LITTLE SWITZERLAND INC/DE, DEF 14A, 1997-12-24

LITTLE SWITZERLAND INC/DE
DEF 14A, 1997-12-24
JEWELRY STORES

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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 Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))

Little Switzerland, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Little Switzerland, Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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

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

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

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] 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 Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

[LITTLE SWITZERLAND LOGO]

161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804

December 24, 1997

Dear Little Switzerland Stockholder:

You are cordially invited to attend the Annual Meeting of Stockholders of
Little Switzerland, Inc. (the "Company") to be held on Thursday, February 5,
1998, at 10:30 a.m., local time, at 225 Franklin Street, 33rd Floor, Boston,
Massachusetts (the "Annual Meeting"). Your Board of Directors and management
look forward to greeting personally those stockholders able to attend the
Annual Meeting.

The Annual Meeting has been called for the purpose of electing two Class
III Directors each for a three-year term and considering and voting upon such
other business as may properly come before the meeting or any adjournments or
postponements thereof. The Board of Directors of the Company recommends that
you vote "FOR" the re-election of the nominees of your Board of Directors, C.
William Carey and John E. Toler, Jr.

CAUTION

As more fully described in the enclosed proxy statement, three
stockholders of the Company have nominated their own candidates for election as
Directors of the Company. One such stockholder, Aspen Investments Inc., has
filed preliminary proxy materials with the Securities and Exchange Commission,
indicating that it is soliciting proxies for election to the Board of Directors
of its nominees. In its preliminary proxy materials, Aspen Investments Inc. has
indicated that, if elected, its nominees intend to take all actions necessary
or appropriate, subject to their fiduciary duties to the Company's
stockholders, to convince the Board of Directors to consummate a merger of
Destination Retail Holdings Corporation, an affiliate of Aspen Investments
Inc., with and into the Company or such other sale of the Company pursuant to a
definitive bona fide offer that is at a price and on terms more favorable to
the Company's stockholders than the merger proposed by Destination Retail
Holdings Corporation. Aspen Investments Inc. and Destination Retail Holdings
Corporation are affiliated with Colombian Emeralds International, a major
competitor of the Company. While two other stockholders of the Company, Kenneth
S. Hackel and Donald L. Sturm, have also nominated candidates for election as
Directors of the Company, they are not soliciting proxies from stockholders of
the Company to elect their nominees to the Board of Directors.

As previously reported, your Board of Directors is actively continuing the
process with its financial advisor of evaluating its strategic alternatives,
including possible business combinations with third parties. Accordingly, the
Board of Directors recommends that you reject the nominees of such stockholders
and that you vote "FOR" the election of C. William Carey and John E. Toler,
Jr., the two nominees of your Board of Directors, as Directors of the Company.

On behalf of your Board of Directors, your continued interest and support
are greatly appreciated.

Very truly yours,

/s/ John E. Toler, Jr.

John E. Toler, Jr.
Chief Executive Officer
and President

IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED WHITE PROXY CARD IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.

<PAGE>

LITTLE SWITZERLAND, INC.
161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804
(809) 776-2010

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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

To Be Held on Thursday, February 5, 1998

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Little
Switzerland, Inc. (the "Company") will be held on Thursday, February 5, 1998,
at 10:30 a.m., local time, at 225 Franklin Street, 33rd Floor, Boston,
Massachusetts (the "Annual Meeting") for the purpose of considering and voting
upon:

1. The election of two Class III Directors each for a three-year term; and

2. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on December 10,
1997 as the record date for determination of stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournments or postponements
thereof. Only holders of common stock of record at the close of business on
that date will be entitled to notice of and to vote at the Annual Meeting and
any adjournments or postponements thereof.

By Order of the Board of Directors
Richard E. Floor
Secretary

St. Thomas, U.S.V.I.
December 24, 1997

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED WHITE PROXY CARD IN THE
ENCLOSED RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. IF YOU HAVE ANY QUESTIONS
OR NEED ASSISTANCE, PLEASE CALL D.F. KING & CO., INC., WHICH IS ASSISTING US,
TOLL FREE AT (800) 848-3410.

<PAGE>

LITTLE SWITZERLAND, INC.
161-B Crown Bay Cruise Ship Port
St. Thomas, U.S.V.I. 00804
(809) 776-2010

-----------
PROXY STATEMENT
-----------

ANNUAL MEETING OF STOCKHOLDERS

To Be Held on Thursday, February 5, 1998

This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Little Switzerland, Inc., a corporation
incorporated under the laws of the state of Delaware on May 23, 1991 (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to be
held on Thursday, February 5, 1998, at 10:30 a.m., local time, at 225 Franklin
Street, 33rd Floor, Boston, Massachusetts, and any adjournments or
postponements thereof (the "Annual Meeting"). Unless otherwise indicated,
references to the "Company" in this Proxy Statement include its various
subsidiaries.

At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:

1. The election of two Class III Directors each for a three-year term,
each such term to continue until the 2000 annual meeting and until each
Director's successor is duly elected and qualified; and

2. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.

The Notice of Annual Meeting, Proxy Statement and Proxy Card are first
being mailed to stockholders of the Company on or about December 24, 1997 in
connection with the solicitation of proxies for the Annual Meeting. The Board
of Directors has fixed the close of business on December 10, 1997 as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting (the "Record Date"). Only holders of the Company's common
stock, par value $.01 per share ("Common Stock"), of record at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were 8,467,359 shares of the
Company's Common Stock outstanding and entitled to vote at the Annual Meeting.
Each holder of a share of Common Stock outstanding as of the close of business
on the Record Date will be entitled to one vote for each share held of record
for each matter properly submitted at the Annual Meeting.

The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect a
nominee as a Director of the Company and the affirmative vote of a majority of
the shares of stock voting on a matter is necessary to approve any proposal
presented at the meeting. Shares that reflect abstentions or "broker non-votes"
(i.e., shares represented at the meeting held by brokers or nominees as to
which instructions have not been received from the beneficial owners or persons
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares) will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the meeting. In addition, abstentions will be treated as votes cast
against a particular proposal while broker non-votes will have no impact on the
outcome of the vote on a particular proposal. With respect to the election of
Directors, votes may only be cast in favor of or withheld from the nominee;
there is no ability to abstain. In addition, broker non-votes will have no
effect on the outcome of the election of Directors.
<PAGE>

Stockholders of the Company are requested to sign, date and promptly mail
the accompanying White Proxy Card in the enclosed return envelope. Common Stock
represented by properly executed proxies received by the Company and not
revoked will be voted at the Annual Meeting in accordance with the instructions
contained therein. If instructions are not given therein, properly executed
proxies will be voted "FOR" the election of the two nominees for Director
listed in this Proxy Statement. It is not anticipated that any matters other
than the election of Directors will be presented at the Annual Meeting. If
other matters are presented, proxies will be voted in accordance with the
discretion of the proxy holders.

Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of the
Company, or by signing and duly delivering a proxy bearing a later date, or by
attending the Annual Meeting and voting in person.

The Annual Report of the Company, including financial statements for the
fiscal year ended May 31, 1997 ("Fiscal 1997") is being mailed to stockholders
of the Company concurrently with this Proxy Statement. The Annual Report,
however, is not a part of the proxy solicitation material.

EVALUATION OF STRATEGIC ALTERNATIVES

During Fiscal 1997, the Company received inquiries from third parties
regarding a possible strategic transaction with the Company. After completing
an operational and strategic review of the Company, the Company announced in
August 1997 that it was pursuing various strategic alternatives and that its
financial advisor, Wasserstein Perella & Co., Inc. ("Wasserstein"), would
discuss possible business combinations with certain third parties. All such
efforts were suspended, however, when events surrounding an employee theft
required Arthur Andersen LLP to expand the scope and duration of its regular
audit. Once the Company's financial statements for Fiscal 1997 were completed
in October, the Company, through Wasserstein, began actively pursuing possible
strategic alternatives, including a possible business combination with a third
party. The Board of Directors agreed to consider a sale of the Company or other
transaction that may result in a change of control in order to compare (i) the
value to stockholders resulting from the long-term strategy developed through
the operational and strategic review of the Company with (ii) the value
stockholders would receive in a strategic transaction, and thereby enable the
Board of Directors to pursue that course of action that is in the best
interests of the stockholders of the Company.

Shortly after receipt of the preliminary indications of interest,
Wasserstein notified those parties who had submitted indications of interest
that they would be provided with access to the senior management and properties
of the Company as well as additional financial, operating and legal information
to enable them to formulate formal proposals. In response to DRHC's interest to
participate in this diligence process, DRHC was notified, by letter dated
November 24, 1997, that it would be provided with access to senior management
but that full access to the confidential and proprietary information of the
Company would not be provided unless it entered into a confidentiality
agreement with the Company similar to that entered into by the other
prospective purchasers. To date, DRHC has refused to enter into the type of
confidentiality agreement entered into by the Company with other prospective
purchasers. Certain prospective purchasers, including DRHC, have been supplied
with an agreement specifying the terms upon which the Company would propose to
enter into a strategic transaction and have been asked to formulate and submit
a formal proposal to the Board of Directors of the Company, including a mark-up
of such agreement, by January 6, 1998. Once Wasserstein has received and
analyzed all final proposals, the Board of Directors will meet to discuss the
proposals and determine a course of action for the Company that is in the best
interests of the stockholders of the Company. In assessing the qualifications
of the parties submitting formal proposals, the Board of Directors will
consider, among other things, such factors as valuation, financial capability,
conditions to closing and the prospective purchaser's ability to consummate a
transaction in a timely manner.

2
<PAGE>

Consummation of a strategic transaction may result in a change in control
of the Company. In that regard, the Board of Directors believes that obtaining
the best available price and most favorable terms for a business combination
with the Company is best accomplished by continuing to pursue the sale process
already begun by the Company in accordance with the procedures outlined above.
Any subsequent merger or sale of all or substantially all of the Company's
assets will be subject to the approval of the holders of a majority of the
outstanding Common Stock of the Company entitled to vote thereon. There can be
no assurances, however, as to the timing of any such transaction or whether any
such strategic transaction with the Company will be agreed to or consummated as
a result of the Company pursuing this sale process.

PROPOSAL NUMBER 1

ELECTION OF DIRECTORS

The Board of Directors of the Company consists of six members and is
divided into three classes, with two Directors in each class. Directors serve
for three-year terms, with one class of Directors being elected by the
Company's stockholders at each annual meeting.

At the Annual Meeting, two Class III Directors will be elected to serve
until the 2000 annual meeting and until their successors are duly elected and
qualified. The Board of Directors has nominated C. William Carey and John E.
Toler, Jr. (the "Board's Nominees") for re-election as Class III Directors.
Unless otherwise specified in the proxy, it is the intention of the persons
named in the proxy to vote the shares represented by each properly executed
proxy for the re-election of Mr. Carey and Mr. Toler as Directors. Each of the
Board's Nominees has agreed to stand for re-election and to serve if re-elected
as a Director. However, if any of the persons nominated by the Board of
Directors fails to stand for re-election or is unable to accept re-election,
the proxies will be voted for the election of such other person or persons as
the Board of Directors may recommend.

Vote Required For Approval

A quorum being present, the affirmative vote of a plurality of the votes
cast is necessary to elect a Board's Nominee as a Director of the Company.

The Board of Directors of the Company recommends that the Company's
stockholders vote FOR the re-election of the Board's Nominees, C. William Carey
and John E. Toler, Jr., as Directors of the Company.

3
<PAGE>

INFORMATION REGARDING DIRECTORS

The Board of Directors of the Company held nine (9) meetings during Fiscal
1997. During Fiscal 1997, each of the incumbent Directors attended at least 75%
of the total number of meetings of the Board and of the committees of which he
or she was a member. The Board of Directors has established an Audit Committee,
a Compensation Committee and an Investment Committee in order to assist it in
discharging its duties. Members of all committees are outside directors. The
members of the Audit Committee are Ms. Jacobs and Messrs. Correra and
Donaldson. The Audit Committee reviews the financial statements of the Company
and the scope of the annual audit, monitors the Company's internal financial
and accounting controls and recommends to the Board of Directors the
appointment of independent certified public accountants. The Audit Committee
met one time during Fiscal 1997. The members of the Compensation Committee are
Messrs. Carey and Donaldson and Ms. Jacobs. The Compensation Committee
recommends the compensation levels of officers and employees of the Company to
the Board of Directors and is responsible for administering the Company's stock
option plans pursuant to authority delegated to it by the Board of Directors.
The Compensation Committee met one time during Fiscal 1997. The members of the
Investment Committee are Messrs. Correra and Carey. The Investment Committee is
responsible for reviewing and presenting to the Board of Directors strategic
alternatives available to the Company. The Investment Committee met nine (9)
times during Fiscal 1997. The Board of Directors does not maintain a nominating
committee. Instead, its functions are carried out by the entire Board of
Directors.

Directors who are officers or employees of the Company receive no
compensation for service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board of Directors may from time to time determine. Non-employee Directors each
receive an annual retainer of $5,000, plus a fee of $2,500 for each Board of
Directors meeting attended ($500 if such meeting is held via telephone
conference) and $1,000 for each committee meeting attended ($500 if such
meeting is held via telephone conference) if such meeting does not take place
in conjunction with a regularly scheduled Board of Directors meeting. All
Directors are reimbursed for expenses incurred in connection with attendance at
meetings. In order to align stockholder and Director interests, in 1992 the
Board of Directors established the 1992 Non-Employee Directors' Nonqualified
Stock Option Plan (the "1992 Option Plan"). Pursuant to the 1992 Option Plan,
each eligible non-employee Director automatically receives an option to
purchase 3,000 shares of Common Stock on the last day of the Company's fiscal
year. All options granted pursuant to the 1992 Option Plan vest and are
immediately exercisable upon grant. All options granted under the 1992 Option
Plan have an exercise price equal to 100% of the fair market value of a share
of Common Stock on the grant date. On May 31, 1997, the eligible non-employee
Directors of the Company each received an option to purchase 3,000 shares of
Common Stock at an exercise price of $4.50 per share, the fair market value of
the Common Stock on May 30, 1997.

Set forth below is certain information regarding the Directors of the
Company as of November 1, 1997, including the two Class III Directors who have
been nominated for re-election at the Annual Meeting, based on information
furnished by them to the Company.

Name Age Director Since
- ---------------------------- ----- ---------------
Class I-Term Expires 1998
Francis X. Correra ......... 59 1991
Ilene B. Jacobs ............ 50 1991
Class II-Term Expires 1999
Timothy B. Donaldson ...... 63 1991
Kenneth W. Watson ......... 54 1991
Class III-Term Expires 1997
C. William Carey* ......... 60 1991
John E. Toler, Jr.* ...... 54 1995

- ------------
* Board's Nominee for re-election.

The principal occupation and business experience during at least the last
five years for each Director of the Company is set forth below.

4
<PAGE>

CLASS III DIRECTORS--NOMINEES FOR RE-ELECTION

Mr. Carey is Chairman of the Board of Directors of the Company. Since
January 1997, Mr. Carey has been President of Carey Associates, Inc., a company
engaged in international marketing and finance, management consulting and
Russian business development. From 1965 through January 3, 1997, he served as
Chairman, Chief Executive Officer, President and Treasurer of Town & Country
Corporation, which was the sole stockholder of the Company prior to the public
offering of approximately 68% of the Company's Common Stock in July 1991. Town
& Country Corporation is a public company specializing in the international
design, manufacture and distribution of jewelry. Mr. Carey is also a Director
of Prospect Street High Income Portfolio, Inc.

Mr. Toler has served as President and Chief Executive Officer and a
Director of the Company since November 1, 1995. Prior to joining the Company,
Mr. Toler was Director of Merchandising of Trimingham's, Bermuda, from May 1995
through October 1995 and President and Chief Executive Officer of Sage-Dey,
Inc. from August 1991 to May 1993. From October 1990 through July 1991, Mr.
Toler was President and Chief Executive Officer of Sage-Allen, Inc. Mr. Toler
was a 15-year employee of May Department Stores Company where he served as
President and Chief Executive Officer of several regional department store
divisions. Mr. Toler has been President and Chief Executive Officer of
prestigious retail companies for 14 years of his 30 years in the retail trade
and has been an active participant in numerous retail associations. In the
past, Mr. Toler has served on the Board of Directors of Norwest Midland Bank
and the Fund For The Arts and Convention Bureau. Also, Mr. Toler has been a
past sponsor/ counselor to Explorer Groups and has volunteered to assist with
Habitat for Humanity Housing Projects.

CLASS I AND CLASS II DIRECTORS--CONTINUING DIRECTORS

Mr. Correra has been President of Town & Country Fine Jewelry Group since
July 1996. Town & Country Fine Jewelry Group is a wholly-owned subsidiary of
Town & Country Corporation, specializing in the international design,
manufacture and distribution of jewelry. Prior to such time, Mr. Correra served
as Senior Vice President and Chief Financial Officer of Town & Country
Corporation since 1983.

Mr. Donaldson has been Chairman and Chief Executive Officer of Dynamo M.
Ltd., an investment trading company, since 1995. Presently, Mr. Donaldson is
also Chairman of the Bahamas Securities and Exchange Commission. He has been
Ambassador to the United States, Government of the Bahamas (1993 to 1995);
Chairman, Bank of Montreal (Bahamas & Caribbean Ltd.) (1980 to 1983); Governor,
the Central Bank of The Bahamas (1968 to 1980); Governor, International
Monetary Fund (1974 to 1980); Governor, The World Bank (1974 to 1980); and
Governor, Caribbean Development Bank (1975 to 1980).

Ms. Jacobs is Vice President of Human Resources of Digital Equipment
Corporation, a publicly held corporation which specializes in computer systems,
software, networks and integration services. From 1986 to 1996, she served as
Vice President and Treasurer of Digital Equipment Corporation. Ms. Jacobs
currently serves as a Director of Arkwright Mutual Insurance Company and AmerUs
Life Holdings, Inc.

Mr. Watson served as Chief Executive Officer and President of the Company
from January 1, 1994 to October 21, 1994, and has been a Director since 1991.
Since October 1996, Mr. Watson has served as Vice President-Marketing of the
New York Times Magazine Group, Inc., a subsidiary of the New York Times
Company. Mr. Watson served as Executive Vice President of KMart Corporation
from October 1994 through March 1996. Mr. Watson was President of Louis Vuitton
Stores, Inc. from July 1992 to March 1993. Previously, he was Chairman and
Chief Executive Officer of Gump's, a retailer of jewelry, art and gift items
from September 1989 to June 1992 and President and Chief Executive Officer of
Cartier, Inc. from 1985 to September 1989.

5
<PAGE>

EXECUTIVE OFFICERS

The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five
years for each are set forth below as of November 1, 1997.

Name Age Position
- -------------------------- ----- -------------------------------------------
John E. Toler, Jr. ...... 54 Chief Executive Officer and President
Thomas S. Liston ......... 59 Chief Financial Officer, Vice President and
Treasurer
William Canfield ......... 50 Vice President of Store Operations

Mr. Toler has served as President and Chief Executive Officer and a
Director of the Company since November 1, 1995. Prior to joining the Company,
Mr. Toler was Director of Merchandising of Trimingham's, Bermuda, from May 1995
through October 1995 and President and Chief Executive Officer of Sage-Dey,
Inc. from August 1991 to May 1993. From October 1990 through July 1991, Mr.
Toler was President and Chief Executive Officer of Sage-Allen, Inc. Mr. Toler
was a 15-year employee of May Department Stores Company where he served as
President and Chief Executive Officer of several regional department store
divisions. Mr. Toler has been President and Chief Executive Officer of
prestigious retail companies for 14 years of his 30 years in the retail trade
and has been an active participant in numerous retail associations. In the
past, Mr. Toler has served on the Board of Directors of Norwest Midland Bank
and the Fund For The Arts and Convention Bureau. Also, Mr. Toler has been a
past sponsor/counselor to Explorer Groups and has volunteered to assist with
Habitat for Humanity Housing Projects.

Mr. Liston joined the Company on September 29, 1997 and became its new
Chief Financial Officer, Vice President and Treasurer, effective as of November
12, 1997. From January 1991 to February 1997, Mr. Liston was with Barry's
Jewelers, Inc., with his most recent position being Vice Chairman, Chief
Financial Officer, Secretary and Treasurer. Prior to his tenure with Barry's,
Mr. Liston was Executive Vice President, Chief Financial Officer of Crescent
Jewelers Inc. for two years and Executive Vice President, Chief Operating
Officer of Gumps in San Francisco for six years. In all, Mr. Liston has 33
years of retail executive experience.

Mr. Canfield has been Vice President of Store Operations since June 1994.
In that position, he has been responsible for store operations, new store
development and strengthening the Company's position in jewelry throughout its
stores. Mr. Canfield was Managing Director of Colombian Emeralds International
from December 1979 to June 1994. In the past, he served as the President of the
St. Thomas Retail Association for two years.

Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal.

Mr. Lataille served as Chief Financial Officer, Vice President and
Treasurer of the Company from May 1991 through October 31, 1997. From October
21, 1994 through October 31, 1995, Mr. Lataille also served as the acting Chief
Executive Officer and President of the Company. He was Controller of the
Company from May 1990 to May 1991. Prior to joining the Company, he was an
Audit Manager with Coopers & Lybrand from January 1990 to May 1990 and an Audit
Supervisor from January 1987 to January 1990. Mr. Lataille resigned from the
Company, effective October 31, 1997.

Denis X. Comment served as Senior Vice President of Merchandise of the
Company from 1994 through August 31, 1997 and, prior to such time, served as
Vice President of Merchandise of the Company since 1987. Mr. Comment was a
buyer of watches and jewelry and a supervisor of crystal, china and perfume
buyers for the Company from 1986 to 1987 and a store manager from 1980 through
1985. Mr. Comment resigned from the Company, effective August 31, 1997.

6
<PAGE>

EXECUTIVE COMPENSATION

The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's Chief
Executive Officer and the four most highly compensated executive officers who
earned in excess of $100,000 during Fiscal 1997.

Summary Compensation Table

The following table shows for the fiscal years ended May 31, 1995, June 1,
1996 and May 31, 1997 compensation paid by the Company to the Chief Executive
Officer and the four most highly compensated executive officers who earned in
excess of $100,000 during Fiscal 1997.

Annual Compensation
-------------------------------------------------
(a) (b) (c) (d) (e)
Other Annual
Salary Bonus Compensation
Name and Principal Position Year ($) ($) ($)
- ----------------------------- ------ ---------- ---------------- --------------
John E. Toler, Jr. ......... 1997 $300,000 -- $ 3,000(5)
President and Chief 1996 $177,804 $ 50,000 $ 1,750(6)
Executive Officer(1) 1995 -- -- --
Ronald J. Lataille ......... 1997 $150,000 $ 44,202(3) --
President and Chief 1996 $110,000 $ 70,000(4) $ 1,250(7)
Executive Officer, 1995 $110,000 $ 15,000 $ 1,750(6)
Chief Financial Officer
and Vice President(2)
Denis X. Comment ............ 1997 $165,000 -- --
Senior Vice President 1996 $150,000 $ 15,000 --
of Merchandise 1995 $136,538 $ 10,000 --
William Canfield ............ 1997 $173,000 -- --
Vice President of 1996 $156,327 $ 15,000 --
Store Operations 1995 $141,923 $ 55,000 --

<TABLE>
<CAPTION>
Long-Term Compensation
-------------------------------------------
Awards Payouts
--------------------------------- ---------
(a) (f) (g) (h) (i)
Restricted Securities LTIP All Other
Stock Award(s) Underlying Payouts Compensation
Name and Principal Position ($) Options(#) ($) ($)
- ----------------------------- ---------------- ---------------- --------- -----------------
<S> <C> <C> <C> <C>
John E. Toler, Jr. ......... -- -- -- $ 519(10)
President and Chief -- 300,000(8) -- --
Executive Officer(1) -- -- -- --
Ronald J. Lataille ......... -- -- -- --
President and Chief -- -- -- --
Executive Officer, -- 75,000(9) -- --
Chief Financial Officer
and Vice President(2)
Denis X. Comment ............ -- -- -- $ 3,894(10)
Senior Vice President -- -- -- $ 4,335(11)
of Merchandise -- 75,000(9) -- --
William Canfield ............ -- -- -- --
Vice President of -- -- -- --
Store Operations -- 60,000 -- --
</TABLE>

- ------------
(1) Mr. Toler was appointed Chief Executive Officer and President on November
1, 1995.

(2) Mr. Lataille resigned as the acting Chief Executive Officer and President
of the Company on October 31, 1995, and resigned as Chief Financial
Officer and Vice President of the Company on October 31, 1997.

(3) Mr. Lataille was awarded a bonus of $44,202 as compensation for certain
services to the Company performed in Fiscal 1997. Specifically, Mr.
Lataille provided additional services to the Company in connection with
(i) the preparation and filing of an insurance claim on behalf of the
Company in connection with hurricane damage to certain of the Company's
properties and (ii) the initial analysis for the disposition and
redeployment of assets of the Company to be used later by Wasserstein, the
Company's financial advisor, in the development of a strategic plan for
the Company.

(4) Mr. Lataille was awarded a bonus of $50,000 as compensation for his
services to the Company as its acting President and Chief Executive
Officer from October 21, 1994 to October 31, 1995.

(5) This amount represents the cost to the Company for one year of certain
automobile allowances.

(6) This amount represents the cost to the Company for seven months of certain
automobile allowances.

(7) This amount represents the cost to the Company for five months of certain
automobile allowances.

(8) In connection with his appointment as President and Chief Executive
Officer of the Company, the Company granted Mr. Toler an option to
purchase 300,000 shares of the Company's Common Stock pursuant to the
Little Switzerland, Inc. 1991 Stock Option Plan (the "1991 Option Plan").

(9) In connection with the December 21, 1994 grant of an option to purchase
75,000 shares of the Company's Common Stock pursuant to the 1991 Option
Plan, the Company canceled an option to purchase 25,000 shares of the
Company's Common Stock that was granted on November 6, 1992 pursuant to
the 1991 Option Plan.

7
<PAGE>

(10) Effective June 1, 1996, the Company replaced its tax-qualified
discretionary contribution retirement plan (the "Retirement Plan") with a
401(k) Plan under which the Company matches each employee's contribution
up to 3% of compensation. In Fiscal 1997, the Company contributed $519 and
$3,894 to individual accounts maintained on behalf of Mr. Toler and Mr.
Comment, respectively, pursuant to the 401(k) Plan.

(11) The Company contributed $4,335 to the Retirement Plan on behalf of Mr.
Comment in Fiscal 1996. As of May 31, 1997, the total amount of
contributions made by the Company to Mr. Comment's account pursuant to the
Retirement Plan was $11,767. The Company made no contributions to the
Retirement Plan on behalf of Mr. Comment in Fiscal 1997 or Fiscal 1995.

Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Values

The following table sets forth the shares acquired and the value realized
upon exercise of stock options during Fiscal 1997 by the Chief Executive
Officer and each other executive officer named in the Summary Compensation
Table and certain information concerning the number and value of unexercised
options.

<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options at
Options at FY-End(#) FY-End($)(1)
----------------------------- ----------------------------
Shares Acquired on Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------- -------------------- ------------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr. -- -- 60,000 240,000 $60,000 $240,000
Ronald J. Lataille -- -- 63,500 30,000 -- --
Denis X. Comment ... -- -- 71,000 30,000 -- --
William Canfield ... -- -- 18,500 41,500 -- --
</TABLE>

- ------------
(1) Equal to the market value of shares covered by in-the-money options on May
31, 1997 (based on the market value of $4.50 per share as reported by the
NASDAQ National Market as of May 30, 1997) less the aggregate option
exercise price. Options are in-the-money if the market value of the shares
covered thereby is greater than the option exercise price.

Report of the Compensation Committee of the Board of Directors on Executive
Compensation

The Compensation Committee of the Board of Directors of the Company
consists of C. William Carey, Timothy B. Donaldson and Ilene B. Jacobs, all of
whom are outside directors. The Compensation Committee approves Company
compensation policies and procedures and establishes compensation levels for
executive officers. The Compensation Committee also administers and grants
awards under the 1991 Option Plan and the Company's Employee Stock Purchase
Plan.

Compensation Policies for Executive Officers

The Compensation Committee's executive compensation philosophy is to
provide competitive levels of compensation, integrate management's pay with
Company performance, reward above average individual performance, and assist
the Company in attracting and retaining qualified management. The Compensation
Committee has determined that base salaries of executive officers should be set
at levels that are competitive within the local retail industry. In addition,
the Compensation Committee believes that it is appropriate to reward
outstanding performance through a combination of cash bonuses and stock option
grants and, through stock option grants, to provide a competitive compensation
package that will enable the Company to attract and retain the executives
needed to achieve such performance. The Compensation Committee also has
determined that any stock option or other equity-based compensation should
involve long-term vesting to encourage long-term tenure and enhancement of
shareholder value over the long-term.

Base salaries for executive officers are targeted according to the
salaries of employees holding similar offices and having similar
responsibilities within the local retail industry. The Compensation Committee
also considers the relative cost of living within the United States Virgin
Islands. Annual salary adjustments for executive officers are determined by
evaluating the competitive marketplace, the performance of the Company, the
performance of the executive officer and any change in the responsibilities
assumed by the executive officer. Salary adjustments are normally determined
and made on an annual basis.

8
<PAGE>

The base salary and salary adjustments for John E. Toler, Jr., President
and Chief Executive Officer since November 1, 1995, and William Canfield, Vice
President of Store Operations since June 16, 1994, were established pursuant to
their respective employment agreements, as described below under "Employment
Agreements." See "--Compensation of John E. Toler, Jr., Chief Executive
Officer" below. The terms of employment of Ronald J. Lataille, the Chief
Financial Officer, Vice President and Treasurer of the Company as of the end of
Fiscal 1997, were determined by the Compensation Committee and approved by the
Board of Directors.

Cash bonuses paid to executive officers generally are earned primarily
through the achievement of financial goals relative to each officer's
responsibilities. Such financial goals include targeted sales and profit
levels, earnings before interest and taxes ratios, selling, general and
administrative expense ratios, return on assets, inventory shrinkage and
inventory turns. Executive officers generally are eligible to earn up to 25% of
their base salaries in cash bonuses. Based upon the foregoing criteria, neither
Mr. Lataille nor Mr. Comment received any bonus for Fiscal 1997 performance.
Cash bonuses may also be paid to executive officers in accordance with the
terms of their employment agreements. Bonuses payable pursuant to such
agreements generally are earned through the achievement of the financial goals
similar to those discussed above and may also be awarded for executive
retention purposes in the sole discretion of the Compensation Committee.
Pursuant to their respective employment contracts, Messrs. Toler and Canfield
were each eligible to earn a bonus of up to 37.22% and 25%, respectively, of
their respective base salaries for Fiscal 1997. Based upon the performance of
the Company for Fiscal 1997, neither Mr. Toler nor Mr. Canfield received any
bonus. See "--Compensation of John E. Toler, Jr., Chief Executive Officer" and
"Employment Agreements" below. Occasionally, cash bonuses are paid to executive
officers for the performance of services to the Company outside the scope of
their offices, as determined by the Compensation Committee of the Board of
Directors of the Company.

Stock options are designed to attract and retain executives who can make
significant contributions to the Company's success; reward executives for such
significant contributions; and give executives a longer-term incentive to
increase shareholder value. In determining whether to grant stock options to
executive officers, the Compensation Committee evaluates each officer's
performance by examining criteria similar to that involved in fixing cash
bonuses (but without any specific performance measures) and awards reflect
individual performance reviews. The Compensation Committee also may grant stock
options for executive retention purposes, taking into account, among other
things, general industry practice. Stock options typically vest over three to
five years in order to encourage outstanding performance over the long-term.
Historically, stock options generally have been granted with a ten-year term
and an exercise price equal to 100% of the fair market value of the Common
Stock on the grant date.

Compensation of John E. Toler, Jr., Chief Executive Officer

The base salary and bonus for Mr. Toler, the Company's President and Chief
Executive Officer since November 1, 1995, were established by Mr. Toler's
employment agreement. See "Employment Agreements" below. During Fiscal 1997,
there were no adjustments made to Mr. Toler's base salary, and he received no
cash bonus, in accordance with the terms of his employment agreement.
Additionally, pursuant to the terms of Mr. Toler's employment agreement, the
Company granted Mr. Toler on November 1, 1995 an option to purchase 300,000
shares of the Company's Common Stock at $3.50 per share pursuant to the 1991
Option Plan. This option vests and becomes exercisable ratably over a five-year
period beginning on November 1, 1996.

Federal Tax Regulations

As a result of Section 162(m) of the Internal Revenue Code (the "Code"),
the Company's deduction of executive compensation may be limited to the extent
that a "covered employee" (i.e., the chief executive officer or one of the four
highest compensated officers who is employed on the last day of the Company's
taxable year and whose compensation is reported in the summary compensation
table in the Company's proxy statement) receives compensation in excess of
$1,000,000 in such taxable year of the Company (other than performance-based
compensation that otherwise meets the requirements of Section 162(m) of the
Code). The Company intends to take appropriate action to comply with such
regulations, if applicable, in the future.

C. William Carey Ilene B. Jacobs Timothy B. Donaldson

9
<PAGE>

Compensation Committee Interlocks and Insider Participation

Mr. Carey, a member of the Compensation Committee and Chairman of the
Board of Directors of the Company, is the controlling stockholder of Town &
Country Corporation ("Town & Country") and was President, Chief Executive
Officer and Chairman of the Board of Town & Country until January 3, 1997. Town
& Country and certain of its subsidiaries supply the Company with jewelry. The
aggregate amount of purchases by the Company from these entities totaled
approximately $2.5 million, $1.4 million and $640,000, in Fiscal 1995, 1996 and
1997 respectively. Pursuant to written agreements among Town & Country, these
subsidiaries and the Company, Town & Country and the subsidiaries have agreed
to supply jewelry to the Company at the Company's option, on the terms and
conditions in effect prior to the Company's initial public offering. These
agreements are automatically renewed each year unless either party terminates
upon 60 days' notice prior to the end of a year. The Company believes that all
jewelry purchased pursuant to these agreements with Town & Country and its
subsidiaries can be readily purchased from other, unrelated third party
suppliers on comparable terms, and that these agreements do not restrict the
Company from purchasing from other sources. See "Certain Relationships and
Related Transactions."

On June 2, 1996, Mr. Carey entered into a consulting agreement with the
Company (the "Carey Consulting Agreement"). Pursuant to the Carey Consulting
Agreement, Mr. Carey has agreed to make himself available for a period of three
(3) years commencing on June 2, 1996 to provide consulting services to the
Company, including, without limitation, advice with respect to business and
product planning, marketing strategy, leasing and new store development and
executive recruitment. In exchange for such services, Mr. Carey will receive a
consulting fee at the annual rate of $150,000, payable in monthly installments.
In addition, Mr. Carey is entitled to receive reimbursement for all reasonable
expenses incurred by him on behalf of the Company in connection with the
performance of his obligations thereunder.

The other members of the Compensation Committee of the Board of Directors
of the Company are Timothy B. Donaldson and Ilene B. Jacobs. Neither Mr.
Donaldson nor Ms. Jacobs has ever been an officer or employee of the Company or
has ever had any other reportable relationship with the Company other than
through his/her position as a Director of the Company.

10
<PAGE>

Shareholder Return Performance Graph

Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the total return of companies within the NASDAQ stock market
and the companies within the NASDAQ Retail Trade Stocks Index prepared by the
Center for Research in Security Prices at The University of Chicago Graduate
School of Business. The calculation of total cumulative return assumes a $100
investment in the Company's Common Stock, the NASDAQ stock market and the
NASDAQ Retail Stocks Index on July 18, 1991.

[LINE CHART]

Comparison of Five-Year Cumulative Total Returns

[LEGEND]
<TABLE>
<CAPTION>

Symbol CRSP Total Returns Index for: 05/28/93 05/31/94 05/31/95 05/31/96 05/30/97 10/31/97
- ------ ---------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
[box ] Little Switzerland, Inc. 100.0 65.0 47.5 58.8 57.5 65.5
[star] Nasdaq Stock Market (US Companies) 100.0 105.3 125.2 182.0 205.1 234.4
[arrow] Nasdaq Retail Trade Stock 100.0 101.4 103.5 142.1 137.1 155.8
SEC 5200-5599, 5700-5799,
5900-5999 US & Foreign
</TABLE>
[/LEGEND]

[Tabular representation of stock performance graph]

Company Index: CUSIP Ticker Class Sic Exchange
53752810 LSVI 5940 NASDAQ

Fiscal Year-end is 05/31/97

Market Index: Nasdaq Stock Market (US Companies)

Peer Index: Nasdaq Retail Trade Stocks
SIC 5200-5599, 5700-5799, 5900-5999 US & Foreign

Date Company Market Peer Date Company Market Peer
---- Index Index Index ---- Index Index Index
----- ----- ----- ----- ----- -----
05/28/93 100.000 100.000 100.000 08/31/95 60.000 148.289 117.680
06/30/93 76.250 100.463 99.852 09/29/95 40.000 151.699 119.819
07/30/93 73.750 100.581 101.715 10/31/95 37.500 150.830 117.705
08/31/93 72.500 105.780 107.485 11/30/95 38.750 154.371 117.079
09/30/93 63.750 108.930 110.749 12/29/95 38.750 153.550 113.166
10/29/93 77.500 111.379 115.184 01/31/96 41.250 154.307 112.037
11/30/93 90.000 108.058 110.772 02/29/96 41.250 160.180 119.439
12/31/93 92.500 111.071 112.753 03/29/96 40.000 160.711 127.282
01/31/94 72.500 114.443 112.437 04/30/96 58.125 174.044 138.787
02/28/94 85.000 113.374 110.145 05/31/96 58.750 182.037 142.059
03/31/94 67.500 106.403 103.629 06/28/96 52.500 173.830 136.039
04/29/94 70.000 105.022 103.847 07/31/96 45.625 158.348 127.705
05/31/94 65.000 105.278 101.437 08/30/96 43.750 167.220 136.753
06/30/94 62.500 101.428 99.402 09/30/96 43.125 180.011 143.612
07/29/94 62.500 103.508 99.564 10/31/96 48.750 178.022 137.685
08/31/94 65.000 110.107 107.041 11/29/96 45.625 189.027 141.062
09/30/94 65.000 109.826 108.667 12/31/96 45.625 188.858 134.918
10/31/94 53.750 111.984 109.992 01/31/97 49.375 202.281 137.771
11/30/94 53.750 108.269 105.816 02/28/97 47.500 191.099 133.027
12/30/94 52.500 108.573 102.726 03/31/97 45.000 178.623 128.328
01/31/95 41.250 109.181 99.129 04/30/97 49.375 184.209 124.052
02/28/95 52.500 114.955 101.174 05/30/97 57.500 205.095 137.090
03/31/95 50.000 118.365 101.615 06/30/97 60.000 211.369 144.996
04/28/95 45.000 122.091 101.059 07/31/97 70.625 233.688 151.694
05/31/95 47.500 125.242 103.462 08/29/97 71.250 233.298 154.267
06/30/95 43.750 135.391 111.931 09/30/97 66.250 247.068 164.382
07/31/95 42.500 145.343 118.011 10/31/97 65.000 234.389 155.821

[/LINE CHART]

Employment Agreements

On November 1, 1995, Mr. Toler entered into an employment agreement with
the Company (the "Toler Employment Agreement"), pursuant to which Mr. Toler
serves as President and Chief Executive Officer of the Company for a five-year
term. Under the Toler Employment Agreement, Mr. Toler receives a base salary of
$300,000 over each twelve month term ending on October 31, beginning with the
term ending on October 31, 1996. The Toler Agreement does not provide for any
adjustment of base salary over the term. Pursuant to the Toler Employment
Agreement, Mr. Toler is entitled to receive a bonus if certain performance
criteria are satisfied, ranging from 33.33% of base salary for Fiscal 1996 to
50% of base salary for fiscal year 1999 and each fiscal year thereafter. In the
event Mr. Toler's employment is terminated without cause, Mr. Toler is entitled
to receive the salary plus pro rata share of any cash bonus he would have
received if he had continued his employment for 18 months following the date of
such termination. Mr. Toler is subject to certain non-competition provisions
during the term of his employment and, in certain circumstances, for a period
of 18 months subsequent to his leaving the Company.

11
<PAGE>

On June 16, 1994, Mr. Canfield entered into an employment agreement with
the Company (the "Canfield Employment Agreement"), pursuant to which Mr.
Canfield serves as the Vice President of Store Operations of the Company for a
five-year term. Under the Canfield Employment Agreement, Mr. Canfield receives
a base salary ranging from $165,000 over the twelve-month term ending on June
15, 1997 to $182,000 over the twelve-month term ending on June 15, 1999, and
upon the achievement of certain financial performance criteria, a bonus in an
amount of up to 25% of his base salary in each year. Pursuant to the Canfield
Employment Agreement, Mr. Canfield received a signing bonus equal to $50,000 on
the date he became Vice President of Store Operations of the Company. In the
event Mr. Canfield's employment is terminated due to his disability, for
non-performance or without cause, Mr. Canfield is entitled to receive the
salary he would have received had he continued his employment for 60 days, 90
days or 12 months, respectively, following the date of such termination. Mr.
Canfield is subject to certain non-competition provisions during the term of
his employment and, in certain circumstances, for a period of up to one year
subsequent to his leaving the Company.

Change-in-Control Agreements

Messrs. Lataille and Comment each entered into Change-in-Control
Agreements (the "Change-in-Control Agreements") with the Company. Each
Change-in-Control Agreement provides that in the event of a "Termination Event"
(as defined in the Change-in-Control Agreements, and generally any termination
of employment (a) for any reason other than death or "For Cause" (as defined in
the Change-in-Control Agreements), or (b) by the executive subsequent to the
occurrence of a 10% reduction in the executive's annual base salary) subsequent
to a "Significant Event" (as defined in the Change-in-Control Agreements, and
generally a change in control, sale or other disposition of all or
substantially all of the assets, or liquidation or dissolution of the Company),
the following benefits will be provided: a monthly cash payment beginning 30
days after the date of the Termination Event equal to one twenty-fourth
(1/24th) of an aggregate amount equal to two times the sum of the executive's
highest annual base salary paid at any time during the twenty-four months prior
to the Termination Event plus the amount of any bonuses paid during the
previous fiscal year; such monthly payment to be paid for a period of 24 months
if the Termination Event occurs within 1 year after a Significant Event or for
a period of 12 months if the Termination Event occurs any time after 1 year
subsequent to the Significant Event. A change in control is deemed to have
occurred if, in the event of certain tender offers, mergers, consolidations,
sale of assets, contested elections or other transactions in which the Company
is acquired, (a) Directors of the Company before the transaction cease to
constitute a majority of the Board of Directors of the Company (or of any
successor entity); (b) the Company is not the surviving corporation; or (c) the
stockholders of the Company immediately prior to such transaction do not hold
immediately after such transaction a majority in the aggregate of the
outstanding common shares of the surviving entity. Mr. Lataille's
Change-in-Control Agreement and Mr. Comment's Change-in-Control Agreement each
terminated upon their voluntary resignation from the Company on October 31,
1997 and August 31, 1997, respectively, in accordance with the terms of such
agreements. Accordingly, neither Mr. Lataille nor Mr. Comment is entitled to
any payment under his respective Change-in-Control Agreements as a result of a
change in control of the Company or other "Significant Event."

12
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Carey, a Director and Chairman of the Board of Directors of the
Company, is the controlling stockholder of Town & Country and was Chairman,
President, Chief Executive Officer of Town & Country until January 3, 1997.
Prior to the consummation of Town & Country's recapitalization on May 14, 1993
(the "Recapitalization"), Switzerland Holding, Inc., a wholly-owned subsidiary
of Town & Country ("Switzerland Holding"), owned 2,700,000 shares of the
Company's Common Stock (approximately 32.0% of the issued and outstanding
Common Stock at that time). In connection with the consummation of the
Recapitalization, Switzerland Holding was dissolved and 2,533,279 shares of
such stock were transferred to a trust (the "Trust") established for the
benefit of Town & Country and the holders of Town & Country's Exchangeable
Preferred Stock (the "Town & Country Exchangeable Preferred Stock"). Generally,
each holder of a share of Town & Country Exchangeable Preferred Stock may
exchange such share for one share of the Company's Common Stock held in the
Trust. On April 6, 1993, Town & Country exercised its rights under a
Registration Rights Agreement and requested that the Company file with the
Securities and Exchange Commission (the "SEC") a registration statement
covering the shares of the Company's Common Stock currently held in the Trust.
In accordance with the terms of the Registration Rights Agreement, the Company
caused such shares to be registered with the SEC. In November 1994, holders of
an aggregate of 2,381,038 shares of Town & Country Exchangeable Preferred Stock
exercised their right to exchange such shares for shares of the Company's
Common Stock on a share-for-share basis. On October 22, 1997, Mr. Carey
exercised his right to exchange 25,000 shares of Town & Country Exchangeable
Preferred Stock, which he purchased on June 9, 1994 for $7.1875 per share, for
25,000 shares of the Company's Common Stock. Accordingly, the Trust currently
holds 127,241 shares of the Company's Common Stock for the benefit of Town &
Country and the holders of Town & Country Exchangeable Preferred Stock.

In addition to Mr. Carey, Mr Correra is President of Town & Country Fine
Jewelry Group and was Senior Vice President and Chief Financial Officer of Town
& Country from 1983 through June 1996. Town & Country and certain of its
subsidiaries supply the Company with jewelry. The aggregate amount of purchases
by the Company from these entities totaled approximately $2.5 million, $1.4
million and $640,000 in Fiscal 1995, 1996 and 1997 respectively. Pursuant to
written agreements among Town & Country, these subsidiaries and the Company,
Town & Country and the subsidiaries have agreed to supply jewelry to the
Company at the Company's option, on the terms and conditions in effect prior to
the Company's initial public offering. These agreements are automatically
renewed each year unless either party terminates upon 60 days' notice prior to
the end of a year. The Company believes that all jewelry purchased pursuant to
these agreements with Town & Country and its subsidiaries can be readily
purchased from other, unrelated third party suppliers on comparable terms, and
that these agreements do not restrict the Company from purchasing from other
sources.

Mr. Carey, a Director of the Company, was, as of the end of Fiscal 1997,
also a Director of Solomon Brothers, Limited, the Company's franchisee which
operates eight (8) stores in the Bahamas under a Franchise Agreement with the
Company. In addition, Mr. Carey entered into the Carey Consulting Agreement
with the Company on June 2, 1996, which provides, among other things, that Mr.
Carey will receive in exchange for certain services a consulting fee at the
annual rate of $150,000 over a three (3) year term. See "Executive
Compensation--Compensation Committee Interlocks and Insider Participation."

13
<PAGE>

PRINCIPAL AND MANAGEMENT STOCKHOLDERS

Beneficial Ownership

The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the
Company's Common Stock as of November 1, 1997 by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock, (ii) each of the Company's Directors, (iii) each of the named executive
officers in the Summary Compensation Table and (iv) all of the Company's
executive officers and Directors as a group.

<TABLE>
<CAPTION>
Directors, Executive Officers Shares Beneficially Percent of
and 5% Stockholders Owned(1) Class(2)
- ------------------------------------------------------------------- --------------------- -----------
<S> <C> <C>
Franklin Advisory Services, Inc. ................................. 1,143,000(3) 12.9%
One Parker Plaza, Sixteenth Floor,
Fort Lee, NJ 07024

Franklin Resources, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Boulevard,
San Mateo, CA 94404

ValueVest Partners L.P. .......................................... 837,400(4) 9.4%
1 Sansome Street, 39 Floor,
San Francisco, CA 94104

Donald L. Sturm
3033 East First Avenue, Suite 200,
Denver, CO 80206

Heartland Advisors, Inc. .......................................... 665,000(5) 7.5%
790 North Milwaukee Street,
Milwaukee, WI 53202

The TCW Group, Inc. ............................................. 627,600(6) 7.1%
Robert Day
865 South Figueroa Street,
Los Angeles, CA 90017

T. Rowe Price Associates, Inc. .................................... 431,100(7) 4.9%
T. Rowe Price New Horizons Fund, Inc.
100 E. Pratt Street,
Baltimore, MD 21202

Kenneth S. Hackel ................................................ 431,000(8) 4.9%
11 Marcotte Lane,
Tenafly, NJ 07670

William Canfield ................................................ 33,000(9) *
C. William Carey ................................................ 55,000(10) *
Denis X. Comment ................................................ 87,459(11) *
Francis X. Correra ................................................ 30,000(12) *
Timothy B. Donaldson ............................................. 21,000(13) *
Ilene B. Jacobs ................................................... 30,000(14) *
Ronald J. Lataille ................................................ 79,468(15) *
John E. Toler, Jr. ................................................ 120,000(16) *
Kenneth W. Watson ................................................ 27,000(17) *
All directors and executive officers as a group (9 persons) ...... 482,927 5.4%
</TABLE>

- ------------
* Less than 1%.

14
<PAGE>

(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
Accordingly, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise has or shares the power to vote such security or
the power to dispose of such security. The amounts set forth as
beneficially owned include shares owned, if any, by spouses and relatives
living in the same home as to which beneficial ownership may be
disclaimed. The amounts set forth as beneficially owned include shares of
Common Stock which such Directors or officers had the right to acquire
within 60 days of November 1, 1997 under options previously granted
pursuant to the 1991 Option Plan and the 1992 Option Plan.

(2) Percentages are calculated on the basis of 8,867,859 shares of stock
outstanding as of November 1, 1997, which includes 88,000 shares subject
to options exercisable within 60 days of November 1, 1997 granted pursuant
to the 1992 Option Plan, and 317,500 shares subject to options exercisable
within 60 days of November 1, 1997 granted pursuant to the 1991 Option
Plan.

(3) The above information is based on copies of a statement on Schedule 13G/A
filed with the SEC on November 12, 1997, which indicates that the Franklin
Advisory Services, Inc. has sole voting power with respect to 543,000
shares and sole dispositive power with respect to all 1,143,000 shares.
These securities are owned by one or more open or closed-end investment
companies or other managed accounts, which are advised by direct and
indirect investment advisory subsidiaries of Franklin Resources, Inc. For
purposes of the reporting requirements of the Exchange Act, each of
Franklin Advisory Services, Inc., Franklin Resources, Inc., Charles B.
Johnson and Rupert B. Johnson may be deemed to be a beneficial owner of
such securities; however, each such person expressly disclaims any
economic interest or beneficial ownership in any of such securities.

(4) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on May 5, 1997, as amended by Amendment No. 1 to
Schedule 13D filed with the SEC on August 4, 1997, which indicates that
ValueVest Partners L.P. has sole voting and dispositive power with respect
to 395,300 shares and Donald L. Sturm has sole voting and dispositive
power with respect to 442,100 shares.
(5) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 14, 1997, which indicates that the
Heartland Advisors, Inc. has sole voting and dispositive power with
respect to all 665,000 shares.
(6) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on February 13, 1996, which indicates that The TCW
Group, Inc. and Robert Day each has sole voting and dispositive power with
respect to all 627,600 shares.
(7) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 14, 1997, which indicates that T. Rowe
Price Associates, Inc. ("Price Associates") has sole dispositive power,
and T. Rowe Price New Horizons Fund, Inc. has sole voting power, with
respect to all 431,100 shares. These securities are owned by various
individual and institutional investors including T. Rowe Price New
Horizons Fund, Inc., for which Price Associates serves as investment
adviser with power to direct investments. For purposes of the reporting
requirements of the Exchange Act, Price Associates is deemed to be a
beneficial owner of such securities; however, Price Associates expressly
disclaims that it is, in fact, the beneficial owner of such securities.
(8) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on October 20, 1997, which indicates that Kenneth S.
Hackel has sole voting and dispositive power with respect to all 431,000
shares.
(9) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Canfield which are subject to options previously granted pursuant to the
1991 Option Plan.
(10) Includes 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Mr. Carey which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively. Includes 25,000 shares of Common Stock which were acquired
pursuant to the one-for-one exchange on October 22, 1997 of 25,000 shares
of Town & Country Exchangeable Preferred Stock, which Mr. Carey purchased
on June 9, 1994 for $7.1875 per share. Does not include 127,241 shares of
Common Stock held in the Trust by Linchmen Company, c/o State Street Bank
& Trust Company, as trustee for the Trust established in connection with
the recapitalization of Town & Country, of which Mr. Carey is the
controlling stockholder.
(11) Includes 86,000 shares of Common Stock deemed to be beneficially owned by
Mr. Comment which are subject to options previously granted pursuant to
the 1991 Option Plan.
(12) Represents 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Mr. Correra which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively. Does not include 127,241 shares of Common Stock held in the
Trust by Linchmen Company, c/o State Street Bank & Trust Company, as
trustee for the Trust established in connection with the recapitalization
of Town & Country, of which Mr. Correra is President of Town & County Fine
Jewelry Group.
(13) Represents 10,000 shares and 11,000 shares of Common Stock deemed to be
beneficially owned by Mr. Donaldson which are subject to options
previously granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.
(14) Represents 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Ms. Jacobs which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.
(15) Includes 78,500 shares of Common Stock deemed to be beneficially owned by
Mr. Lataille which are subject to options previously granted pursuant to
the 1991 Option Plan.
(16) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Toler which are subject to options previously granted pursuant to the 1991
Option Plan.
(17) Represents 10,000 shares and 17,000 shares of Common Stock deemed to be
beneficially owned by Mr. Watson which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.

15
<PAGE>

Possibility of Change in Control

During Fiscal 1997, the Company received inquiries from third parties
regarding a possible strategic transaction with the Company. After completing
an operational and strategic review of the Company, the Company announced in
August 1997 that it was pursuing various strategic alternatives and that
Wasserstein, its financial advisor, would discuss possible business
combinations with certain third parties. All such efforts were suspended,
however, when events surrounding an employee theft required Arthur Andersen LLP
to expand the scope and duration of its regular audit. Once the Company's
financial statements for Fiscal 1997 were completed in October, the Company,
through Wasserstein, began actively pursuing possible strategic alternatives,
including a possible business combination with a third party. The Board of
Directors agreed to consider a sale of the Company or other transaction that
may result in a change of control in order to compare (i) the value to
stockholders resulting from the long-term strategy developed through the
operational and strategic review of the Company with (ii) the value
stockholders would receive in a strategic transaction, and thereby enable the
Board of Directors to pursue that course of action that is in the best
interests of the stockholders of the Company.

As of the date hereof, the Company has entered into confidentiality
agreements with thirteen (13) third parties, each of whom received a
Confidential Offering Memorandum of the Company, inviting them to submit
preliminary indications of interest in the Company. As a result of this
process, the Company received several indications of interest from prospective
purchasers. Shortly after receipt of the preliminary indications of interest,
Wasserstein notified those parties who had submitted indications of interest
that they would be provided with access to the senior management and properties
of the Company as well as additional financial, operating and legal information
to enable them to formulate formal proposals. Certain prospective purchasers
have been supplied with an agreement specifying the terms upon which the
Company would propose to enter into a strategic transaction and have been asked
to formulate and submit a formal proposal to the Board of Directors of the
Company, including a mark-up of such agreement, by January 6, 1998. Once
Wasserstein has received and analyzed all final proposals, the Board of
Directors will meet to discuss the proposals and determine a course of action
for the Company that is in the best interests of the stockholders of the
Company.

Consummation of a strategic transaction may result in a change in control
of the Company. There can be no assurances, however, as to the timing of any
such transaction or whether any such strategic transaction with the Company
will be agreed to or consummated as a result of the Company pursuing this sale
process. See "Evaluation of Strategic Alternatives."

MARKET VALUE

On November 1, 1997, the closing price of a share of the Company's Common
Stock on NASDAQ was $6.50.

AMENDMENT TO THE BY-LAWS OF THE COMPANY

As disclosed in the Company's Current Report on Form 8-K filed with the
SEC on November 12, 1997, the Board of Directors of the Company adopted an
amendment to the Amended and Restated By-laws of the Company (as amended, the
"By-laws") on November 3, 1997. The amendment requires that all of the
Company's Directors enter into a confidentiality agreement with the Company and
provides that certain persons who are employed or affiliated with competitors
of the Company are not qualified to serve as Directors of the Company. The
purpose of this amendment is to ensure that the Company is able to disseminate
confidential and/or proprietary information to members of the Board of
Directors without a risk of improper further dissemination or misuse of that
information. The foregoing amendment was not, therefore, adopted as a defense
to hostile takeovers, but was, instead, adopted to protect the Company's
confidential and/or proprietary information from being given to, or shared
with, its competitors. All stockholders of the Company submitting nominees for
election as Directors of the Company who did not satisfy the requirements of
the amendment were given the opportunity to designate new nominees who
qualified for election as Directors under the amendment. Accordingly, Aspen has
changed its nominees from Mr. Stephen G. E. Crane, President and Chief
Executive Officer of Colombian Emeralds International, a major competitor of
the Company, to Mr. Charles R. Scott and Mr. Ralph O. Hellmold. In addition,
Donald L. Sturm has changed his nominees from himself and Mr. Richard C. Hunter
to himself and Mr. Mark Bakar.

16
<PAGE>

PROXY CONTEST

Solicitation in Opposition to the Board's Nominees and Other Shareholder
Designated Nominees

According to revised preliminary proxy materials filed by Aspen on
December 17, 1997 with the SEC with respect to the Annual Meeting (the "Aspen
Proxy Statement"), Aspen has indicated that it is soliciting proxies for
election to the Board of Directors of its nominees, Mr. Charles R. Scott and
Mr. Ralph O. Hellmold (the "Aspen Nominees"), to serve until the year 2000
annual meeting.

In addition to Aspen, two other stockholders of the Company, Kenneth S.
Hackel and Donald L. Sturm, have also nominated their own candidates (the
"Other Stockholder Nominees") for election as Directors of the Company at the
Annual Meeting, though neither stockholder is soliciting proxies from
stockholders of the Company to elect its nominees to the Board of Directors.
Under the terms of the By-laws of the Company, each such stockholder making a
nomination must be a record stockholder as of the Record Date, and such
stockholder or his representative must be present in person at the Annual
Meeting.

YOUR BOARD RECOMMENDS THAT YOU REJECT THE ASPEN NOMINEES AND THE OTHER
STOCKHOLDER NOMINEES AND VOTE FOR THE BOARD'S NOMINEES ON THE ENCLOSED WHITE
PROXY CARD. YOUR BOARD RECOMMENDS THAT YOU NOT SIGN ANY PROXY CARD SENT TO YOU
BY ASPEN OR ANY OTHER NOMINEE.

Participants on Behalf of Little Switzerland, Inc.

As a result of the proxy contest initiated against the Company by Aspen,
the rules of the SEC require the Company to provide to its stockholders certain
additional information, including with respect to participants (as defined in
Schedule 14A promulgated pursuant to the Exchange Act). Pursuant to those
rules, the members of the Board of Directors are, and certain employees and
agents of the Company may be deemed to be, participants. Unless otherwise
indicated below, the address of the participants described below is the address
of the Company's principal executive offices. Except as indicated below, no
participant has purchased or sold or otherwise acquired or disposed of any
shares of Common Stock of the Company in the last two (2) years. Pursuant to
the 1992 Option Plan, each eligible non-employee Director automatically
receives an option to purchase 3,000 shares of Common Stock on the last day of
the Company's fiscal year. As of the end of Fiscal 1997, each Director of the
Company other than Mr. Toler was eligible for, and received, such option grant.
See, "Information Regarding Directors." The participants in the solicitation on
behalf of the Company set forth below beneficially own, in the aggregate,
316,000 shares of the Common Stock of the Company.

C. William Carey is a Director and Chairman of the Board of Directors of
the Company. Since January 1997, Mr. Carey has been President of Carey
Associates, Inc., a company involved in international marketing and finance,
management consulting and Russian business development, located at 177 Milk
Street, Suite 605, Boston, Massachusetts. He is the beneficial owner of 55,000
shares of the Common Stock of the Company, including (a) 10,000 shares of
Common Stock deemed to be beneficially owned by Mr. Carey which are subject to
options previously granted pursuant to the 1991 Option Plan, (b) 20,000 shares
of Common Stock deemed to be beneficially owned by Mr. Carey which are subject
to options previously granted pursuant to the 1992 Option Plan and (c) 25,000
shares of Common Stock, which were acquired pursuant to the one-for-one
exchange on October 22, 1997 of 25,000 shares of Town & Country Exchangeable
Preferred Stock, which Mr. Carey purchased on June 9, 1994 for $7.1875 per
share. Other than the acquisition of such shares pursuant to such conversion
and the grant of a stock option to purchase 3,000 shares of Common Stock each
fiscal year pursuant to the 1992 Option Plan, Mr. Carey has not made any
dispositions of Common Stock of the Company over the past two years. Mr. Carey
is the controlling stockholder of Town & Country, located at 25 Union Street,
Chelsea, Massachusetts. 127,241 shares of Common Stock are held in trust by
Linchmen Company, c/o State Street Bank & Trust Company, 225 Franklin Street,
Boston, Massachusetts, as trustee for the trust established in connection with
the recapitalization of Town & Country. See "Certain Relationships and Related
Transactions" above for a detailed summary of the relationships between Mr.
Carey, Town & Country and the Company.

Francis X. Correra is a Director of the Company. Since July 1996, he has
been President of Town & Country Fine Jewelry Group, a wholly-owned subsidiary
of Town & Country, located at 25 Union Street, Chelsea, Massachusetts,
specializing in the international design, manufacture and distribution of
jewelry. Mr. Correra is the beneficial owner of 30,000 shares of Common Stock
of the Company, which represents 10,000 shares and 20,000 shares of Common
Stock deemed to be beneficially owned by Mr. Correra which are subject to
options previously

17
<PAGE>

granted pursuant to the 1991 Option Plan and 1992 Option Plan, respectively. In
addition, 127,241 shares of Common Stock are held in trust by Linchmen Company,
c/o State Street Bank & Trust Company, 225 Franklin Street, Boston,
Massachusetts, as trustee for the trust established in connection with the
recapitalization of Town & Country. See "Certain Relationships and Related
Transactions" above for a detailed summary of the relationships between Mr.
Correra, Town & Country and the Company.

Timothy B. Donaldson is a Director of the Company. Since 1995, he has been
Chairman and Chief Executive Officer of Dynamo M. Ltd., an investment trading
company located at Saffrey Square Building, Second Floor, Bank Lane, P.O. Box
N-4927, Nassau, Bahamas. Mr. Donaldson is the beneficial owner of 21,000 shares
of Common Stock of the Company, which represents 10,000 shares and 11,000
shares of Common Stock deemed to be beneficially owned by Mr. Donaldson which
are subject to options previously granted pursuant to the 1991 Option Plan and
1992 Option Plan, respectively.

Ilene B. Jacobs, a Director of the Company, is Vice President of Human
Resources of Digital Equipment Corporation. From 1986 to 1996, she served as
Vice President and Treasurer of Digital Equipment Corporation, which is located
at 111 Powdermill Road, Maynard, Massachusetts. Digital Equipment Corporation
is a publicly held corporation which specializes in computer systems, software,
network and integration services with operations throughout the world. Ms.
Jacobs is the beneficial owner of 30,000 shares of Common Stock of the Company,
which represents 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Ms. Jacobs which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan, respectively.

Kenneth W. Watson is a Director of the Company. Since October 1996, Mr.
Watson has served as Vice President-Marketing of the New York Times Magazine
Group, Inc., a subsidiary of the New York Times Company, located at 5520 Park
Avenue, Trumbull, Connecticut. Mr. Watson is the beneficial owner of 27,000
shares of Common Stock of the Company, which represents 10,000 shares and
17,000 shares of Common Stock deemed to be beneficially owned by Mr. Watson
which are subject to options previously granted pursuant to the 1991 Option
Plan and 1992 Option Plan, respectively.

John E. Toler, Jr. has served as President and Chief Executive Officer and
a Director of the Company since November 1, 1995. Mr. Toler is the beneficial
owner of 120,000 shares of Common Stock of the Company, which represents shares
of Common Stock deemed to be beneficially owned by Mr. Toler which are subject
to options previously granted pursuant to the 1991 Option Plan. Pursuant to his
employment agreement, the Company granted Mr. Toler an option to purchase
300,000 shares of the Company's Common Stock at $3.50 per share, one-fifth of
which vests each November 1, commencing on November 1, 1996.

Thomas S. Liston joined the Company on September 29, 1997 and, effective
as of November 12, 1997, has served as the Company's Chief Financial Officer,
Vice President and Treasurer. Pursuant to his employment agreement, the Company
granted Mr. Liston an option to purchase 25,000 shares of the Company's Common
Stock at $6.4375 per share, one-fifth of which vests each November 12,
commencing on November 12, 1998.

William Canfield has been Vice President of Store Operations since June
1994. Mr. Canfield is the beneficial owner of 33,000 shares of Common Stock of
the Company, which represents shares of Common Stock deemed to be beneficially
owned by Mr. Canfield which are subject to options previously granted pursuant
to the 1991 Option Plan. On December 21, 1994, the Company granted Mr. Canfield
an option to purchase 10,000 shares of the Company's Common Stock at $4.75 per
share, one-fifth of which vests each December 21, commencing on December 21,
1994.

18
<PAGE>

SOLICITATION OF PROXIES

This solicitation of proxies for use at the Annual Meeting is being made
by the Board of Directors of the Company. The cost of this proxy solicitation
will be borne by the Company. In addition to solicitations by mail,
solicitations also may be made by advertisement, telephone, telegram, facsimile
transmission or other electronic media, and personal meetings and interviews.
In addition to solicitation services to be provided by D.F. King & Co., Inc.
("D.F. King"), as described below, proxies may be solicited by the Company and
its directors, officers and employees (who will receive no compensation
therefor in addition to their regular salaries). Arrangements also will be made
with brokerage houses and other custodians, nominees and fiduciaries to forward
solicitation materials to the beneficial owners of the Common Stock of the
Company, and such persons will be reimbursed for their expenses. Although no
precise estimate can be made at the present time, it is currently estimated
that the aggregate amount to be spent in connection with the solicitation of
proxies by the Company (excluding the salaries and fees of officers and
employees) will be approximately $250,000, or a greater amount if there is
litigation in connection with the solicitation, and that the total cash
expenditures to date relating to the solicitation have been under $18,000. On
September 22, 1997, the Company settled litigation brought by Aspen on
September 16, 1997, permitting Aspen to nominate candidates for election as
Directors of the Company. The total cost of this litigation to the Company was
approximately $8,000 and is included in the estimate of the cost of
solicitation set forth above. These estimates include fees for attorneys,
accountants, advisers, proxy solicitors, advertising, printing, distribution
and other costs incidental to the solicitation.

The Company has retained D.F. King at a fee estimated not to exceed
$75,000, plus reimbursement of reasonable out-of-pocket expenses, to assist in
the solicitation of proxies (which amount is included in the estimate of total
expenses above). The Company has also agreed to indemnify D.F. King against
certain liabilities and expenses, including liabilities under the Federal
securities laws. It is anticipated that approximately 50 employees of D.F. King
may solicit proxies.

SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING

Stockholder proposals intended to be presented at the 1998 annual meeting
must be received by the Company on or before June 19, 1998 in order to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. The Company's By-laws provide that any stockholder of record
wishing to have a stockholder proposal considered at an annual meeting must
provide written notice of such proposal and appropriate supporting
documentation, as set forth in the By-laws, to the Company at its principal
executive office not less than 75 days nor more 120 days prior to the first
anniversary of the date of the preceding year's annual meeting; provided,
however, that in the event the annual meeting is advanced by more than seven
days from the anniversary date, notice must be so delivered not later than (i)
the 20th day after public disclosure of the date of such meeting or (ii) if
such public disclosure occurs more than 75 days prior to such scheduled date of
such meeting, then the later of the 20th day after the date of public
disclosure or the 75th day prior to such scheduled date of such meeting. Any
such proposal should be mailed to: Secretary, Little Switzerland, Inc., 161-B
Crown Bay Cruise Port, St. Thomas, U.S.V.I. 00804.

INDEPENDENT ACCOUNTANTS

The Company has selected Arthur Andersen LLP as the independent public
accountants for the Company for the fiscal year ending May 30, 1998. The firm
of Arthur Andersen LLP has served as the Company's independent public
accountants since its incorporation and has served as the accountant for
certain of its subsidiaries since 1980. A representative of Arthur Andersen LLP
will be present at the Annual Meeting and will be given the opportunity to make
a statement if he or she so desires. The representative will be available to
respond to appropriate questions.

19
<PAGE>

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and Directors, and persons who own more than 10% of the
Company's outstanding shares of Common Stock, to file reports of ownership and
changes in ownership with the SEC and NASDAQ. Officers, Directors and greater
than ten percent stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on its
review of the copies of such forms received by it, or written representations
from certain reporting persons that no Section 16(a) reports were required for
those persons, the Company believes that during the fiscal year ended May 31,
1997, all filing requirements were complied with, except for the following
reports which were inadvertently filed late: (1) a Form 4 report for Mr. Carey
reflecting his exchange of 25,000 shares of Town & Country Exchangeable
Preferred Stock into 25,000 shares of the Company's Common Stock and (2) a Form
3 report for Mr. Liston reflecting his employment with the Company as its Chief
Financial Officer, Vice President and Treasurer as of November 12, 1997.

VOTING INFORMATION

Please sign, date and mail promptly the enclosed WHITE proxy card in the
enclosed self-addressed envelope. The Board recommends that you NOT sign or
return any proxy or notice or revocation sent to you by Aspen.

The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the proxy holders intend to vote such proxies in accordance with their best
judgment. Unrevoked WHITE proxy cards returned without direction will be voted
FOR the Board's Nominees for election to the Board of Directors.

Your vote is important. Please make sure your latest dated proxy is a
WHITE card voting FOR your Board's Nominees. A later dated Aspen proxy card,
even if marked to "withhold authority" to vote for the Aspen Nominees, will
cancel your vote for the nominees of your Board of Directors.

If your shares are registered in your name, please mail your WHITE card at
your earliest convenience. If your shares are held in "street name,"
immediately instruct your broker or the person responsible for your account to
sign a WHITE proxy card on your behalf. You should also sign, date and mail
your WHITE proxy card immediately upon receipt from your broker or bank, using
the postage-paid envelope provided. Please do so for each account you maintain.
If you have further questions or need assistance, please call:

D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (collect)
CALL TOLL FREE (800) 848-3410

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED WHITE PROXY CARD IN THE ENCLOSED
RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
PLEASE ACT TODAY.

20
<PAGE>

IMPORTANT

Your vote is important. Regardless of the number of shares of Little
Switzerland Common Stock you own, please support your Board of Directors by
promptly taking these few easy steps:

1. Please sign, date and mail promptly the enclosed WHITE Proxy Card in
the post-paid envelope provided.

2. Your Board of Directors recommends that you NOT sign any proxy card
sent to you by Aspen, not even as a vote of protest.

3. If your shares are held in the name of a brokerage firm or bank
nominee, only it can sign a WHITE Proxy Card with respect to your
shares and only after receiving your specific instructions.
Accordingly, please provide your instructions by signing, dating and
mailing the enclosed WHITE Proxy Card in the postage-paid envelope
provided. Please do so for each account you maintain. To ensure that
your shares are voted, you should also contact the person responsible
for your account and give instructions for a WHITE Proxy Card to be
issued representing your shares.

IF YOU VOTED ASPEN'S PROXY CARD BEFORE RECEIVING YOUR LITTLE SWITZERLAND
WHITE PROXY CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE SIMPLY BY SIGNING,
DATING AND MAILING THE ENCLOSED WHITE PROXY CARD. THIS WILL CANCEL YOUR EARLIER
VOTE SINCE ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.

If you have any questions or require assistance, please call:

D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
(212) 269-5550 (Collect)

CALL TOLL-FREE
1-800-848-3410

21
<PAGE>

LITTLE SWITZERLAND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LITTLE SWITZERLAND, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON FEBRUARY 5, 1998

The undersigned hereby constitutes and appoints C. William Carey and John E.
Toler, Jr., and each of them, as Proxies of the undersigned, with full power to
appoint his substitute, and authorizes each of them to represent and to vote
all shares of Common Stock of Little Switzerland, Inc. (the "Company") held of
record by the undersigned as of the close of business on December 10, 1997, at
the Annual Meeting of Stockholders (the "Annual Meeting") to be held at State
Street Bank and Trust Company, 225 Franklin Street, 33rd Floor, Boston,
Massachusetts, at 10:30 a.m. local time, on Thursday, February 5, 1998, and at
any adjournments or postponements thereof.

When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is given, this proxy will be
voted FOR the two nominees of the Board of Directors listed in Proposal 1. A
stockholder wishing to vote in accordance with the Board of Directors'
recommendations need only sign and date this proxy and return it in the
enclosed envelope.

The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's 1997 Annual Report to Stockholders and hereby
revoke(s) any proxy or proxies heretofore given. This proxy may be revoked at
any time before it is exercised.

Proposal 1. Election of C. William Carey and John E. Toler, Jr. as Class III
Directors for a three-year term.
[ ] FOR [ ] WITHHOLD

To withhold authority to vote FOR a particular nominee, write that nominee's
name below. Your shares will be voted for the remaining nominee.

-----------------------------------
Please vote above and sign on other side
and return promptly in enclosed envelope.
<PAGE>

In their discretion, the Proxies are each authorized to vote upon such other
business as may properly come before the Annual Meeting and any adjournments or
postponements thereof.

Please be sure to sign and date this Proxy.
Date:--------------------------

Shareholder(s) signature(s):

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

Please sign name exactly as
shown. Where there is more
than one holder, each should
sign. When signing as an
attorney, administrator,
executor, guardian or
trustee, please add your
title as such. If executed by
a corporation or partnership,
the proxy should be signed by
a duly authorized person,
stating his or her title or
authority.

PLEASE, SIGN, DATE AND PROMPTLY MAIL YOUR PROXY.