294			34,848
Deferred Income Taxes		—			—			—
Other Assets		—			—			—
Total Assets	$	1,842,001		$	1,835,847		$	1,787,040
Accounts Payable	$	—		$	—		$	—
Accrued Expenses		—			—			—
Short Term Debt		367,724			497,097			461,520
Short Term Capital Leases		—			—			—
Other Current Liabilities		—			—			—
Total Current Liabilities		367,724			497,097			461,520
Other LT Liabilities		39,606			38,556			23,328
Long Term Debt		267,743			262,242			323,424
Long Term Capital Leases		—			—			—
Minority Interests		—			—			—
Pref Stock (Liq Value)		—			—			—
Total Liabilities & Pref Stock		675,073			797,895			808,272
Common Equity		1,166,928			1,037,952			978,768
Total Liabilities & Equity	$	1,842,001		$	1,835,847		$	1,787,040
Common Shares Outstanding (000’s)		57,290			57,126			56,867
Cash Value per share	$	0.87		$	2.39		$	1.68
Common Book Value per share	$	20.37		$	18.17		$	17.21
Common Tangible Book Value per share	$	19.82		$	17.64		$	16.60
Total Debt	$	635,467		$	759,339		$	784,944
Net Debt	$	585,396		$	622,863		$	689,184
Total Capitalization	$	1,802,395		$	1,797,291		$	1,763,712
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		4.9	x		4.6	x		4.1	x
Inventory Turnover		2.4	x		2.5	x		2.4	x
Asset Turnover		1.4	x		1.4	x		1.3	x
Days Sales Outstanding		74.7			79.9			88.1
Days Inventory Outstanding		149.8			145.6			153.8
Days Payable Outstanding		na			na			na
Normalized Return on Avg Assets		11.0	%		10.9	%		na
Normalized Return on Avg Common Equity		18.3	%		19.6	%		na
Financial Strength
Current Ratio		4.0			3.0			3.1
Quick Ratio		1.5			1.3			1.4
Total Debt/Total Capitalization		35.3	%		42.2	%		44.5	%
Total Debt/TIC		17.2	%		20.6	%		21.3	%
Total Debt/EBITDA		1.6	x		2.0	x		2.3	x
Total Debt/EBITDA-CAPEX		2.0	x		2.4	x		3.1	x
EBITDA/Interest Expense		16.7	x		15.4	x		13.2	x
EBITDA-CAPEX/Interest Expense		13.5	x		12.5	x		9.8	x

Income and Cashflow Analysis

		LTM Jul-03		Six Months Ended				Fiscal Years Ended
				Jul-03		Jul-02		Feb-03		Jan-02
Profitability & Cost Ratios (as % of Revenue)
Gross Margin		16.9	%	8.1	%	8.1	%	17.2	%	16.5	%
S,G & A		3.6	%	0.0	%	0.0	%	3.7	%	3.7	%
Operating Income		13.3	%	8.1	%	8.1	%	13.4	%	12.7	%
Pre-Tax		12.3	%	7.2	%	7.0	%	12.4	%	11.6	%
EBIT		13.3	%	8.1	%	8.1	%	13.4	%	12.7	%
EBITDA		15.7	%	10.9	%	10.7	%	15.8	%	14.9	%
Normalized Net Income to Common		8.0	%	4.6	%	4.5	%	8.0	%	7.6	%
Reported Net Income		8.0	%	4.6	%	4.5	%	8.0	%	7.6	%
CAPEX		3.0	%	3.6	%	3.6	%	3.0	%	3.8	%
Period Growth Rates
Revenue				7.8	%			8.3	%
EBIT	��			7.5	%			14.5	%
EBITDA				9.2	%			14.6	%
Notes
One ASD share = 30 UK Ordinary Shares
				Six Months Ended				Fiscal Years Ended
Assumed USD to UKP Exchange Rate:				Jul-03		Jul-02		Feb-03		Jan-02
P&L (Average)				1.61		1.46		1.53		1.44
Bal Sheet (Closing)				1.60		1.57		1.64		1.42

Company has own credit operations.

On November 25, Company announced third quarter sales up from aprox $407m to $465m and operating profit up from aprox. $9.8 m to $13.3 m.

Other Analysis

	Number of stores	Avg Store Size (Sq Ft)	Avg Sales/ Store ($000)		Avg Price Per Trans ($)
US - Kay	676	1,444	$	1,490	$	242
US - Regional	307	1,444	$	1,558	$	265
US - Jared	67	5,800	$	4,310	$	558
UK - H. Samuels	418	1,124	$	1,090	$	53
UK - Ernest Jones	192	851	$	1,658	$	209

Company Description

Signet Group plc is primarily engaged in the retailing of jewelry, watches and gifts. The Company is managed as two operating segments, the United States and United Kingdom divisions. In the United States, Signet is a specialty retail jeweler that operated 1,050 stores in 45 states as of February 1, 2003. As of the same date, the Company operated 983 mall jewelry stores and 67 destination superstores in off-mall shopping centers. Its mall stores trade nationwide as Kay Jewelers, and regionally under a number of well-established and recognized names. The destination superstores trade as Jared The Galleria of Jewelry. In the United Kingdom, Signet is a specialty retailer of fine jewelry with 610 stores as of February 1, 2003. It trades as H.Samuel, targeting the middle market, and Ernest Jones, positioned at the upper end of the middle market. As of February 1, 2003, there were 418 H.Samuel stores and 192 Ernest Jones stores (including 16 Leslie Davis stores).

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 63

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Zale Corp Overview ($  in thousands, except per share )

Company Information

Name	Zale Corp	Address	901 West Walnut Hill Lane
Symbol	ZLC	City, State Zip	Irving, TX 75038
Latest Fiscal YE	31-Jul-03	Telephone	(972) 580-4000
Latest Rprt Per	31-Jul-03	Website	zales.com

Market Information

As of Date		25-Nov-03	Market Cap	$	1,512,155
Exchange		NYSE	Total Invested Capital (TIC)	$	1,696,555
Stock Price	$	55.17	Enterprise Value (EV)	$	1,661,282
52 Week High	$	56.05
52 Week Low	$	28.35	Insider Ownership		0.03	%
Avg. Daily Volume (000’s)		278	Institutional
Beta		1.65	% Owned		95.00	%
Shares Outstanding (000’s)		27,409	Number of Institutions		10

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	0.68	x	0.77	x	0.75	x
EBIT	9.61	x	10.78	x	10.56	x
EBITDA	7.08	x	7.95	x	7.78	x
Normalized Net Income	15.81	x	17.74	x	17.37	x
Basic Normalized EPS	18.64	x	na		na
Projected
Jul-04 Mean Revenue	0.66	x	0.74	x	0.73	x
Jul-05 Mean Revenue	0.63	x	0.71	x	0.69	x
Jul-04 Mean EBITDA	na		na		na
Jul-05 Mean EBITDA	na		na		na
Jul-04 Mean EPS	14.89	x	na		na
Jul-05 Mean EPS	13.10	x	na		na
Most Recent Filing
Assets	1.17	x	1.31	x	1.28	x
Common Equity	2.32	x	na		na
Tangible Common Equity	2.65	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue		EBITDA	EPS
July-04	9	$	2,278,260	na	$	3.70
July-05	7	$	2,390,480	na	$	4.21
LT Growth	7		na	na		13.86	%

Income and Cashflow Statement Data

	LTM Jul-03			Fiscal Year is LTM				Fiscal Years Ended
				Jul-03		Jul-02		Jul-03			Jul-02
Revenue	$	2,212,241		$	—	$	—	$	2,212,241		$	2,191,727
Cost of Revenue		1,101,030			—		—		1,101,030			1,083,053
Gross Profit		1,111,211			—		—		1,111,211			1,108,674
Selling, General & Administrative		892,297			—		—		892,297			881,885
Depreciation & Amortization		55,690			—		—		55,690			58,340
Operating Income		163,224			—		—		163,224			168,449
Interest Income / (Expense), net		(6,319	)		—		—		(6,319	)		(7,750	)
Other Income / (Expense), net		(5,910	)		—		—		(5,910	)		—
Pre-tax Income		150,995			—		—		150,995			160,699
Taxes		55,340			—		—		55,340			59,256
After-tax Income		95,655			—		—		95,655			101,443
Minority Interest		—			—		—		—			—
Equity in Affiliates		—			—		—		—			—
Normalized Net Income		95,655			—		—		95,655			101,443
Preferred Dividends		—			—		—		—			—
Normalized Net Income to Common	$	95,655		$	—	$	—	$	95,655		$	101,443
Normalized EBIT	$	157,314		$	—	$	—	$	157,314		$	168,449
Depreciation & Amortization	$	56,153		$	—	$	—	$	56,153		$	58,787
Normalized EBITDA	$	213,467		$	—	$	—	$	213,467		$	227,236
CAPEX	$	37,385		$	—	$	—	$	37,385		$	50,251
EBITDA - CAPEX	$	176,082		$	—	$	—	$	176,082		$	176,985
GAAP Operating Cash Flow	$	158,626		$	—	$	—	$	158,626		$	175,007
Basic Reported Weighted Avg Shares Out (000’s)					—		—		32,264			34,589
Basic Normalized EPS	$	2.96			na		na	$	2.96		$	2.93
Basic Reported EPS	$	(1.26	)		na		na	$	(1.26	)	$	4.16
Diluted Reported Weighted Avg Shares Out (000’s)					—		—		32,264			34,846
Diluted Normalized EPS	$	2.96			na		na	$	2.96		$	2.91
Diluted Reported EPS	$	(1.26	)		na		na	$	(1.26	)	$	4.13
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	(136,300	)	$	—	$	—	$	(136,300	)	$	—
Other Unusual (Expense) Gain Items		—			—		—		—			1,202
Tax Shelter (Charge) on Unusual Items		—			—		—		—			—
Unusual (Exp) Gain Items, net of Taxes		(136,300	)		—		—		(136,300	)		1,202
Accounting Changes, net of Taxes		—			—		—		—			41,287
Discontinued Operations, net of Taxes		—			—		—		—			—
Extraordinary Items, net of Taxes		—			—		—		—			—
Total Reconciling Items, net of Taxes	$	(136,300	)	$	—	$	—	$	(136,300	)	$	42,489
Reported Income Tax (Benefit)	$	55,340		$	—	$	—	$	55,340		$	59,256
Reported Net Income (Loss)	$	(40,645	)	$	—	$	—	$	(40,645	)	$	143,932
Revenue Breakdown
Net Sales	$	2,212,241		$	—	$	—	$	2,212,241		$	2,191,727
Other		—			—		—		—			—
	$	2,212,241		$	—	$	—	$	2,212,241		$	2,191,727
Net Sales		100.0	%		na		na		100.0	%		100.0	%
Other		0.0	%		na		na		0.0	%		vm0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 64

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Zale Corp Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Jul-03			Jul-03			Jul-02
Cash & Mkt Securities	$	35,273		$	35,273		$	84,887
Accounts Receivable		—			—			—
Inventory		798,761			798,761			782,316
Other Current Assets		52,450			52,450			47,915
Total Current Assets		886,484			886,484			915,118
PPE, net		266,167			266,167			284,438
Intangibles, net		82,199			82,199			212,039
Deferred Income Taxes		21,123			21,123			43,016
Other Assets		38,133			38,133			34,654
Total Assets	$	1,294,106		$	1,294,106		$	1,489,265
Accounts Payable	$	307,775		$	307,775		$	331,663
Accrued Expenses		—			—			—
Short Term Debt		—			—			—
Short Term Capital Leases		—			—			—
Other Current Liabilities		46,266			46,266			21,516
Total Current Liabilities		354,041			354,041			353,179
Other LT Liabilities		103,342			103,342			109,530
Long Term Debt		184,400			184,400			86,749
Long Term Capital Leases		—			—			—
Minority Interests		—			—			—
Pref Stock (Liq Value)		—			—			—
Total Liabilities & Pref Stock		641,783			641,783			549,458
Common Equity		652,323			652,323			939,807
Total Liabilities & Equity	$	1,294,106		$	1,294,106		$	1,489,265
Common Shares Outstanding (000’s)		27,611			27,611			33,569
Cash Value per share	$	1.28		$	1.28		$	2.53
Common Book Value per share	$	23.63		$	23.63		$	28.00
Common Tangible Book Value per share	$	20.65		$	20.65		$	21.68
Total Debt	$	184,400		$	184,400		$	86,749
Net Debt	$	149,127		$	149,127		$	1,862
Total Capitalization	$	836,723		$	836,723		$	1,026,556
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		na			na			na
Inventory Turnover		1.4	x		1.4	x		1.4	x
Asset Turnover		1.6	x		1.6	x		1.5	x
Days Sales Outstanding		na			na			na
Days Inventory Outstanding		262.1			262.1			263.6
Days Payable Outstanding		57.0			57.0			59.8
Normalized Return on Avg Assets		6.9	%		6.9	%		na
Normalized Return on Avg Common Equity		12.0	%		12.0	%		na
Financial Strength
Current Ratio		2.5			2.5			2.6
Quick Ratio		0.2			0.2			0.4
Total Debt/Total Capitalization		22.0	%		22.0	%		8.5	%
Total Debt/TIC		11.1	%		11.1	%		5.2	%
Total Debt/EBITDA		0.9	x		0.9	x		0.4	x
Total Debt/EBITDA-CAPEX		1.0	x		1.0	x		0.5	x
EBITDA/Interest Expense		33.8	x		33.8	x		29.3	x
EBITDA-CAPEX/Interest Expense		27.9	x		27.9	x		22.8	x

Income and Cashflow Analysis

	LTM Jul-03		Fiscal Year is LTM		Fiscal Years Ended
			Jul-03	Jul-02	Jul-03		Jul-02
Profitability & Cost Ratios (as % of Revenue)
Gross Margin	50.2	%	na	na	50.2	%	50.6	%
S,G & A	40.3	%	na	na	40.3	%	40.2	%
Operating Income	7.4	%	na	na	7.4	%	7.7	%
Pre-Tax	6.8	%	na	na	6.8	%	7.3	%
EBIT	7.1	%	na	na	7.1	%	7.7	%
EBITDA	9.6	%	na	na	9.6	%	10.4	%
Normalized Net Income to Common	4.3	%	na	na	4.3	%	4.6	%
Reported Net Income	-1.8	%	na	na	-1.8	%	6.6	%
CAPEX	1.7	%	na	na	1.7	%	2.3	%
Period Growth Rates
Revenue			na		0.9	%
EBIT			na		-6.6	%
EBITDA			na		-6.1	%

Notes

$136.3 million impairment reduced the carrying value of the Piercing Pagoda goodwill to approximately $19.4 million

Unusual Items are Executive Transaction and Retiree Medical Curtailment

Other Analysis

	Number of stores	Avg Store Size (Sq Ft)	Avg Sales / Store ($000)		Avg Price Per Trans ($)
Zales	851	1654	$	1,356	$	282
Gordon’s	287	1444	$	1,084	$	355
Bailey Banks Biddle	116	3593	$	2,702	$	916
People’s Jewelers	167	1586	$	878	$	177
Piercing Pagoda	813	192	$	322	$	27

Company Description

Zale Corporation operates as a specialty retailer of fine jewelry in North America. As of July 31, 2003, the Company operated 2,234 specialty retail jewelry stores and kiosks located primarily in shopping malls throughout the United States, Canada and Puerto Rico. Zale primarily operates under six principal brands, each targeted to reach a distinct customer. Its specialty retail jewelry stores operate under brand names including Zales Jewelers (including Zale.com), Zales the Diamond Store Outlet, Gordon’s Jewelers, Bailey Banks & Biddle Fine Jewelers, Peoples Jewellers in Canada and Mappins Jewelers in Canada. In addition, Zale operates mall-based kiosks under the brand name Piercing Pagoda. The Company, through Zale Indemnity Company, Zale Life Insurance Company and Jewel Re-Insurance Ltd., provides insurance and reinsurance facilities for various types of insurance coverage, which typically are marketed to its private-label credit card customers.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 65

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Friedmans Inc Overview ($ in thousands, except per share)

Company Information
Name	Friedmans Inc	Address	171 Crossroads Parkway
Symbol	FRM	City, State Zip	Savannah, GA 31422
Latest Fiscal YE	28-Sep-02	Telephone	(912) 233-9333
Latest Rprt Per	28-Jun-03	Website	friedmans.com

Market Information

As of Date		25-Nov-03	Market Cap	$	120,228
Exchange		NYSE	Total Invested Capital (TIC)	$	247,425
Stock Price	$	6.39	Enterprise Value (EV)	$	247,139
52 Week High	$	17.50
52 Week Low	$	5.05	Insider Ownership		18.15	%
Avg. Daily Volume (000’s)		362	Institutional
Beta		0.84	% Owned		78.31	%
Shares Outstanding (000’s)		18,815	Number of Institutions		64

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	0.26	x	0.53	x	0.53	x
EBIT	2.9	x	6.0	x	6.0	x
EBITDA	2.2	x	4.6	x	4.6	x
Normalized Net Income	4.5	x	9.3	x	9.3	x
Basic Normalized EPS	4.6	x	na		na
Projected
Sep-03 Mean Revenue	0.26	x	0.53	x	0.53	x
Sep-04 Mean Revenue	0.18	x	0.36	x	0.36	x
Sep-03 Mean EBITDA	na		na		na
Sep-04 Mean EBITDA	na		na		na
Sep-03 Mean EPS	4.6	x	na		na
Sep-04 Mean EPS	4.2	x	na		na
Most Recent Filing
Assets	0.2	x	0.5	x	0.5	x
Common Equity	0.4	x	na		na
Tangible Common Equity	0.4	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue		EBITDA	EPS
September-03	5	$	467,940	na	$	1.39
September-04	5	$	684,270	na	$	1.52
LT Growth	3		na	na		15.00	%

Income and Cashflow Statement Data

	LTM Jun-03			Nine Months Ended						Fiscal Years Ended
				Jun-03			Jun-02			Sep-02			Sep-01
Revenue	$	462,758		$	393,518		$	366,829		$	436,069		$	411,037
Cost of Revenue		242,076			203,512			188,922			227,486			216,265
Gross Profit		220,682			190,006			177,907			208,583			194,772
Selling, General & Administrative		166,798			138,518			133,256			161,536			160,941
Depreciation & Amortization		12,424			9,541			8,457			11,340			13,881
Operating Income		41,460			41,947			36,194			35,707			19,950
Interest Income / (Expense), net		(714	)		(674	)		(265	)		(305	)		(2,511	)
Other Income / (Expense), net		—			—			—			—			—
Pre-tax Income		40,746			41,273			35,929			35,402			17,439
Taxes		14,187			14,391			12,619			12,415			6,584
After-tax Income		26,559			26,882			23,310			22,987			10,855
Minority Interest		98			44			126			180			1,374
Equity in Affiliates		—			—			—			—			—
Normalized Net Income		26,657			26,926			23,436			23,167			12,229
Preferred Dividends		—			—			—			—			—
Normalized Net Income to Common	$	26,657		$	26,926		$	23,436		$	23,167		$	12,229
Normalized EBIT	$	41,460		$	41,947		$	36,194		$	35,707		$	19,950
Depreciation & Amortization	$	12,424		$	9,541		$	8,457		$	11,340		$	13,881
Normalized EBITDA	$	53,884		$	51,488		$	44,651		$	47,047		$	33,831
CAPEX	$	12,859		$	10,948		$	5,703		$	7,614		$	11,473
EBITDA - CAPEX	$	41,025		$	40,540		$	38,948		$	39,433		$	22,358
GAAP Operating Cash Flow	$	12,110		$	670		$	(7,047	)	$	4,393		$	288
Basic Reported Weighted Avg Shares Out (000’s)					18,630			16,604			17,108			14,501
Basic Normalized EPS	$	1.39		$	1.45		$	1.41		$	1.35		$	0.84
Basic Reported EPS	$	1.39		$	1.45		$	1.41		$	1.35		$	0.84
Diluted Reported Weighted Avg Shares Out (000’s)					19,142			19,030			17,347			14,531
Diluted Normalized EPS	$	1.52		$	1.41		$	1.23		$	1.34		$	0.84
Diluted Reported EPS	$	1.52		$	1.41		$	1.23		$	1.34		$	0.84
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	—		$	—		$	—		$	—		$	—
Other Unusual (Expense) Gain Items		—			—			—			—			—
Tax Shelter (Change) on Unusual Items		—			—			—			—			—
Unusual (Exp) Gain Items, net of Taxes		—			—			—			—			—
Accounting Changes, net of Taxes		—			—			—			—			—
Discontinued Operations, net of Taxes		—			—			—			—			—
Extraordinary Items, net of Taxes		—			—			—			—			—
Total Reconciling Items, net of Taxes	$	—		$	—		$	—		$	—		$	—
Reported Income Tax (Benefit)	$	14,187		$	14,391		$	12,619		$	12,415		$	6,584
Reported Net Income (Loss)	$	26,657		$	26,926		$	23,436		$	23,167		$	12,229
Revenue Breakdown
Net Sales	$	462,758		$	393,518		$	366,829		$	436,069		$	411,037
Other		—			—			—			—			—
	$	462,758		$	393,518		$	366,829		$	436,069		$	411,037
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 66

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Friedmans Inc Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Jun-03			Sep-02			Sep-01
Cash & Mkt Securities	$	286		$	271		$	468
Accounts Receivable		176,433			149,868			132,695
Inventory		153,134			136,606			136,520
Other Current Assets		17,058			13,396			12,000
Total Current Assets		346,911			300,141			281,683
PPE, net		52,947			50,117			54,495
Intangibles, net		5,022			5,022			5,022
Deferred Income Taxes		—			—			—
Other Assets		91,296			92,603			111,425
Total Assets	$	496,176		$	447,883		$	452,625
Accounts Payable	$	41,601		$	31,070		$	46,680
Accrued Expenses		19,041			18,649			12,561
Short Term Debt		632			590			168,814
Short Term Capital Leases		—			—			—
Other Current Liabilities		—			—			—
Total Current Liabilities		61,274			50,309			228,055
Other LT Liabilities		2,581			2,581			1,314
Long Term Debt		126,565			114,808			—
Long Term Capital Leases		—			618			685
Minority Interests		—			—			—
Pref Stock (Liq Value)		—			—			—
Total Liabilities & Pref Stock		190,420			168,316			230,054
Common Equity		305,756			279,567			222,571
Total Liabilities & Equity	$	496,176		$	447,883		$	452,625
Common Shares Outstanding (000’s)		18,800			18,620			14,519
Cash Value per share	$	0.02		$	0.01		$	0.03
Common Book Value per share	$	16.26		$	15.01		$	15.33
Common Tangible Book Value per share	$	16.00		$	14.74		$	14.98
Total Debt	$	127,197		$	116,016		$	169,499
Net Debt	$	126,911		$	115,745		$	169,031
Total Capitalization	$	432,953		$	395,583		$	392,070
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		2.8	x		3.1	x		3.1	x
Inventory Turnover		1.7	x		1.7	x		1.6	x
Asset Turnover		1.0	x		1.0	x		0.9	x
Days Sales Outstanding		128.7			118.3			117.8
Days Inventory Outstanding		218.4			219.1			230.4
Days Payable Outstanding		31.5			35.4			43.6
Normalized Return on Avg Assets		5.6	%		5.1	%		na
Normalized Return on Avg Common Equity		9.1	%		9.2	%		na
Financial Strength
Current Ratio		5.7			6.0			1.2
Quick Ratio		3.2			3.3			0.6
Total Debt/Total Capitalization		29.4	%		29.3	%		43.2	%
Total Debt/TIC		54.7	%		49.9	%		72.9	%
Total Debt/EBITDA		2.4	x		2.5	x		5.0	x
Total Debt/EBITDA-CAPEX		3.1	x		2.9	x		7.6	x
EBITDA/Interest Expense		75.5	x		154.3	x		13.5	x
EBITDA-CAPEX/Interest Expense		57.5	x		129.3	x		8.9	x

Income and Cashflow Analysis

	LTM		Nine Months Ended				Fiscal Years Ended
	Jun-03		Jun-03		Jun-02		Sep-02		Sep-01
Profitability & Cost Ratios (as % of Revenue)
Gross Margin	47.7	%	48.3	%	48.5	%	47.8	%	47.4	%
S,G & A	36.0	%	35.2	%	36.3	%	37.0	%	39.2	%
Operating Income	9.0	%	10.7	%	9.9	%	8.2	%	4.9	%
Pre-Tax	8.8	%	10.5	%	9.8	%	8.1	%	4.2	%
EBIT	9.0	%	10.7	%	9.9	%	8.2	%	4.9	%
EBITDA	11.6	%	13.1	%	12.2	%	10.8	%	8.2	%
Normalized Net Income to Common	5.8	%	6.8	%	6.4	%	5.3	%	3.0	%
Reported Net Income	5.8	%	6.8	%	6.4	%	5.3	%	3.0	%
CAPEX	2.8	%	2.8	%	1.6	%	1.7	%	2.8	%
Period Growth Rates
Revenue			7.3	%			6.1	%
EBIT			15.9	%			79.0	%
EBITDA			15.3	%			39.1	%

Notes

The company has their own merchandise credit operations.

Company is undergoing fraud investigations by the SEC. Company CFO is on administrative leave.

Company has announced that they will need to restate financial statements since FY2000 to reflect higher doubtful debt provisions.

Other Analysis

Number of stores	Avg Store Size (Sq Ft)	Avg Sales/ Store ($000)	Avg Price Per Trans ($)
697	1500	$            664	na

Company Description

Friedman’s, Inc. operates as a specialty retailer of fine jewelry in the United States. As of October 2, 2003, it operated a total of 675 stores in 20 states, of which 449 were located in power strip centers and 226 were located in regional malls. Stores are primarily located in the southeast, midwest, and mid-Atlantic regions. Friedman’s targets low to middle income consumers aged between 18 to 45 years, with its selection of diamonds, gold, gemstones, and wedding-related items. The company’s stores provide various jewelry products, including earrings, rings, necklaces, chains, watches, and other fine jewelry for men and women. These items are made of yellow and white gold, platinum, and silver; and set with diamonds and other fine gemstones. The gold jewelry, which the company sells in its stores, is primarily 10 and 14 karat. Friedman’s stores also offer a range of diamonds up to one carat. Friedman’s affiliate, Crescent Jewelers, a specialty retailer of fine jewelry, operates stores in six western states. The company’s competitors include Zale Corporation; Sterling, Inc.; Whitehall Jewelers, Inc.; and Helzberg’s Diamond Shops, Inc.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 67

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Whitehall Jewellers Overview ($ in thousands, except per share)

Company Information
Name	Whitehall Jewellers	Address	155 North Wacker, Suite 500
Symbol	JWL	City, State Zip	Chicago, IL 60606
Latest Fiscal YE	31-Jan-03	Telephone	(312) 782-6800
Latest Rprt Per	31-Jul-03	Website	whitehalljewellers.com

Market Information

As of Date		25-Nov-03	Market Cap	$	153,806
Exchange		NYSE	Total Invested Capital (TIC)	$	240,821
Stock Price	$	10.82	Enterprise Value (EV)	$	239,422
52 Week High	$	13.25
52 Week Low	$	7.90	Insider Ownership		9.00	%
Avg. Daily Volume (000’s)		36	Institutional
Beta		1.48	% Owned		70.00	%
Shares Outstanding (000’s)		14,215	Number of Institutions		10

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	0.46	x	0.73	x	0.72	x
EBIT	14.34	x	22.45	x	22.32	x
EBITDA	6.86	x	10.74	x	10.68	x
Normalized Net Income	40.42	x	63.29	x	62.92	x
Basic Normalized EPS	43.28	x	na		na
Projected
Jan-04 Mean Revenue	0.43	x	0.67	x	0.66	x
Jan-05 Mean Revenue	0.45	x	0.71	x	0.70	x
Jan-04 Mean EBITDA	na		na		na
Jan-05 Mean EBITDA	na		na		na
Jan-04 Mean EPS	14.05	x	na		na
Jan-05 Mean EPS	20.42	x	na		na
Most Recent Filing
Assets	0.54	x	0.84	x	0.84	x
Common Equity	1.36	x	na		na
Tangible Common Equity	1.43	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue		EBITDA	EPS
January-04	3	$	360,150	na	$	0.77
January-05	3	$	340,450	na	$	0.53
LT Growth	1		na	na		20.00	%

Income and Cashflow Statement Data

	LTM Jul-03			Six Months Ended						Fiscal Years Ended
				Jul-03			Jul-02			Jan-03			Jan-02
Revenue	$	332,087		$	141,881		$	150,831		$	341,037		$	338,911
Cost of Revenue		210,506			94,675			97,079			212,910			206,574
Gross Profit		121,581			47,206			53,752			128,127			132,337
Selling, General & Administrative		110,855			53,943			50,878			107,790			109,975
Depreciation & Amortization		—			—			—			—			—
Operating Income		10,726			(6,737	)		2,874			20,337			22,362
Interest Income / (Expense), net		(4,690	)		(2,472	)		(2,123	)		(4,341	)		(6,902	)
Other Income / (Expense), net		—			—			—			—			—
Pre-tax Income		6,036			(9,209	)		751			15,996			15,460
Taxes		2,231			(3,590	)		268			6,089			5,380
After-tax Income		3,805			(5,619	)		483			9,907			10,080
Minority Interest		—			—			—			—			—
Equity in Affiliates		—			—			—			—			—
Normalized Net Income		3,805			(5,619	)		483			9,907			10,080
Preferred Dividends		—			—			—			—			—
Normalized Net Income to Common	$	3,805		$	(5,619	)	$	483		$	9,907		$	10,080
Normalized EBIT	$	10,726		$	(6,737	)	$	2,874		$	20,337		$	22,362
Depreciation & Amortization	$	11,700		$	6,028		$	5,544		$	11,216		$	10,715
Normalized EBITDA	$	22,426		$	(709	)	$	8,418		$	31,553		$	33,077
CAPEX	$	12,357		$	8,125		$	4,339		$	8,571		$	12,695
EBITDA - CAPEX	$	10,069		$	(8,834	)	$	4,079		$	22,982		$	20,382
GAAP Operating Cash Flow	$	8,008		$	10,176		$	(17,898	)	$	(20,066	)	$	45,193
Basic Reported Weighted Avg Shares Out (000’s)					14,210			14,719			14,545			14,584
Basic Normalized EPS	$	0.25		$	(0.40	)	$	0.03		$	0.68		$	0.69
Basic Reported EPS	$	0.25		$	(0.40	)	$	0.03		$	0.68		$	0.69
Diluted Reported Weighted Avg Shares Out (000’s)					14,210			14,576			15,038			14,685
Diluted Normalized EPS	$	0.23		$	(0.40	)	$	0.03		$	0.66		$	0.69
Diluted Reported EPS	$	0.23		$	(0.40	)	$	0.03		$	0.66		$	0.69
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	—		$	—		$	—		$	—		$	—
Other Unusual (Expense) Gain Items		—			—			—			—			—
Tax Shelter (Charge) on Unusual Items		—			—			—			—			—
Unusual (Exp) Gain Items, net of Taxes		—			—			—			—			—
Accounting Changes, net of Taxes		—			—			—			—			—
Discontinued Operations, net of Taxes		—			—			—			—			—
Extraordinary Items, net of Taxes		—			—			—			—			—
Total Reconciling Items, net of Taxes	$	—		$	—		$	—		$	—		$	—
Reported Income Tax (Benefit)	$	2,231		$	(3,590	)	$	268		$	6,089		$	5,380
Reported Net Income (Loss)	$	3,805		$	(5,619	)	$	483		$	9,907		$	10,080
Revenue Breakdown
Net Sales	$	332,087		$	141,881		$	150,831		$	341,037		$	338,911
Other		—			—			—			—			—
	$	332,087		$	141,881		$	150,831		$	341,037		$	338,911
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 68

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Whitehall Jewellers Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Jul-03			Jan-03			Jan-02
Cash & Mkt Securities	$	1,399		$	2,048		$	2,741
Accounts Receivable		333			1,621			1,189
Inventory		206,149			197,859			173,931
Other Current Assets		8,802			3,921			4,188
Total Current Assets		216,683			205,449			182,049
PPE, net		63,604			61,634			63,914
Intangibles, net		5,662			5,662			5,662
Deferred Income Taxes		—			—			—
Other Assets		781			213			723
Total Assets	$	286,730		$	272,958		$	252,348
Accounts Payable	$	57,051		$	24,726		$	56,695
Accrued Expenses		22,293			19,750			27,667
Short Term Debt		86,375			98,990			40,527
Short Term Capital Leases		—			—			—
Other Current Liabilities		—			3,454			3,963
Total Current Liabilities		165,719			146,920			128,852
Other LT Liabilities		7,217			6,745			4,672
Long Term Debt		640			640			5,140
Long Term Capital Leases		—			—			—
Minority Interests		—			—			—
Pref Stock (Liq Value)		—			—			—
Total Liabilities & Pref Stock		173,576			154,305			138,664
Common Equity		113,154			118,653			113,684
Total Liabilities & Equity	$	286,730		$	272,958		$	252,348
Common Shares Outstanding (000’s)		14,206			14,198			14,610
Cash Value per share	$	0.10		$	0.14		$	0.19
Common Book Value per share	$	7.97		$	8.36		$	7.78
Common Tangible Book Value per share	$	7.57		$	7.96		$	7.39
Total Debt	$	87,015		$	99,630		$	45,667
Net Debt	$	85,616		$	97,582		$	42,926
Total Capitalization	$	200,169		$	218,283		$	159,351
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		339.9	x		242.7	x		285.0	x
Inventory Turnover		1.0	x		1.1	x		1.2	x
Asset Turnover		1.2	x		1.3	x		1.3	x
Days Sales Outstanding		1.1			1.5			1.3
Days Inventory Outstanding		350.3			318.7			307.3
Days Payable Outstanding		46.4			46.3			65.4
Normalized Return on Avg Assets		1.4	%		3.8	%		na
Normalized Return on Avg Common Equity		3.3	%		8.5	%		na
Financial Strength
Current Ratio		1.3			1.4			1.4
Quick Ratio		0.1			0.1			0.1
Total Debt/Total Capitalization		43.5	%		45.6	%		28.7	%
Total Debt/TIC		35.7	%		40.9	%		18.7	%
Total Debt/EBITDA		3.9	x		3.2	x		1.4	x
Total Debt/EBITDA-CAPEX		8.6	x		4.3	x		2.2	x
EBITDA/Interest Expense		4.8	x		7.3	x		4.8	x
EBITDA-CAPEX/Interest Expense		2.1	x		5.3	x		3.0	x

Income and Cashflow Analysis

	LTM Jul-03		Six Months Ended				Fiscal Years Ended
			Jul-03		Jul-02		Jan-03		Jan-02
Profitability & Cost Ratios (as % of Revenue)
Gross Margin	36.6	%	33.3	%	35.6	%	37.6	%	39.0	%
S,G & A	33.4	%	38.0	%	33.7	%	31.6	%	32.4	%
Operating Income	3.2	%	-4.7	%	1.9	%	6.0	%	6.6	%
Pre-Tax	1.8	%	-6.5	%	0.5	%	4.7	%	4.6	%
EBIT	3.2	%	-4.7	%	1.9	%	6.0	%	6.6	%
EBITDA	6.8	%	-0.5	%	5.6	%	9.3	%	9.8	%
Normalized Net Income to Common	1.1	%	-4.0	%	0.3	%	2.9	%	3.0	%
Reported Net Income	1.1	%	-4.0	%	0.3	%	2.9	%	3.0	%
CAPEX	3.7	%	5.7	%	2.9	%	2.5	%	3.7	%
Period Growth Rates
Revenue			-5.9	%			0.6	%
EBIT			-334.4	%			-9.1	%
EBITDA			-108.4	%			-4.6	%

Notes

Other Analysis

Number of stores	Avg Store Size (Sq Ft)	Avg Sales/ Store ($000)	Avg Price Per Trans ($)
383	870	$            929	$302

Company Description

Whitehall Jewellers, Inc. serves as a national specialty retailer of fine jewelry. It offers jewelry in the following key categories: diamond, such as diamond jewelry, diamond solitaires, and bridal), gold, precious, and semi-precious jewelry. As of August 28, 2003, it operated 384 stores in 38 states. These stores are operated in regional and superregional shopping malls under the names, Whitehall Co. Jewellers, Lundstrom Jewelers, and Marks Bros. Jewelers. On an average, the company’s store offers approximately 2,700 individual items, including approximately 1,450 core jewelry items. Whitehall’s target customers are middle to upper-middle income women over 25 years old. Diamond Trading Company, a marketing arm of DeBeers Consolidated Mines, Ltd., is one of the company’s competitors.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 69

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Mayor’s Jewelers Overview ($ in thousands, except per share)

Company Information

Name	Mayor’s Jewelers	Address	14051 N.W. 14th Street
Symbol	MYR	City, State Zip	Sunrise, FL 33323
Latest Fiscal YE	29-Mar-03	Telephone	(954) 846-8000
Latest Rprt Per	27-Sep-03	Website	mayors.com

Market Information

As of Date		25-Nov-03	Market Cap	$	14,118
Exchange		AMEX	Total Invested Capital (TIC)	$	74,019
Stock Price	$	0.72	Enterprise Value (EV)	$	72,943
52 Week High	$	0.98
52 Week Low	$	0.17	Insider Ownership		16.00	%
Avg. Daily Volume (000’s)		39	Institutional
Beta		1.10	% Owned		13.00	%
Shares Outstanding (000’s)		19,608	Number of Institutions		9

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	0.13	x	0.66	x	0.65	x
EBIT	na		na		na
EBITDA	na		na		na
Normalized Net Income	na		na		na
Basic Normalized EPS	na		na		na
Projected
Dec-03 Mean Revenue	na		na		na
Dec-04 Mean Revenue	na		na		na
Dec-03 Mean EBITDA	na		na		na
Dec-04 Mean EBITDA	na		na		na
Dec-03 Mean EPS	na		na		na
Dec-04 Mean EPS	na		na		na
Most Recent Filing
Assets	0.13	x	0.67	x	0.66	x
Common Equity	0.74	x	na		na
Tangible Common Equity	0.74	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue	EBITDA	EPS
December-03	na	na	na	na
December-04	na	na	na	na
LT Growth	na	na	na	na

Income and Cashflow Statement Data

	LTM Sep-03			Six Months Ended						Fiscal Years Ended
				Sep-03			Sep-02			Mar-03			Feb-02
Revenue	$	111,910		$	48,339		$	54,820		$	118,391		$	160,727
Cost of Revenue		69,310			28,934			38,364			78,740			101,179
Gross Profit		42,600			19,405			16,456			39,651			59,548
Selling, General & Administrative		47,494			23,672			29,897			53,719			76,206
Depreciation & Amortization		3,093			1,712			2,796			4,177			9,564
Operating Income		(7,987	)		(5,979	)		(16,237	)		(18,245	)		(26,222	)
Interest Income / (Expense), net		(4,025	)		(2,209	)		(3,508	)		(5,324	)		(3,614	)
Other Income / (Expense), net		—			—			—			—			—
Pre-tax Income		(12,012	)		(8,188	)		(19,745	)		(23,569	)		(29,836	)
Taxes		(1,017	)		—			470			(547	)		3,431
After-tax Income		(10,995	)		(8,188	)		(20,215	)		(23,022	)		(33,267	)
Minority Interest		—			—			—			—			—
Equity in Affiliates		—			—			—			—			—
Normalized Net Income		(10,995	)		(8,188	)		(20,215	)		(23,022	)		(33,267	)
Preferred Dividends		596			715			119			—			—
Normalized Net Income to Common	$	(11,591	)	$	(8,903	)	$	(20,334	)	$	(23,022	)	$	(33,267	)
Normalized EBIT	$	(7,987	)	$	(5,979	)	$	(16,237	)	$	(18,245	)	$	(26,222	)
Depreciation & Amortization	$	3,093		$	1,712		$	2,796		$	4,177		$	9,771
Normalized EBITDA	$	(4,894	)	$	(4,267	)	$	(13,441	)	$	(14,068	)	$	(16,451	)
CAPEX	$	1,423		$	544		$	(4,412	)	$	(3,533	)	$	6,400
EBITDA - CAPEX	$	(6,317	)	$	(4,811	)	$	(9,029	)	$	(10,535	)	$	(22,851	)
GAAP Operating Cash Flow	$	(22,588	)	$	(8,321	)	$	(4,540	)	$	(18,807	)	$	330
Basic Reported Weighted Avg Shares Out (000’s)					19,608			19,548			19,568			19,416
Basic Normalized EPS	$	(0.59	)	$	(0.45	)	$	(1.04	)	$	(1.18	)	$	(1.71	)
Basic Reported EPS	$	(0.61	)	$	(0.45	)	$	(1.21	)	$	(1.37	)	$	(4.32	)
Diluted Reported Weighted Avg Shares Out (000’s)					19,608			19,548			19,568			19,416
Diluted Normalized EPS	$	(0.59	)	$	(0.45	)	$	(1.04	)	$	(1.18	)	$	(1.71	)
Diluted Reported EPS	$	(0.61	)	$	(0.45	)	$	(1.21	)	$	(1.37	)	$	(4.32	)
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	(2,272	)	$	—		$	—		$	(2,272	)	$	(50,479	)
Other Unusual (Expense) Gain Items		2,976			—			(2,976	)		—			—
Tax Shelter (Charge) on Unusual Items		—			—			—			—			—
Unusual (Exp) Gain Items, net of Taxes		704			—			(2,976	)		(2,272	)		(50,479	)
Accounting Changes, net of Taxes		—			—			—			—			—
Discontinued Operations, net of Taxes		(1,354	)		—			(250	)		(1,604	)		(112	)
Extraordinary Items, net of Taxes		—			—			—			—			—
Total Reconciling Items, net of Taxes	$	(650	)	$	—		$	(3,226	)	$	(3,876	)	$	(50,591	)
Reported Income Tax (Benefit)	$	(1,017	)	$	—		$	470		$	(547	)	$	3,431
Reported Net Income (Loss)	$	(12,241	)	$	(8,903	)	$	(23,560	)	$	(26,898	)	$	(83,858	)
Revenue Breakdown
Net Sales	$	111,910		$	48,339		$	54,820		$	118,391		$	160,727
Other		—			—			—			—			—
	$	111,910		$	48,339		$	54,820		$	118,391		$	160,727
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

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PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Mayor’s Jewelers Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Sep-03			Mar-03			Feb-02
Cash & Mkt Securities	$	1,076		$	276		$	2,886
Accounts Receivable		5,314			6,559			31,845
Inventory		87,386			76,753			80,716
Other Current Assets		1,754			2,987			2,604
Total Current Assets		95,530			86,575			118,051
PPE, net		14,704			15,872			25,455
Intangibles, net		—			—			—
Deferred Income Taxes		—			—			—
Other Assets		864			736			1,083
Total Assets	$	111,098		$	103,183		$	144,589
Accounts Payable	$	19,721		$	13,798		$	10,769
Accrued Expenses		9,256			7,434			7,318
Short Term Debt		32,183			23,283			53,464
Short Term Capital Leases		—			—			—
Other Current Liabilities		—			527			8,574
Total Current Liabilities		61,160			45,042			80,125
Other LT Liabilities		3,031			3,046			3,357
Long Term Debt		12,668			12,668			—
Long Term Capital Leases		—			—			—
Minority Interests		—			—			—
Pref Stock (Liq Value)		15,050			15,050			—
Total Liabilities & Pref Stock		91,909			75,806			83,482
Common Equity		19,189			27,377			61,107
Total Liabilities & Equity	$	111,098		$	103,183		$	144,589
Common Shares Outstanding (000’s)		19,608			19,608			19,526
Cash Value per share	$	0.05		$	0.01		$	0.15
Common Book Value per share	$	0.98		$	1.40		$	3.13
Common Tangible Book Value per share	$	0.98		$	1.40		$	3.13
Total Debt	$	59,901		$	51,001		$	53,464
Net Debt	$	58,825		$	50,725		$	50,578
Total Capitalization	$	79,090		$	78,378		$	114,571
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		18.9	x		6.2	x		5.0	x
Inventory Turnover		0.8	x		1.0	x		1.3	x
Asset Turnover		1.0	x		1.0	x		1.1	x
Days Sales Outstanding		19.4			59.2			72.3
Days Inventory Outstanding		432.2			365.0			291.2
Days Payable Outstanding		51.0			32.8			21.0
Normalized Return on Avg Assets		-10.8	%		-18.6	%		na
Normalized Return on Avg Common Equity		-49.8	%		-52.0	%		na
Financial Strength
Current Ratio		1.6			1.9			1.5
Quick Ratio		0.1			0.2			0.5
Total Debt/Total Capitalization		75.7	%		65.1	%		46.7	%
Total Debt/TIC		79.9	%		68.0	%		71.3	%
Total Debt/EBITDA		na			na			na
Total Debt/EBITDA-CAPEX		na			na			na
EBITDA/Interest Expense		na			na			na
EBITDA-CAPEX/Interest Expense		na			na			na

Income and Cashflow Analysis

	LTM Sep-03		Six Months Ended				Fiscal Years Ended
			Sep-03		Sep-02		Mar-03		Feb-02
Profitability & Cost Ratios (as % of Revenue)
Gross Margin	38.1	%	40.1	%	30.0	%	33.5	%	37.0	%
S,G & A	42.4	%	49.0	%	54.5	%	45.4	%	47.4	%
Operating Income	-7.1	%	-12.4	%	-29.6	%	-15.4	%	-16.3	%
Pre-Tax	-10.7	%	-16.9	%	-36.0	%	-19.9	%	-18.6	%
EBIT	-7.1	%	-12.4	%	-29.6	%	-15.4	%	-16.3	%
EBITDA	-4.4	%	-8.8	%	-24.5	%	-11.9	%	-10.2	%
Normalized Net Income to Common	-10.4	%	-18.4	%	-37.1	%	-19.4	%	-20.7	%
Reported Net Income	-10.9	%	-18.4	%	-43.0	%	-22.7	%	-52.2	%
CAPEX	1.3	%	1.1	%	-8.0	%	-3.0	%	4.0	%
Period Growth Rates
Revenue			-11.8	%			-26.3	%
EBIT			-63.2	%			-30.4	%
EBITDA			-68.3	%			-14.5	%

Notes

Normalized items: Restructuring plan implementation and the goodwill impairment of $22.3 million is a write off of goodwill associated with the Mayor’s acquisition.

Disc Ops: The Company closed a store outside of its core area

Other Analysis

Number of stores	Avg Store Size (Sq Ft)	Avg Sales/ Store ($000)	Avg Price Per Trans ($)
28	4,213	$            3,997	$            1,360

Company Description

Mayor’s Jewelers, Inc. sells jewelry, watches, and giftware in the United States. As of June 28, 2003, it operated 28 locations in south and central Florida; and metropolitan Atlanta, Georgia. The company offers a selection of merchandise that includes designer jewelry, diamond, gemstone, and precious metal jewelry; rings; wedding bands; earrings; bracelets; necklaces; charms; its own private label jewelry that includes baby jewelry; and Swiss timepieces that are often not available from other jewelers in its markets. All of Mayor’s jewelry products are constructed of 18-karat gold, platinum, or sterling silver. Its stores also carry a large selection of brand name watches and giftware.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 71

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Reeds Jewelers Overview ($ in thousands, except per share)

Company Information

Name	Reeds Jewelers	Address	2525 South 17th Street
Symbol	RJI	City, State Zip	Wilmington, NC 28401
Latest Fiscal YE	28-Feb-03	Telephone	(910) 350-3100
Latest Rprt Per	31-Aug-03	Website	www.reeds.com/

Market Information

As of Date		25-Nov-03	Market Cap	$	9,324
Exchange		AMEX	Total Invested Capital (TIC)	$	33,991
Stock Price	$	1.10	Enterprise Value (EV)	$	33,479
52 Week High	$	1.35
52 Week Low	$	0.91	Insider Ownership		88.00	%
Avg. Daily Volume (000’s)		1	Institutional
Beta		0.46	% Owned		2.00	%
Shares Outstanding (000’s)		8,476	Number of Institutions		4

Valuation Analysis

	Multiple of
	Market Cap		TIC		EV
Latest Twelve Months
Revenue	0.09	x	0.34	x	0.33	x
EBIT	na		na		na
EBITDA	5.39	x	19.66	x	19.36	x
Normalized Net Income	na		na		na
Basic Normalized EPS	na		na		na
Projected
Feb-04 Mean Revenue	0.09	x	0.33	x	0.33	x
Feb-05 Mean Revenue	0.09	x	0.31	x	0.31	x
Feb-04 Mean EBITDA	2.50	x	9.10	x	8.96	x
Feb-05 Mean EBITDA	2.24	x	8.15	x	8.03	x
Feb-04 Mean EPS	45.83	x	na		na
Feb-05 Mean EPS	11.96	x	na		na
Most Recent Filing
Assets	0.14	x	0.50	x	0.49	x
Common Equity	0.38	x	na		na
Tangible Common Equity	0.38	x	na		na

Mean Consensus Estimates

Year Ending	# Ests	Revenue		EBITDA		EPS
February-04	na	$	101,956	$	3,735	$	0.02
February-05	na	$	109,188	$	4,169	$	0.09
LT Growth	na		na		na		na

Income and Cashflow Statement Data

	LTM			Six Months Ended						Fiscal Years Ended
	Aug-03			Aug-03			Aug-02			Feb-03			Feb-02
Revenue	$	101,084		$	39,045		$	39,972		$	102,011		$	113,449
Cost of Revenue		52,426			19,908			20,072			52,590			60,091
Gross Profit		48,658			19,137			19,900			49,421			53,358
Selling, General & Administrative		46,929			21,023			21,335			47,241			52,808
Depreciation & Amortization		2,456			1,201			1,195			2,450			3,797
Operating Income		(727	)		(3,087	)		(2,630	)		(270	)		(3,247	)
Interest Income / (Expense), net		(1,352	)		(620	)		(711	)		(1,443	)		(1,871	)
Other Income / (Expense), net		—			—			—			—			—
Pre-tax Income		(2,079	)		(3,707	)		(3,341	)		(1,713	)		(5,118	)
Taxes		602			—			(1,236	)		(634	)		(1,548	)
After-tax Income		(2,681	)		(3,707	)		(2,105	)		(1,079	)		(3,570	)
Minority Interest		—			—			—			—			—
Equity in Affiliates		—			—			—			—			—
Normalized Net Income		(2,681	)		(3,707	)		(2,105	)		(1,079	)		(3,570	)
Preferred Dividends		—			—			—			—			—
Normalized Net Income to Common	$	(2,681	)	$	(3,707	)	$	(2,105	)	$	(1,079	)	$	(3,570	)
Normalized EBIT	$	(727	)	$	(3,087	)	$	(2,630	)	$	(270	)	$	(3,247	)
Depreciation & Amortization	$	2,456		$	1,201		$	1,195		$	2,450		$	3,797
Normalized EBITDA	$	1,729		$	(1,886	)	$	(1,435	)	$	2,180		$	550
CAPEX	$	1,112		$	555		$	139		$	696		$	2,792
EBITDA - CAPEX	$	617		$	(2,441	)	$	(1,574	)	$	1,484		$	(2,242	)
GAAP Operating Cash Flow	$	3,063		$	(2,532	)	$	(8,388	)	$	(2,793	)	$	52,028
Basic Reported Weighted Avg Shares Out (000’s)					8,476			8,476			8,476			8,476
Basic Normalized EPS	$	(0.32	)	$	(0.44	)	$	(0.25	)	$	(0.13	)	$	(0.42	)
Basic Reported EPS	$	(0.35	)	$	(0.46	)	$	(0.29	)	$	(0.18	)	$	(1.81	)
Diluted Reported Weighted Avg Shares Out (000’s)					8,476			8,476			8,476			8,476
Diluted Normalized EPS	$	(0.32	)	$	(0.44	)	$	(0.25	)	$	(0.13	)	$	(0.42	)
Diluted Reported EPS	$	(0.35	)	$	(0.46	)	$	(0.29	)	$	(0.18	)	$	(1.81	)
Normalized Reconciliation
Restructuring/Goodwill Impairment	$	—		$	—		$	(270	)	$	(270	)	$	(17,067	)
Other Unusual (Expense) Gain Items		—			—			—			—			—
Tax Shelter (Charge) on Unusual Items		—			—			100			100			5,163
Unusual (Exp) Gain Items, net of Taxes		—			—			(170	)		(170	)		(11,904	)
Accounting Changes, net of Taxes		—			—			—			—			—
Discontinued Operations, net of Taxes		(327	)		(224	)		(153	)		(256	)		98
Extraordinary Items, net of Taxes		—			—			—			—			—
Total Reconciling Items, net of Taxes	$	(327	)	$	(224	)	$	(323	)	$	(426	)	$	(11,806	)
Reported Income Tax (Benefit)	$	602		$	—		$	(1,336	)	$	(734	)	$	(6,711	)
Reported Net Income (Loss)	$	(3,008	)	$	(3,931	)	$	(2,428	)	$	(1,505	)	$	(15,376	)
Revenue Breakdown
Net Sales	$	101,084		$	39,045		$	39,972		$	102,011		$	113,449
Other		—			—			—			—			—
	$	101,084		$	39,045		$	39,972		$	102,011		$	113,449
Net Sales		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Other		0.0	%		0.0	%		0.0	%		0.0	%		0.0	%

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 72

PROJECT SPARKLE	CONFIDENTIAL
APPENDIX – COMPARABLE COMPANY DATA

Reeds Jewelers Overview (continued) ($ in thousands, except per share)

Balance Sheet Data

	Aug-03			Feb-03			Feb-02
Cash & Mkt Securities	$	512		$	384		$	809
Accounts Receivable		2,332			1,418			621
Inventory		44,458			41,637			44,337
Other Current Assets		2,014			2,390			7,430
Total Current Assets		49,316			45,829			53,197
PPE, net		9,844			10,442			12,154
Intangibles, net		—			—			—
Deferred Income Taxes		3,091			3,132			—
Other Assets		5,887			6,616			6,597
Total Assets	$	68,138		$	66,019		$	71,948
Accounts Payable	$	12,140		$	7,385		$	17,233
Accrued Expenses		3,793			4,894			5,816
Short Term Debt		—			—			—
Short Term Capital Leases		—			—			—
Other Current Liabilities		—			—			—
Total Current Liabilities		15,933			12,279			23,049
Other LT Liabilities		3,318			4,137			855
Long Term Debt		24,667			21,452			18,388
Long Term Capital Leases		—			—			—
Minority Interests		—			—			—
Pref Stock (Liq Value)		—			—			—
Total Liabilities & Pref Stock		43,918			37,868			42,292
Common Equity		24,220			28,151			29,656
Total Liabilities & Equity	$	68,138		$	66,019		$	71,948
Common Shares Outstanding (000’s)		8,476			8,476			8,476
Cash Value per share	$	0.06		$	0.05		$	0.10
Common Book Value per share	$	2.86		$	3.32		$	3.50
Common Tangible Book Value per share	$	2.86		$	3.32		$	3.50
Total Debt	$	24,667		$	21,452		$	18,388
Net Debt	$	24,155		$	21,068		$	17,579
Total Capitalization	$	48,887		$	49,603		$	48,044
Balance Sheet Analysis
Effectiveness and Efficiency
A/R Turnover		53.9	x		100.1	x		182.7	x
Inventory Turnover		1.2	x		1.2	x		1.4	x
Asset Turnover		1.5	x		1.5	x		1.6	x
Days Sales Outstanding		6.8			3.6			2.0
Days Inventory Outstanding		299.7			298.4			269.3
Days Payable Outstanding		35.0			43.9			53.9
Normalized Return on Avg Assets		-4.0	%		-1.6	%		na
Normalized Return on Avg Common Equity		-10.2	%		-3.7	%		na
Financial Strength
Current Ratio		3.1			3.7			2.3
Quick Ratio		0.3			0.3			0.4
Total Debt/Total Capitalization		50.5	%		43.2	%		38.3	%
Total Debt/TIC		72.6	%		63.1	%		54.1	%
Total Debt/EBITDA		14.3	x		9.8	x		33.4	x
Total Debt/EBITDA-CAPEX		40.0	x		14.5	x		na
EBITDA/Interest Expense		1.3	x		1.5	x		0.3	x
EBITDA-CAPEX/Interest Expense		0.5	x		1.0	x		na

Income and Cashflow Analysis

	LTM Aug-03		Six Months Ended				Fiscal Years Ended
			Aug-03		Aug-02		Feb-03		Feb-02
Profitability & Cost Ratios (as % of Revenue)
Gross Margin	48.1	%	49.0	%	49.8	%	48.4	%	47.0	%
S,G & A	46.4	%	53.8	%	53.4	%	46.3	%	46.5	%
Operating Income	-0.7	%	-7.9	%	-6.6	%	-0.3	%	-2.9	%
Pre-Tax	-2.1	%	-9.5	%	-8.4	%	-1.7	%	-4.5	%
EBIT	-0.7	%	-7.9	%	-6.6	%	-0.3	%	-2.9	%
EBITDA	1.7	%	-4.8	%	-3.6	%	2.1	%	0.5	%
Normalized Net Income to Common	-2.7	%	-9.5	%	-5.3	%	-1.1	%	-3.1	%
Reported Net Income	-3.0	%	-10.1	%	-6.1	%	-1.5	%	-13.6	%
CAPEX	1.1	%	1.4	%	0.3	%	0.7	%	2.5	%
Period Growth Rates
Revenue			-2.3	%			-10.1	%
EBIT			17.4	%			-91.7	%
EBITDA			31.4	%			296.4	%

Notes

Restructuring/Goodwill Impairment: $6,020,000 for restructuring and related costs associated with the Company’s exit from under-performing markets and asset impairment charge of $9,047,000 (including a write-down of goodwill due to the closing of a significant number of stores and a reduction to fair value of the historical cost of assets associated with Reeds.com.)

Other Analysis

Number of stores	Avg Store Size (Sq Ft)	Avg Sales/ Store ($000)	Avg Price Per Trans ($)
92	1150	$            1,099	$            280

Company Description

Reeds Jewelers, Inc. operates 92 specialty retail jewelry stores in enclosed regional malls located principally in the Southeast and Midwest sections of the United States. The Company has opened 39 new stores and closed 45 under-performing stores since 1998. Reeds operates stores under the names of Reeds Jewelers, Mills Jewelers and Reeds Jewelers Outlet. The Company operates one store with the Mills Jewelers name and two stores with the Reeds Jewelers Outlet name. The Company’s stores range in size from approximately 500 to 2,100 square feet of selling space, and average approximately 1,150 square feet of selling space. The stores are designed to invite customers into a well-lit and attractive setting where typically more than 2,200 items are offered for sale. Reeds has an Internet site, www.reeds.com, which offers consumers the opportunity to buy diamond jewelry, gold jewelry, watches and giftware online. Customers can also apply online for credit.

Sources of information: SEC Edgar filings, Multex, Capital IQ, Yahoo and Commodity Systems.

Page 73