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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:

[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Sec 240.14a-11(c) or Sec 240.14a-12

REEDS JEWELERS, INC.
(Name of Registrant as Specified in its Charter)

James R. Rouse
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)

(4) Proposed maximum aggregate value of transactions:

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration No:

(3) Filing Party:

(4) Date Filed:

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

(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
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REEDS JEWELERS, INC.
2525 SOUTH SEVENTEENTH STREET
WILMINGTON, NORTH CAROLINA 28401

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

To Our Shareholders:

The Annual Meeting of Shareholders of Reeds Jewelers, Inc. (the
"Company") will be held at the Hilton Hotel, 301 North Water Street,
Wilmington, North Carolina, on Wednesday, July 18, 2001, at 10:00 a.m., local
time, for the following purposes:

1. To elect ten (10) Directors to serve until the 2002 Annual Meeting of
Shareholders or until their successors are elected and qualified;

2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending February 28, 2002;

3. To transact such other business as may properly come before the meeting
or any adjournments thereof.

Shareholders of record at the close of business on May 4, 2001 are
entitled to notice of and to vote at the meeting and any adjournments thereof.

By Order of the Board of Directors,

/s/ Roberta G. Zimmer

ROBERTA G. ZIMMER
Secretary

Wilmington, North Carolina
May 29, 2001

SHAREHOLDERS ARE URGED TO VOTE BY SIGNING, DATING, AND RETURNING THE
ENCLOSED PROXY IN THE ENCLOSED ENVELOPE TO WHICH NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
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REEDS JEWELERS, INC.
2525 SOUTH SEVENTEENTH STREET
WILMINGTON, NORTH CAROLINA 28401

PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 18, 2001

This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Reeds Jewelers, Inc. (the
"Company") to be voted at the Annual Meeting of Shareholders of the Company to
be held at the Hilton Hotel, 301 North Water Street, Wilmington, North Carolina,
on Wednesday, July 18, 2001, at 10:00 a.m., local time, and at any adjournments
thereof. In addition to solicitation by mail, proxies may be solicited by
telephone or in person by officers, directors, and by other agents of the
Company without compensation therefor, except for reimbursement of actual
expenses. All costs of solicitation of proxies will be borne by the Company. The
Company expects to mail this proxy statement and enclosed form of proxy to its
shareholders on or about Tuesday, May 29, 2001.

All shares represented by proxies received and not revoked will be voted
in accordance with the instructions therein. A proxy may be revoked prior to the
voting of the proxy by: (1) giving written notice to the Secretary of the
Company at the Company's executive office at 2525 South Seventeenth Street,
Wilmington, North Carolina 28401; (2) submitting a duly executed, later-dated
proxy to the Secretary of the Company; or (3) submitting notice to the Company,
prior to the exercise of the proxy, of the death or incapacity of the maker of
the proxy. A proxy is suspended if the person executing the proxy votes in
person at the meeting. Proxies duly executed and returned by shareholders which
specify no choice will be voted FOR election of the nominees for director as
proposed by the Board of Directors, and FOR ratification of the appointment of
Ernst & Young LLP as independent auditors. Although the Board of Directors is
not aware of any other matters to be presented at the meeting, if other matters
are properly presented at the meeting for action, the persons named in the
enclosed form of proxy and acting thereunder will have the discretion to vote on
such matters in accordance with their best judgment.

The Board has fixed the close of business on May 4, 2001 as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting and any adjournments thereof. As of the record date, there were
outstanding 8,476,372 shares of Common Stock, which number represents all of the
voting securities of the Company. Each holder of Common Stock on the record date
is entitled to cast one vote per share, in person or by properly executed proxy,
with respect to each matter to be considered at the meeting. Directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. The proposals to approve the
appointment of independent auditors are approved if the votes in favor of the
proposal exceed the votes opposed to the proposal. Shares which are withheld as
to voting with respect to one or more of the nominees for Director and
abstentions will be counted in determining the existence of a quorum, but shares
held by a broker, as a nominee, that are not voted on any matter will not be
counted for such purposes. Abstentions, shares which are withheld as to voting
with respect to nominees for Director and shares held of record by a broker, as
a nominee, that are not voted with respect to any of the proposals will not be
counted as a vote in favor of or against such proposal, and, therefore, will
have no effect on the proposal to elect the Directors and the proposals to
ratify the appointment of independent auditors.

Other than certain directors and officers of the Company, the Company is
aware of no person who beneficially owns more than five percent of the Company's
outstanding Common Stock. See "Election of Directors" below.

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ELECTION OF DIRECTORS

Ten Directors are to be elected at the meeting and shall hold office until
the next Annual Meeting of Shareholders or until their respective successors
have been duly elected and qualified. All nominees have indicated that they are
willing and able to serve as Directors if elected. However, if any nominee for
Director shall withdraw his candidacy or otherwise be unable to serve, it is
intended that votes will be cast, pursuant to the discretionary power granted in
the enclosed form of proxy, for such substitute nominee or nominees as may be
nominated by the Board of Directors. Each director will be elected by a
plurality vote of the votes cast, in person or by proxy, at the meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED BELOW:

COMMON STOCK OF THE COMPANY BENEFICIALLY
OWNED ON MAY 4, 2001
YEAR FIRST PERCENT OF
NAME, AGE, PRINCIPAL OCCUPATION, BECAME NUMBER OF COMMON STOCK
AND BUSINESS EXPERIENCE DIRECTOR (1) SHARES (2) OUTSTANDING
- ----------------------- ------------ ---------- -----------

ALAN M. ZIMMER, age 42; President and 1981 2,029,690(4,5,9,10) 23.95%
Chief Executive Officer for more than the past
five years (3)

WILLIAM R. ZIMMER, age 82; Chairman of 1946 23,352 0.28%
the Board for more than the past five years (3)

ROBERTA G. ZIMMER, age 76; Secretary for 1946 8,724 0.10%
more than the past five years (3)

G. WADDY GARRETT, age 60; President of GWG 1994 10,000(4) 0.12%
Financial, LLC, a financial holding company;
previously, Chairman and Chief Executive
Officer of Alliance Agronomics, Inc. for more
than the past five years; Director of Cadmus
Communications, Inc. and Community Bancshares
of Virginia, Inc.

KENNETH M. GASSMAN, JR. age 55; Senior Vice 2001 700 0.01%
President and Retailing Securities Analyst,
Davenport & Co. LLC since 1991; Director of
Concepts Direct, Inc.

FENTON N. HORD, age 54; President & CEO 1997 6,000(4) 0.07%
of Carolina Holdings, Inc. for more than the
past five years; Director of Wolseley plc

ARLENE Z. SCHREIBER, age 50; Member of 1986 1,751,956(4,6,9,10) 20.67%
Zimmer Development Company LLC and
affiliates; previously, Vice President and
Secretary, Schreiber's Inc., a ladies specialty
store for more than the past five years (3)

RICHARD F. SHERMAN, age 57; Private 1991 8,470(4) 0.10%
Investor for more than the past five years;
Chairman of P.J. America, Inc., and Director
of Papa John's International, Inc.

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HERBERT J. ZIMMER, age 55; Partner in the 1986 1,837,622(4,7,9,10) 21.68%
law firm of Zimmer and Zimmer LLP, which
serves as general counsel to the Company, for
more than the past five years (3)

JEFFREY L. ZIMMER, age 44; Partner in the 1986 1,783,318(4,8,9,10) 21.04%
law firm of Zimmer and Zimmer LLP, which
serves as general counsel to the Company, for
more than the past five years (3)

All directors and executive officers as a group -- 7,464,030(4) 88.06%
(fourteen persons)

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

(1) Year first became director of the Company or its affiliates.

(2) Unless otherwise indicated, each person has sole voting and investment
power over the shares beneficially owned by such person.

(3) William R. Zimmer and Roberta G. Zimmer are the father and mother of Alan
M. Zimmer, Herbert J. Zimmer, Jeffrey L. Zimmer, and Arlene Z. Schreiber.

(4) Does not include shares which may be acquired by the exercise of options
within 60 days of May 4, 2001 by the following persons pursuant to the
Company's various stock option plans (G. Waddy Garrett, 13,840 shares;
Fenton N. Hord, 7,000 shares; Richard F. Sherman, 11,420 shares; Alan M.
Zimmer, 10,000 shares; Herbert J. Zimmer, 7,000 shares; Jeffrey L. Zimmer,
7,000 shares; Arlene Z. Schreiber, 7,000 shares) and all directors and
executive officers as a group, 306,760 shares.

(5) Rose W. Zimmer, wife of Alan M. Zimmer, is the voting trustee of 191,597
shares held in trust for their minor children; she also owns 3,900 shares
in her name. Such shares are included in the beneficial ownership of Alan
M. Zimmer.

(6) Ronald L. Schreiber, husband of Arlene Z. Schreiber, owns 3,900 shares in
his name. Their sons, Andrew Michael Schreiber and Mark Harrison
Schreiber, own 111,629 and 111,629 shares, respectively. Such shares are
included in the beneficial ownership of Arlene Z. Schreiber.

(7) Ronna T. Zimmer, wife of Herbert J. Zimmer, owns 3,900 shares in her name.
Their son, Bradley Trent Zimmer and Landon Garrett Zimmer, own 116,469 and
116,469 shares, respectively. Such shares are included in the beneficial
ownership of Herbert J. Zimmer.

(8) Jeffrey L. Zimmer, is the voting trustee of 197,779 shares held in trust
for his minor children. Such shares are included in the beneficial
ownership of Jeffrey L. Zimmer.

(9) A partnership comprised of Alan M. Zimmer, Herbert J. Zimmer, Jeffrey L.
Zimmer, and Arlene Z. Schreiber owns 93,854 shares of Company stock.
Beneficial ownership for each of the above persons includes 23,463-1/2
shares over which each such person has the power to vote or dispose of
such shares.

(10) The address of each person who beneficially owns more than 5% of the
Company's Common Stock is 2525 South Seventeenth Street, Wilmington, North
Carolina 28401.

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COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS AND COMPENSATION OF DIRECTORS

In accordance with the By-Laws of the Company, the Board of Directors has
established an Audit Committee and a Compensation Committee.

The Audit Committee, which is composed of outside Directors, G. Waddy
Garrett (chairman), Richard F. Sherman, and Fenton N. Hord, recommends to the
Board of Directors the engagement of the independent auditors of the Company and
reviews with the independent auditors the scope and results of the Company's
audits, the Company's internal accounting controls, and the professional
services furnished by the independent auditors to the Company. The Audit
Committee met three times in the fiscal year ended February 28, 2001.

The Compensation Committee, which is composed of outside Directors,
Richard F. Sherman (chairman), G. Waddy Garrett, and Fenton N. Hord, reviews and
approves all salary arrangements and other remuneration for officers of the
Company. It also is responsible for review of certain benefit plans and for
administration of the stock option plans. The Compensation Committee met three
times in the fiscal year ended February 28, 2001.

In the fiscal year ended February 28, 2001, the Board of Directors held
four meetings and Committees of the Board of Directors held a total of six
meetings. All Directors attended 100% of the total number of meetings of the
Board of Directors and the Committees on which he or she served during the
fiscal year ended February 28, 2001.

Officers of the Company who are also Directors do not receive any fee or
remuneration for services as members of the Board of Directors or of any
Committee of the Board of Directors. Non-management Directors received an annual
retainer fee of $7,500, $1,250 for each Board meeting attended, $1,000 for each
Committee meeting attended, and options for 1,000 shares of stock for their
services during the fiscal year ended February 28, 2001.

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COMPENSATION OF EXECUTIVE OFFICERS

The following tables and narrative text set forth the compensation earned
in fiscal year ended February 28, 2001 and the two prior fiscal years to the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers.

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (#) SATION (2)
- --------------------------- ---- ------ --------- ----------- ----------

Alan M. Zimmer 2001 $281,063 $ 0 2,000 $12,075
President & Chief Executive Officer 2000 281,690 180,282 2,000 10,746
1999 264,880 157,000 2,000 12,550
William R. Zimmer 2001 154,627 0 0 5,634
Chairman of the Board 2000 154,627 50,000 0 6,338
1999 149,925 45,000 0 4,692
James R. Rouse 2001 181,472 0 2,000 25,101
Treasurer & Chief Financial Officer 2000 186,420 63,718 2,000 24,077
1999 174,018 50,260 2,000 30,430
Orville R. Westmoreland 2001 170,622 0 2,000 13,263
Vice President of Financial Services 2000 176,562 60,252 2,000 12,395
1999 162,672 63,343 2,000 12,449
Allan E. Metzner 2001 169,940 0 2,000 13,672
Vice President of Merchandising 2000 169,288 60,049 4,000 12,601
1999 151,551 57,725 2,000 12,730

(1) Under the Company's Annual Bonus Plan, cash awards are made to participants
based upon achieving pre-determined profit goals. Key management individuals in
the corporate office are covered under this plan and are paid based on corporate
profitability. The plan also awards cash bonuses to store managers and district
supervisors based on the profitability of their individual stores and districts.
Awards are paid to participants annually, normally during the year following the
Annual Bonus Plan year. In 1999 a portion of each executive's salary was paid in
the form of a guaranteed bonus as follows: Alan M. Zimmer, $55,000; William R.
Zimmer, $75,000; James R. Rouse, $25,000; and all other executives, $12,500
each. Beginning March 1, 1999, the annual bonus plan was changed and the above
amounts are included in the bi-weekly pay for each executive. Accordingly the
guaranteed bonus amounts for 1999 are included above as salary.

(2) During each of the fiscal years ended February 28, 2001, February 29, 2000
and February 28, 1999, respectively, the Company paid premiums for insurance to
fund the supplemental executive retirement plan for each named executive as
follows: Alan M. Zimmer, $6,428, $6,428, and $6,428; William R. Zimmer, $0, $0,
and $0; James R. Rouse, $19,337, $19,337, and $25,337; Orville R. Westmoreland,
$7,500, $7,500, and $7,500; and Allan E. Metzner, $7,905, $7,905, and $7,905.
During each of the fiscal years ended February 28, 2001, February 29, 2000 and
February 28, 1999, respectively, the Company also made contributions to the
profit-sharing and 401(k) savings plan accounts of each named executive as
follows: Alan M. Zimmer, $5,647, $4,318, and $6,122; William R. Zimmer, $5,634,
$6,338 and $4,692; James R. Rouse, $5,764, $4,740 and $5,093; Orville R.
Westmoreland, $5,763, $4,895 and $4,949; and Allan E. Metzner, $5,768, $4,696
and $4,825.

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OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES OF STOCK PRICE APPRECIATION
FOR OPTION TERM (10 YEARS) (1)
-------------------------------------------
% OF TOTAL
OPTIONS 5% 10%
NUMBER OF GRANTED TO EXERCISE -------------------- -------------------
SECURITIES EMPLOYEES OR BASE PRICE PRICE
UNDERLYING IN FISCAL PRICE EXPIRATION PER AGGREGATE PER AGGREGATE
NAME OPTIONS(2) YEAR ($/SHARE) DATE SHARE VALUE SHARE VALUE
- ---- ---------- ---- --------- ---- ----- ----- ----- -----

Alan M. Zimmer (3) 2,000 12.50 $1.925 7/25/2005 $2.46 $1,070 $3.10 $2,350
James R. Rouse 2,000 12.50 1.750 7/25/2010 2.85 2,200 4.54 5,580
O. R. Westmoreland 2,000 12.50 1.750 7/25/2010 2.85 2,200 4.54 5,580
Allan E. Metzner 2,000 12.50 1.750 7/25/2010 2.85 2,200 4.54 5,580

(1) The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates over an option period of ten years (except as otherwise
noted) and are not intended to forecast future price appreciation of the Common
Stock of the Company. The gains reflect a future value based upon growth at
these prescribed rates. The Company did not use an alternative formula for a
grant date valuation, an approach that would state gains at present, and
therefore lower, value. Options have value to the listed executives and to all
option recipients only if the stock price advances beyond the grant date price
shown in the table during the effective option period.

(2) These awards were made pursuant to the 1994 Stock Option Plan. Under this
plan, the option price must not be less than 100% of the fair market value of
the Company's Common Stock on the date the option is granted. The fair market
value of a share of the Company's Common Stock is the closing price as reported
on the date of grant.

(3) Options for Alan M. Zimmer expire after five years. The calculations for
potential realizable value for the options of Alan M. Zimmer are therefore for a
period of only five years, rather than ten years.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY
NAME SHARES FEBRUARY 28, 2001 OPTIONS
- ---- ACQUIRED ON VALUE EXERCISABLE EXERCISABLE AT
EXERCISE (#) REALIZED ($) UNEXERCISABLE (#) FEBRUARY 28, 2001 ($)(1)
------------ ------------ ----------------- ----------------- ------

Alan M. Zimmer 0 $ 0 10,000 / 0 0
James R. Rouse 0 0 70,500 / 0 0
Orville R. Westmoreland 0 0 70,500 / 0 0
Allan E. Metzner 0 0 52,250 / 0 0

(1) Based on $ 1.2500 per share at February 28, 2001.

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PERFORMANCE GRAPH

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
REEDS JEWELERS, INC.,

CRSP TOTAL RETURN INDEX FOR THE S & P SMALL-CAP 600, AND
THE COMPANY'S PEER GROUP

[LINE GRAPH OMITTED]

1996 1997 1998 1999 2000 2001
- -----------------------------------------------------------------------------------------------------------

Reeds Jewelers, Inc. 100.00 83.33 110.00 86.67 78.35 33.33
- -----------------------------------------------------------------------------------------------------------
S & P Small-Cap 600 100.00 116.70 157.49 130.54 179.44 178.79
- -----------------------------------------------------------------------------------------------------------
Peer Group 100.00 104.40 150.06 155.14 185.53 193.98
- -----------------------------------------------------------------------------------------------------------

The above graph assumes $100 invested on February 29, 1996 in the
Company's Common Stock, the S & P Small-Cap 600, and the Company's Peer Group.
The Peer Group Index consists of the following publicly-traded retail jewelry
chains: Friedman's, Inc. (FRDM), Samuels Jewelers (SMJW), Signet Group PLC
(SIGY), Whitehall Jewellers, Inc. (JWL), and Zale Corporation (ZLC). The S & P
Small Cap 600 Index and the Peer Group Index are calculated based on indexes
prepared for Reeds Jewelers, Inc. by Zacks Investment Research, Inc.

RELATIONSHIPS AND RELATED TRANSACTIONS

The Company leases its corporate headquarters, consisting of 20,731 square
feet of office space and 155 parking spaces, from a partnership comprised of
Alan M. Zimmer, Herbert J. Zimmer, Jeffrey L. Zimmer, and Arlene Z. Schreiber.
Alan M. Zimmer is President and Chief Executive Officer of the Company and
Herbert J. Zimmer, Jeffrey L. Zimmer, and Arlene Z. Schreiber are all Directors.
Monthly rental payments under the leases are $26,556, and increase to $27,073 on
January 1, 2003. The Company also pays the related insurance, property taxes,
maintenance fees, and utilities for this location. The leases for these
facilities expire December 31, 2006. Based on rentals charged for comparable
properties in Wilmington, the Company believes the terms of the leases are no
less favorable to the Company than those that could be obtained from
unaffiliated parties.

Herbert J. Zimmer and Jeffrey L. Zimmer are partners in the law firm of
Zimmer and Zimmer, which serves as general counsel to the Company. During the
fiscal year ended February 28, 2001, Zimmer and Zimmer received from the Company
legal fees and reimbursement of costs advanced in the amount of $171,000. Zimmer
and Zimmer has advised the Board of Directors that legal fees paid to Zimmer and
Zimmer are based on the firm's customary fees for similar services.

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Between June 30, 1989 and February 6, 1990, the Company borrowed a total
of $1,370,000 from three of its principal shareholders, of which $470,000 was
repaid as of May 28, 1991, $21,000 was repaid in June 1996, and $34,000 was
repaid in July 1998. The amounts borrowed accumulate interest at the prime rate
as quoted monthly in the Wall Street Journal. The amounts remaining outstanding
under the notes are $560,000 to Alan M. Zimmer, $185,000 to Arlene Z. Schreiber,
and $100,000 to Ronna T. Zimmer (the wife of Herbert J. Zimmer). These amounts
are evidenced by various subordinated notes and are due and payable upon full
payment of all senior obligations or with approval of all senior lenders.

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS OF REEDS JEWELERS, INC.
ON EXECUTIVE COMPENSATION

The Compensation Committee, which is composed of outside Directors,
Richard F. Sherman (chairman), G. Waddy Garrett, and Fenton N. Hord reviews and
approves all salary arrangements and other remuneration for officers of the
Company. It also is responsible for review of certain benefit plans and for
administration of the stock option plans. The Compensation Committee met three
times in the fiscal year ended February 28, 2001.

The primary responsibility of the Company's management is to maximize
shareholder value over time. To accomplish this objective, the Company's
business strategy and operating plans are derived from its goal to increase the
net earnings of the Company at a compound annual growth rate of 20% over any
five-year period. The overall goal of the Compensation Committee is to pay
executive officers in a manner that is consistent with and linked to this
strategic objective.

The Committee believes that the compensation package of executive officers
must be structured to enable the Company to attract, retain, and encourage the
continued development of its executive officers. Accordingly, the Company's
executive officers are compensated as follows:

BASE COMPENSATION: An executive of Reeds Jewelers, Inc. is
compensated for the required general management and specific technical
skills demanded by his position. The value of such skills are determined
by evaluation of the executive's demonstrated knowledge, experience,
productivity, and effectiveness, as well as the value placed upon such
qualities as reflected by compensation for similar positions within the
retail jewelry industry. Such guaranteed compensation for each executive
is in the form of a base salary and certain benefits designed to relieve
financial concerns of the executive regarding illness, disability,
retirement, or death. The base salary of each executive is reviewed
annually in light of the aforementioned criteria and typically is
increased, as appropriate for each executive, within the general
guidelines for all salary increases within the Company. No pay increases
for any executives were approved during fiscal year 2001.

PAY FOR PERFORMANCE: An executive of the Company is challenged to
perform and manage so that the Company's net income goal is achieved or
exceeded. Upon achievement of the budget for corporate net income, an
amount equal to 60% of base salary is placed in a bonus pool for the
President and Chief Executive Officer. An amount equal to 30% of base
salary for each other executive is placed in bonus pools for each of them.
In addition, for each 1% that net income exceeds budget, an amount equal
to 1% of the excess would be added to the executives' bonus pools in the
ratio of 1.67 shares for the President and Chief Executive Officer and 1
share for each of the other executives. The pools are capped at 40% of all
excess over the budget. If the net income budget is not achieved, the
executives receive no bonus. If the net income budget is achieved, then
the executives earn a portion or all of their bonus pools based on
achieving certain performance goals.

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11
EQUITY PARTICIPATION: An executive of the Company makes numerous
tactical decisions about the short-term operations of the Company, and
also provides consistent input and influence regarding longer-term
strategic issues. In addition, because the Company believes that its
shareholders are attracted primarily by consistent and increasing
profitability, the executive's daily application and interpretation of the
Company's policies and procedures must be couched within a longer-term
perspective. Stock ownership aligns the interests of executives with those
of shareholders. Accordingly, the final component of executive
compensation provides for the periodic granting of stock options as a
longer-term incentive designed to reward executives for managing the
Company over a period of several years in a manner that is more likely to
increase shareholder value through higher market valuations of the
Company's share price as the result of consistent and sustainable
increases in profitability. Factors considered regarding the timing and
number of stock options granted include the executive's scope of
responsibility and time in the position, as well as corporate performance.
Alan M. Zimmer received options for 2,000 shares of stock during the
fiscal year ended February 28, 2001.

SUMMARY. The Committee believes that the executive compensation policies
and programs described in this report serve the interests of the shareholders
and the Company. Compensation of executive officers is intended to be linked to,
and commensurate with, Company performance and with shareholder expectations.
The Committee believes that the practice and the performance results of the
compensation philosophy described herein should be measured over a period
sufficiently long to determine whether strategy development and implementation
are in line with, and responsive to, shareholder expectations.

Richard F. Sherman, Chairman
G. Waddy Garrett
Fenton N. Hord

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REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF REEDS JEWELERS, INC.

The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed the audited financial statements in the Annual Report with management
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of a significant judgments, and the
clarity of disclosures in the financial statements.

The Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Committee under
generally accepted auditing standards. In addition, the Committee has discussed
with the independent auditors the auditors' independence from management and the
Company including the matters in the written disclosures required by the
Independence Standards Board and considered the compatibility of nonaudit
services with the auditors' independence.

The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, their evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting. The Committee held three meetings during fiscal year 2001.

In reliance on the reviews and discussions referred to above, the
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended February 28, 2001 for filing with the Securities and
Exchange Commission. The Committee and the Board have also recommended, subject
to shareholder approval, the selection of the Company's independent auditors.

G. Waddy Garrett, Chairman
Richard F. Sherman
Fenton N. Hord

10
13
APPOINTMENT OF INDEPENDENT AUDITORS

Ernst & Young LLP, Certified Public Accountants, has been recommended by
the Board of Directors to serve as independent auditors of the Company for the
fiscal year ending February 28, 2002. Ernst & Young LLP is the present
independent auditor of the Company and has served in this capacity for the past
nine years. The Company knows of no direct or material indirect financial or
other interest of Ernst & Young in the Company.

Fees for the fiscal year 2001 audit were $129,000 and all other fees were
$157,000, including audit related services of $36,000 and nonaudit services of
$121,000. Audit related services generally include fees for pension and
statutory audits, business acquisitions, accounting consultations, internal
audit and SEC registration statements.

Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPOINTMENT OF ERNST &
YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
FEBRUARY 28, 2002.

SHAREHOLDER PROPOSALS

Proposals of shareholders for the 2002 Annual Meeting of Shareholders of
the Company must be received at the Company's corporate office, P.O. Box 2229,
2525 South Seventeenth Street, Wilmington NC 28401, Attention: Corporate
Secretary, no later than February 28, 2002.

ANNUAL REPORT

The Company's Annual Report to Shareholders and Annual Report on Form 10-K
for the year ended February 28, 2001 are included in this mailing to all
shareholders.

By Order of the Board of Directors,

/s/ Roberta G. Zimmer

ROBERTA G. ZIMMER
Secretary

Wilmington, North Carolina
May 29, 2001

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PROXY REEDS JEWELERS, INC.
2525 SOUTH SEVENTEENTH STREET
WILMINGTON, NORTH CAROLINA 28401

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned hereby appoints Alan M. Zimmer and Roberta G. Zimmer, or
either of them, as agents, each with the power to appoint his or her substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Common Stock of Reeds Jewelers, Inc. (the "Company") held of
record by the undersigned on May 4, 2001 at the Annual Meeting of Shareholders
to be held at the Hilton Hotel, 301 North Water Street, Wilmington, North
Carolina, on Wednesday, July 18, 2001, at 10:00 a.m., local time, and at any
adjournments thereof.

1. ELECTION OF DIRECTORS

[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary below) all nominees listed below

G. Waddy Garrett; Kenneth M. Gassman; Fenton N. Hord; Arlene Z. Schreiber;
Richard F. Sherman; Alan M. Zimmer; Herbert J. Zimmer; Jeffrey L. Zimmer;
Roberta G. Zimmer; William R. Zimmer

(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

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

2. TO APPROVE THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE YEAR ENDING FEBRUARY 28, 2002.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. In their discretion, the proxy agents are authorized to vote upon such other
business as may properly come before the meeting.

This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for all the nominees for Director and for independent auditors.

Please sign exactly as name
appears below. When shares are
held as joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by the
president or other authorized
officer. If a partnership,
please sign in partnership
name by an authorized person.

------------------------------
Signature

------------------------------
Signature if held jointly

DATED: , 2001
------------------

PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY,
USING THE ENCLOSED ENVELOPE.