As filed with the Securities and Exchange Commission on December 21, 2000

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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-KFOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

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|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 0-27677

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CHARLOTTE RUSSE HOLDING, INC.(Exact Name of Registrant as Specified in Its Charter)

DELAWARE(State or Other Jurisdiction of
Incorporation or Organization)

33-0724325(I.R.S. Employer Identification No.)


4645 MORENA BOULEVARD, SAN DIEGO, CA 92117(Address, including Zip Code, of Registrant's Principal Executive Offices)

(858) 587-1500(Registrant's Telephone Number, Including Area Code)

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SECURITIES
REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: COMMON STOCK, PAR VALUE $0.01 PER SHARE(Title of Each Class)

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

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

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The
aggregate market value of voting stock held by non-affiliates of the registrant was approximately $275,189,562 as of December 11, 2000 based upon the closing
sale price per share of the registrant's common stock as reported on the Nasdaq National Market® (Nasdaq) on such date. Shares of common stock held by each executive officer and director
and by each person who owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily conclusive for other purposes. As of December 11, 2000, 20,384,412 shares of common stock, $0.01 per share par value, of the registrant were outstanding.

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DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive Proxy Statement for the 2000 Annual Meeting of Shareholders, to be filed with the
Commission within 120 days after the end of the registrant's fiscal year covered by this Form 10-K.

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The
Charlotte Russe® stylized trademark referred to in this Form 10-K is federally registered in the United States and the LOGO,
non-stylized Charlotte Russe and Charlotte's Room trademarks referred to in this Form 10-K are subject
to pending applications for registration. These trademarks are the property of Charlotte Russe Holding, Inc. or its subsidiaries. The Rampage® trademark referred to in this
Form 10-K is federally registered in the United States and is used by Charlotte Russe under a license agreement with Rampage Clothing Company. The use of the Rampage trademark by
other parties, including other apparel manufacturers and retailers, should not be attributed to our business. All other trademarks or trade names referred to in this Form 10-K are
the property of their respective owners.

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PART I

ITEM 1. BUSINESS

We are a rapidly growing mall-based specialty retailer of fashionable, value-priced apparel and accessories targeting young women between the ages
of 15 and 35. We have two distinct store concepts, "Charlotte Russe" and "Rampage," and operated a total of 136 stores as of the end of fiscal 2000. Through our fashion content, merchandise mix,
exciting store layout and design, and striking merchandise presentation, we project fashion attitudes that appeal to customers from a broad range of socioeconomic, demographic and cultural profiles.
In addition, our breadth of merchandise enables our customers to assemble coordinated and complete outfits that satisfy many of their lifestyle needs. Our success is dependent upon our ability to
anticipate, identify and capitalize upon the fashion preferences of our target customers.

Our
Charlotte Russe stores offer fashionable, affordable apparel and accessories that have been tested and accepted by the marketplace, thus appealing to women who prefer established
fashion trends. Our Rampage stores feature emerging fashion trends and thus appeal to women with a flair for making fashion statements and who are willing to pay somewhat higher prices to create a
cutting-edge look. Our stores are located predominately in high visibility, center court mall locations in spaces that average approximately 7,500 square feet. These stores, which are
generally twice as large as those of most of our mall-based competitors, are designed to create an environment that is exciting to shop and accentuates the fashion, breadth and value of
our merchandise selection.

Our
broad assortment of merchandise is centered around styles that are affordable, feminine and reflect the latest fashion trends. Our breadth of merchandise enables our customers to
assemble coordinated and complete outfits that satisfy many of their lifestyle needs. Both our Charlotte Russe and Rampage store concepts offer merchandise at value-oriented prices, generally less
than prices for comparable items offered by most of our direct mall-based competitors. Over 80% of our Charlotte Russe merchandise is sold under the Charlotte Russe label and over 90% of
our Rampage merchandise is sold under our proprietary LOGO label. The remainder of our merchandise consists of nationally-recognized brands
popular with our customers.

We
opened our first store in 1975 in Carlsbad, California and slowly expanded to 35 stores in southern California, Arizona and Nevada by the end of fiscal 1996. In
September 1996, we were acquired by two funds, SK Investment Fund, L.P. and The SK Equity Fund, L.P. (collectively, the "SKM Funds"), managed by Saunders Karp & Megrue, L.P., a private
equity investment firm, and Bernard Zeichner, our Chairman, Chief Executive Officer and President. Following the acquisition, we implemented a series of strategic initiatives to position us to support
an accelerated national store roll-out, including:



These
initiatives, together with superior store economics that on average have historically generated a cash return on investment in excess of 90% in the first year of operation, have
allowed us to grow significantly since our acquisition. There can be no assurance that our new stores will obtain this level of performance in the future, and our continued high growth expansion could
strain our resources. As of the end of fiscal 2000, we operated 136 stores throughout 21 states and Puerto Rico, an increase of 101 stores since our acquisition at the beginning of fiscal 1997. Our
net sales increased

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to $245.3 million in fiscal 2000 from $70.7 million in fiscal 1996, representing a compound annual growth rate of 36.5%.

Our business strategy differentiates us from our competitors.

The elements of our business strategy combine to create a merchandise assortment that appeals to consumers from a broad range of socioeconomic, demographic and
cultural profiles and that differentiates us from our competitors. We believe this broad consumer appeal, coupled with our
superior new store cash returns on investment, creates a highly portable store concept and a significant opportunity for growth. The principal elements of our business strategy include the following:

Offer Consistent Value Pricing.We offer a broad assortment of fashionable, quality merchandise at prices generally
below most of our direct mall-based competitors. We employ this value-pricing strategy across both of our store concepts, with an average sales price for apparel items at our Charlotte
Russe and Rampage stores of approximately $18.00 and $29.00. Because our prices are affordable and our merchandise quality is comparable to higher priced specialty retailers and department stores, we
create a strong perception of value that has enabled us to build a broad and loyal base of customers.

Maintain Distinct Brand Images.We have created focused and differentiated brand images based on fashion attitude,
value pricing and quality. These images are consistently communicated through all aspects of our business, including merchandise assortments and in-store visual merchandising. We also
enhance brand recognition by offering over 80% of our Charlotte Russe merchandise under the Charlotte Russe label and over 90% of our Rampage merchandise under our proprietary LOGO label. We believe that the strength of our private label merchandise, along with other nationally branded merchandise, provides opportunities for expansion of our
current merchandise categories and entry into new product categories.

Target A Highly Desirable Market.Our stores and fashionable merchandise target women between the ages of 15 and 35, a
broad and large group that is expected to grow over the next ten years. While our target customer base is expected to grow, the teenage and early twenties population, a core group of our target
market, is expected to grow at a rate faster than that of the overall United States population according to the United States Census Bureau. We believe that an increase in minimum wage, higher
employment and easier access to credit cards will continue to contribute to substantial growth in the buying power of our target market.

Offer Broad, Exciting Merchandise Assortment.Our merchandising strategy is founded on offering a broad assortment of
apparel and accessories that conveys a consistent fashion attitude. Our merchandise includes ready-to-wear apparel such as knit and woven tops, dresses, shorts, pants and
skirts, as well as accessories such as shoes, handbags and jewelry that enable our customers to create distinct ensembles complemented by color coordinated and fashion-forward items. Our merchandise
assortment is voguish enough to attract teenage customers and yet stylish enough to retain those women as they mature into young adults. We maintain a fresh and exciting shopping environment by
frequently introducing new merchandise into our stores and by regularly updating our merchandise displays. In addition, our stores average approximately 7,500 square feet and thus provide a
comfortable and spacious environment that accentuates the breadth of our merchandise offerings.

Capitalize On Strong Store Economics.Based on our experience with recent store openings, we estimate that the average
net investment to open a new store is approximately $450,000, which includes capital expenditures, net of landlord contributions, and initial inventory, net of payables. During their first year of
operations, our new stores opened during fiscal years 1997 through 1999 generated average net sales of approximately $1.8 million and store-level operating cash flow in excess of $400,000, or
more than 22.0% of net sales. Accordingly, these stores generated an average cash return on investment in excess of 90% in their first year of operations, although there can be no assurance that our
new stores will obtain these levels in the future.

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Leverage Highly Experienced Management Team.We believe our senior management team combines a unique blend of
experience with the company and other national growth retailers. Following our acquisition in September 1996, Mr. Zeichner recruited eight members of our highly experienced management
team, who have participated in the successful national expansion of retailers such as Contempo Casuals, Guess? and Price Club. As a group, these officers currently have an average of over
20 years of retail experience. These new managers complemented our core group of buying and operations managers who had participated in the evolution and growth of the Charlotte Russe concept
and who currently have an average of over 17 years of retail experience with us. The successful integration of these distinct skill sets has produced a unique corporate culture that leverages
the talents of each group. We believe that our management is positioned to capitalize on the strong economics of the Charlotte Russe and Rampage concepts and to successfully execute our national
expansion program.

Actively Manage Inventory.The cornerstone of our merchandising strategy is our
test-and-reorder philosophy. This strategy allows us to minimize our inventory risk by ordering small quantities of fashion merchandise to test customer acceptance before
placing larger purchase commitments. Our test-and-reorder strategy is successful in large part because we deal primarily with domestic vendors, which in management's experience
has generally resulted in short lead times of three to six weeks. These short lead times, together with our ability to monitor store sales on a daily basis, permit us to quickly react to
sell-through trends and fashion preferences. We have one of the highest inventory turn rates in the industry and we believe that our approach to managing our merchandise mix has
contributed to strong gross margins and lower-than-average markdown rates.

We intend to become a leading national specialty retailer.

Our long-term objective is to become a leading national specialty retailer of affordable fashion-forward apparel and accessories to youthful-minded
women. We intend to achieve this objective by pursuing an aggressive store opening campaign and by expanding the breadth of our product categories.

Open New Stores.In connection with our acquisition in 1996, we initiated a program to accelerate the rate of our new
store openings and to expand our operations to areas outside our core markets of southern California, Arizona and Nevada. Since that time, we have more than tripled our store base from 35 stores to
136 stores throughout 21 states and Puerto Rico as of the end of fiscal 2000. Based on this successful track record, favorable demographic trends and a solid infrastructure, we believe we are well
positioned for accelerated growth over the next several years. Our plan is to open a total of at least 40 Charlotte Russe and Rampage stores during fiscal 2001, for which we have already completed our
site selection and evaluation process. We expect to open new stores in existing markets as well as in markets in which we currently do not have a presence. We believe that our Charlotte Russe and
Rampage stores are highly portable store concepts that achieve superior new store cash returns on investment and can operate successfully in a wide variety of geographic and demographic markets. Our
Charlotte Russe stores, for instance, have generated similar store-level operating cash flow margins across a variety of mall types throughout different geographic regions. In addition, we continually
review our store base and have identified two under-performing stores that we are considering closing prior to the end of fiscal 2001.

Expand Product Offerings.We also plan to grow by increasing the breadth and depth of our product categories, which may
be sold in either existing stores or through new store concepts. We have historically been able to leverage our strong brand images to expand single item offerings into an entire collection of related
merchandise. For example, over the past four fiscal years we have expanded our initial offering of bras into an entire lingerie department consisting of bras, panties, intimate nighttime apparel,
robes and slippers. We experienced similar success in expanding our shoe product category. We believe that a substantial market opportunity exists for adding fashionable new products, particularly in
the high-margin areas of accessories and gift and decor items.

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Introduce Additional Retail Concepts.Operating additional retail concepts represents another growth opportunity for
our business. For example, we are developing a new retail concept known as Charlotte's Room. These stores feature accessories, novelty gifts and home décor items to satisfy the 11 to
19 year olds' ever-changing lifestyle wants and needs. In addition to diaries, frames, bedding, specialty jewelry, we offer a limited assortment of novelty apparel and sleepwear
items. The stores average 3,300 square feet and use blue, white and silver to create an ageless, playful environment. Based upon customer response to our first three locations, we are expanding our
test of this concept to reach a total of 10 to 12 stores during the next 12 to 18 months.

Our target customers are young, fashion-conscious women.

Our two retail store concepts target young, fashion-conscious women. Our Charlotte Russe customer is a woman who desires understandable trends at substantial
value. She is a hip teenager seeking the current fashion trends, as well as the fashionable working woman looking for career dressing. Regardless of her age, the Charlotte Russe customer is feminine
and body conscious. Our Rampage stores cater to women with definitive fashion sense who set rather than follow trends. Our Rampage customer is hip, eclectic, body conscious and tapped into pop
culture. She wants her look to be cutting-edge, while recognizing the value of competitive pricing.

We manage our inventory through merchandise planning and allocation.

Our merchandise planning and allocation team works closely with our General Merchandise Manager, merchants and store personnel to meet the requirements of
individual stores for appropriate merchandise in sufficient quantities. This team is also responsible for managing inventory levels, allocating merchandise to stores and replenishing inventory based
upon information generated by our management information systems. Our planning department allocates merchandise for new store openings based on estimated units per square foot, and all new stores are
fully stocked prior to opening. Our inventory control systems monitor current inventory levels at each store and for our operations as a whole. If necessary, we shift slow moving inventory to other
stores for sell-through prior to instituting corporate-wide markdowns. We also monitor recent selling history within each store by merchandise classification, style, color and
size.

Our two retail concepts offer established fashion and cutting-edge merchandise.

Charlotte Russe.Our Charlotte Russe stores provide an exciting, fashionable assortment of merchandise that complements
virtually every facet of our customers' lifestyle. Our merchandise reflects established fashion trends and includes a broad offering of ready-to-wear apparel, including knit
and woven tops, dresses, shorts, pants and skirts, as well as seasonal items such as prom dresses and outerwear. This product assortment allows us to be fashionable enough to attract teenage customers
and yet stylish enough to retain customers as they become young working women. We believe Charlotte Russe stores offer a higher percentage of dresses as compared to other specialty retailers to better
meet our customers' broad lifestyle needs for casual, social, career and special occasion wear. Our typical dresses range in price from $19.99 to $60.00, although prices can be as high as $80.00 to
$120.00 for special occasion dresses. By offering a product mix that reflects a more mature stage of the fashion cycle, our Charlotte Russe stores are able to learn from the experience of our Rampage
stores with emerging trends in order to more quickly identify fashion that has a broad market appeal. Charlotte Russe stores
also offer a broad assortment of accessories, such as lingerie, shoes, jewelry, handbags and cosmetics. Our expansive accessories category enables us to offer the convenience of one-stop
shopping to our customers, enabling them to complement their ready-to-wear clothing with color coordinated items and fashion-forward accessories. Over 80% of the merchandise
sold in these stores carries the Charlotte Russe label. Our average sales price for apparel items is $18.00, and the average sales price for all of our merchandise, including accessories, is $14.00.

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Rampage.Our Rampage stores offer essentially the same breadth of ready-to-wear apparel as our
Charlotte Russe stores, but the merchandise reflects emerging trends and therefore a more cutting-edge look. There is also less emphasis on the career customer in our Rampage stores. The
retail prices for our typical dresses range from $38.00 to $68.00, although prices can be higher for special occasion dresses. Over 90% of the Rampage merchandise is offered under our proprietary LOGO label. We work with our vendors to design a majority of the merchandise that is carried in our Rampage stores. We also have established a standard fit for all of
our apparel to ensure consistent sizing among our merchandise. Our Rampage stores also offer specialty accessories that complement our higher-end merchandise. By offering the latest in
emerging fashions, our Rampage stores are able to command higher price points than Charlotte Russe, but still below our competitors. The average sales price for apparel items in our Rampage stores is
$29.00, and the average sales price for all of our merchandise, including accessories, is $24.00.

Our visual merchandising strengthens our brand name and creates an exciting shopping environment.

Our merchandising presentation communicates a clear fashion point-of-view to our customers and encourages the purchase of coordinated
outfits. Our visual merchandising team also makes use of mannequins in store windows as well as on the selling floor to enhance our merchandise presentation.

Within
our Charlotte Russe stores, we seek to create an inviting environment for our broad product offerings. Apparel merchandise is generally grouped by color and fashion trend, and
accessories are typically presented as in-store boutiques. While shopping the store, our customer will observe that our merchandise extends to her various lifestyle needs, including
casual, club and career wear, lingerie, shoes and accessories. We believe that the color and fashion trend presentation, when accompanied with boutiques of various accessories, creates an attractive
atmosphere for our customers and that the breadth and depth of our product offerings makes us a destination location for their shopping needs.

At
our Rampage stores, we employ an equally effective visual merchandising strategy in order to capture our customers' interest. Our Rampage merchandise is generally grouped by color
and fashion trend to keep the stores vibrant, hip and visually stimulating. Our stores are larger than most of our competitors, and we take advantage of our store size by providing an expansive and
diverse offering of merchandise. Our store window displays and in-store graphics accentuate the fashion, quality and cutting-edge style of our merchandise.

We order primarily from domestic sources and utilize a test-and-reorder strategy.

All of our inventory is purchased from third party vendors. The cornerstone of our merchandising strategy is our test-and-reorder
philosophy. This strategy allows us to manage our inventory risk by testing small quantities of fashion merchandise in our stores before placing larger purchase commitments. Our experienced buying
staff then uses sophisticated information systems to track the weekly sell-through of each merchandise item by classification, style, color and size, and places appropriate reorders for
popular merchandise. Accordingly, our test-and-reorder strategy enables us to quickly react to sell-through trends and fashion preferences.

Our
test-and-reorder strategy is successful in large part because we deal with domestic vendors, which in management's experience has generally resulted in
short lead times of three to six weeks. Accordingly, we have established relationships with over 600 vendors to meet our ongoing fashion and inventory needs. We believe that we generally are able to
obtain attractive pricing and other terms from vendors because of their desire to be associated with the Charlotte Russe and Rampage images and the rapid consumer feedback provided by our
test-and-reorder philosophy. We maintain a buying office in the CaliforniaMart in Los Angeles, the primary apparel center in southern California, to facilitate constant
dialogue and feedback between our buying staff and our vendors. During fiscal year 2000, our

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top five vendors accounted for approximately 9.5% of our total purchases and no single vendor accounted for more than 2.4% of our total purchases.

We distribute merchandise through our modern San Diego facility.

The timely and efficient distribution of merchandise to our stores is critical to the success of our test-and-reorder strategy. We
process all of our merchandise through our modern 125,000 square foot distribution center in San Diego, California, which we built and took possession of in April 1998. Our distribution
facility employs an automated system for sorting apparel by store and facilitating packaging for display in our stores. We estimate that approximately 50% of our apparel merchandise is currently
pre-ticketed by our vendors, and we expect that this percentage will continue to increase over the next fiscal year. This pre-ticketing by vendors saves time, reduces labor
costs and enhances inventory management. Our merchandise is generally shipped to stores within 24 hours of receipt at the distribution center for delivery on common carrier within one to three
business days. Our merchandise is available for sale in our stores the same day it is received and, accordingly, the time period from receipt of goods at our distribution center to display in our
stores is typically less than five days. Each store generally receives three to five merchandise shipments per week. We believe our current distribution operations are sufficient to accommodate our
expected store growth and expanded product offerings into fiscal 2002.

We have stores in numerous locations throughout the United States.

As of September 30, 2000, we operated 107 Charlotte Russe stores, 26 Rampage stores, and three Charlotte's Room stores throughout 21 states and Puerto
Rico. The number of our stores located in each state is shown in the following map according to the state or territory in which such store is located.

MAP

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The following table highlights the number of stores, by geographic region, opened in each of the last five fiscal years:

|                                  |                           | California |    | Southwest |   | Southeast |   | Northeast
& Other |    | Total |   
|--------------------------------- | ------------------------- | ---------- | -- | --------- | - | --------- | - | ----------------- | -- | ----- | --
|Store count as of October 1, 1995 |                           | 26         |    | 7         |   |          |   |                  |    | 33    |   
|Fiscal 1996                       |                           |            |    |           |   |           |   |                   |    |       |   
|                                  | Stores opened             |            | 0  |           | 2 |           |  |                   |   |       | 2 
|                                  |                           |            |    |           |   |           |   |                   |    |       |   
|                                  |                           | 26         |    | 9         |   |          |   |                  |    | 35    |   
|Fiscal 1997                       |                           |            |    |           |   |           |   |                   |    |       |   
|                                  | Stores opened             |            | 3  |           | 1 |           | 2 |                   | 1  |       | 7 
|                                  | Stores closed             |            | (1 | )         | 0 |           | 0 |                   | 0  |       | (1
|                                  |                           |            |    |           |   |           |   |                   |    |       |   
|                                  |                           | 28         |    | 10        |   | 2         |   | 1                 |    | 41    |   
|Fiscal 1998                       |                           |            |    |           |   |           |   |                   |    |       |   
|                                  | Stores acquired (Rampage) |            | 7  |           | 2 |           | 3 |                   | 4  |       | 16
|                                  | Stores opened             |            | 4  |           | 4 |           | 9 |                   | 0  |       | 17
|                                  |                           |            |    |           |   |           |   |                   |    |       |   
|                                  |                           | 39         |    | 16        |   | 14        |   | 5                 |    | 74    |   
|Fiscal 1999                       |                           |            |    |           |   |           |   |                   |    |       |   
|                                  | Stores opened             |            | 1  |           | 3 |           | 9 |                   | 9  |       | 22
|                                  |                           |            |    |           |   |           |   |                   |    |       |   
|                                  |                           | 40         |    | 19        |   | 23        |   | 14                |    | 96    |   
|Fiscal 2000                       |                           |            |    |           |   |           |   |                   |    |       |   
|                                  | Stores opened             |            | 4  |           | 9 |           | 6 |                   | 21 |       | 40
|                                  |                           |            |    |           |   |           |   |                   |    |       |   
|Store count at end of fiscal 2000 |                           | 44         |    | 28        |   | 29        |   | 35                |    | 136   |   
|                                  |                           |            |    |           |   |           |   |                   |    |       |   

We seek to locate our stores in large, commanding spaces in high traffic areas of strong regional malls.

Our stores, which average approximately 7,500 square feet, are generally twice the size of most of our mall-based competitors' stores and provide a
comfortable and spacious shopping environment that accentuates the breadth of our merchandise offering. To distinguish our stores, we also seek prominent center court locations with distinctive
architectural features, such as high angled ceilings, which our store designers and visual merchandisers can use to create striking displays, facades and entrances. We believe that specialized store
design features, including finished ceilings, classic lighting and detailed features, help create a differentiated store environment unique to young women's apparel retailers in the mall. We have
historically been able to locate and profitably operate our stores in a variety of malls catering to different socioeconomic, demographic and cultural profiles. We remodel our stores as appropriate
and economically feasible, generally in connection with our lease renewals.

We
engage an independent real estate consultant to initially identify favorable store locations in existing or new markets. This consultant currently does not advise any other
operators within the women's apparel industry. Our site selection criteria includes:



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Immediately
after site approval, we simultaneously negotiate lease terms and begin planning the store layout and design. We typically open a new store within three months after lease
execution and delivery of space.

Store Operations

Our store operations are currently organized into a Western region with eight districts, an Eastern region with six districts and a Southeastern region with
five districts. Each region is managed by a regional manager and each district is managed by a district manager. Each district manager is responsible for an average of seven stores. Individual store
personnel generally consists of a store manager, one or two assistant managers and seven to ten sales associates, the number of which generally increases during our peak selling seasons. Our store
managers are responsible primarily for customer service training and hiring store level staff. Merchandise selections, inventory management and visual merchandising strategies for each store are
determined at the corporate level. Our regional, district, and store managers receive a base compensation plus incentive compensation based on sales goals.

Our
commitment to customer satisfaction and service is an integral part of building customer loyalty. We strive to hire enthusiastic sales personnel and provide them with extensive
training to create a sales staff with a strong fashion sense, a focus on customer service and a willingness to assist customers with assembling, accessorizing and coordinating outfits.

Our
standard training program for store managers includes an initial three week session at a store managed by one of our approved training managers, as well as frequent regional and
district meetings. In addition, our training manual provides practical information and skill development for all store level positions. We develop new store managers by promoting from within and
selectively hiring from other retail organizations. In anticipation of our store expansion, we will continue to increase the number of people in our store manager training program as appropriate to
support our proposed expansion strategy.

We focus marketing and promotion on developing our brands.

Our marketing and promotional activities contribute greatly to the development of our brands, and as our operations continue to grow nationally, these
activities will expand in scope and become increasingly important to us. Historically, our marketing and promotional activities have been primarily focused on in-store initiatives. For
example, we maintain store signage and in-store graphics, packaging, and displays that convey our fashion-forward orientation and brand. We have also conducted direct mail campaigns in
association with new store openings and utilized limited outdoor advertising. Additionally, our periodic promotional activities are designed to drive traffic into our stores and to further our brand
image of fashion and value. In fiscal 2001, we expect our marketing and promotional program will include national print and outdoor advertising. We have developed an Internet website that we believe
will further enhance our brand image.

Management information systems are important to our business.

We are committed to investing in and continually upgrading our management information systems, as we believe those systems are critical to implementing our
expansion strategy in an efficient manner and to maintaining a competitive industry position. Our management information systems address, among others things, our stock keeping unit and classification
inventory tracking, purchase order management, merchandise distribution, automated ticket making, general ledger, sales audit, accounts payable, fixed asset management, payroll, integrated financials
and point-of-sale information. Our buying, allocation and distribution functions are supported by an ICM merchandising system that is tailored for Charlotte Russe and we
utilize a Lawson Software package for our financial reporting and

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human resource functions. We believe our current systems are adequate to meet future expansion plans over the next several years.

Our
sales are updated daily in the merchandise reporting system by polling sales information from each store's point-of-sale terminal. Our
point-of-sale system consists of registers providing price look-up, time and attendance, supply ordering, bill of lading tracking and automated charge card
processing. We believe these features improve transaction accuracy, increase speed of checkout time and overall store efficiency, and enable us to track the productivity of individual sales
associates. Through automated nightly two-way electronic communication with each store, we upload sales information, payroll hours and messages to our host system, and download new
merchandise pricing, price changes for existing merchandise, carton receipts and system maintenance tasks to the point-of-sale devices. Based upon the evaluation of information
obtained through daily polling, our planning department implements
merchandising decisions regarding inventory levels, reorders, price changes and allocation of merchandise to stores.

We compete with other retailers primarily on the basis of timeliness of fashions, breadth of
merchandise, brand recognition, pricing and quality.

We currently compete against a diverse group of retailers, including national and local specialty retail stores, regional retail chains, traditional retail
department stores and, to a lesser extent, mass merchandisers. The primary competitors of Charlotte Russe are Express, Contempo Casuals, Wet Seal and Forever 21. The primary competitors of Rampage are
bebe and Arden B. Our competitors sell a broad assortment of apparel and accessories that are similar and often identical to those we sell. Furthermore, our competitors may at times sell their
merchandise at prices lower than what we charge for comparable merchandise. We believe that the principal bases upon which we compete in our industry are timeliness of fashions, breadth of
merchandise, brand recognition, pricing and quality. We believe that we have a significant competitive advantage over our competitors because of our exciting shopping environment. Our stores are
generally twice as large as most of our mall-based competitors and provide a feminine look that is exciting to shop and accentuates the value and breadth of our merchandise selection. We
also believe that we have a competitive advantage because of high consumer recognition and acceptance of our brands, our strong presence in major shopping malls throughout the United States, our
relationship with our vendors and the experience of our management. The retail and apparel industries, however, are highly competitive and characterized by relatively low barriers to entry.

Our intellectual property is important to our success.

We believe that our trademarks are important to our success. Our Charlotte Russe trademark is registered with the United States Patent and Trademark Office. In
addition, we have applications pending with the United States Patent and Trademark Office for a number of additional marks, including LOGO
and Charlotte's Room. We have also submitted applications for additional uses related to the Charlotte Russe trademark. In connection with the acquisition of our
Rampage stores, we acquired the exclusive right within the United States to use the Rampage trademark on exterior or interior signage identifying our Rampage stores, as well as the
non-exclusive right within the United States to use the Rampage trademark for promotional and advertising materials. The right to market merchandise under the Rampage trademark was
retained by Rampage Clothing Company and, accordingly, we do not have the right to use the Rampage trademark on our merchandise. Further, nothing in our license agreement prohibits the sale of
merchandise bearing the Rampage trademark by other parties or the licensing of the Rampage trademark to other parties. In fact, Rampage Clothing Company has licensed the trademark to other parties. If
the product quality or activities of the Rampage Clothing Company or these other parties negatively impact our business reputation, we have the right to rename our Rampage stores and terminate the
license agreement upon 30 days written

9

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notice. Furthermore, over 90% of the merchandise in our Rampage stores is sold under our proprietary LOGO label, and only a nominal amount
is sold under the Rampage brand name. We pay a royalty under the license agreement equal to the greater of a stated dollar amount
or a percentage of net sales during the fiscal year. The license agreement has an initial term of four years with an automatic option to renew for another four years. We may also extend the license
for ten additional four-year periods. We may exercise each of these extension periods, however, only if our net sales for the last fiscal year of the then current four-year
extension period exceed by 10% our net sales for the fiscal year ending immediately prior to the beginning of such extension period.

We consider the relationship with our employees to be good.

As of September 30, 2000, we employed 1,034 full-time and 1,663 part-time employees. Of our full-time employees, 162
were employed at our corporate offices, 139 were employed at our distribution center and 733 were employed at our store locations. The number of part-time employees fluctuates depending on
our seasonal needs. None of our employees are represented by a labor union, and we consider the relationship with our employees to be good.

10

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ITEM 2. PROPERTIES

We operated 136 stores throughout 21 states and Puerto Rico at the end of fiscal 2000. We currently lease all of our store locations. Most leases have an
initial term of at least ten years and do not contain options to extend the lease. Our leases, however, often allow for termination after three years if sales at that site do not exceed specified
levels, although in some instances we are required to pay back any landlord allowances received. We lease space containing approximately 125,000 square feet for our executive offices and distribution
center in San Diego, California. This lease is for a term of twelve years and is scheduled to expire on August 31, 2009. We believe our distribution facility is adequate for our operations over
the next several years. We also lease approximately 7,600 square feet at the CaliforniaMart in Los Angeles. This lease expires April 30, 2005.

The
number of our stores located in each state is shown in the following store list according to the state or territory in which such store is located.

Arizona (9)Arizona Mills (Tempe) 
Arrowhead Center (Glendale)
Fashion Square (Scottsdale)
Fiesta Mall (Mesa) 
Metro Center (Phoenix)
Paradise Valley Mall (Phoenix) 
Park Place (Tucson)
Tucson Mall

California (43)Fresno Fashion Fair
Los Angeles
  Beverly Center (R)
  Brea Mall 
  Del Amo Fashion Center (Torrance) 
  Fox Hills Mall (Culver City)
  Glendale Galleria 
  Laguna Hills Mall
  Lakewood Fashion Center
  Los Cerritos Center
  Main Place (Santa Ana)
  Mission Viejo (R)
  Montclair Plaza
  Montebello Town Center
  Moreno Valley Mall
  Northridge Fashion Center
  Ontario Mills
  Plaza at West Covina
  Santa Anita Fashion Park
  Sherman Oaks (R)
  South Coast Plaza (Costa Mesa) (R)
  Thousand Oaks Center
  Topanga Plaza (Canoga Park) 
  Westminster Mall
  Westside Pavillion (R)

11

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San Diego
  Chula Vista Center
  Fashion Valley Center
  Grossmont Center (La Mesa)
  Mission Valley
  Plaza Camino Real (Carlsbad)
  North County Fair (Escondido)
  Parkway Plaza (El Cajon)
  Plaza Bonita (National City)
  University Towne Center
Galleria at Roseville
Great Mall of the Bay Area (Milpitas)
Santa Rosa Plaza
Serramonte Center (Daly City)
Sun Valley (Concord) (R)
Temecula Promenade
Valley Plaza (Bakersfield)

Colorado (1)Flatiron Crossing (Broomfield)

Connecticut (2)Crystal Mall (Waterford)
Meriden Square

Florida (18)Aventura Mall (R)
Broward Mall (Plantation)
Citrus Park Center (Tampa)
Coral Square
Dadeland Mall (Miami) (R)
Edison Mall (Fort Meyers)
Florida Mall (Orlando) 
Melbourne Square
Orange Park Mall
Orlando Fashion Square
Oviedo Marketplace
Regency Square (Jacksonville)
Seminole Town Center (Sanford)
Shops at Sunset (South Miami)
The Falls (Miami) (R)
Tyrone Square (St. Petersburg)
West Oaks Mall (Ococe)

Georgia (8)Arbor Place (Douglasville)
Augusta Mall
Mall of Georgia at Mill Creek 
North Georgia Outlet (Dawsonville)
Northlake Mall (Atlanta)
Perimeter Mall (Atlanta)
Town Center at Cobb (Kennesaw)

12

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Hawaii (1)Pearlridge (Aiea)

Illinois (4)Fox Valley Center (Aurora)
Spring Hill Mall (West Dundee)
Stratford Square (Bloomingdale)
Water Tower Place (Chicago) (R)

Massachusetts (1)Holyoke Mall

Michigan (2)Great Lakes Crossing (Auburn Hill)
River Town Crossings (Grandville)

New Jersey (4)Garden State Plaza (Paramus) (R)
Hamilton Mall (Mays Landing)
Jersey Gardens (Elizabeth)
Quaker Bridge Mall (Lawrenceville)

New York (11)Palisades Center (West Nyack) 
Roosevelt Field (Garden City) 
Soho (R)
Walden Galleria (Buffalo)
Eastview Mall (Victor)
Crossgates Mall (Albany) 
Galleria at Crystal Run (Middletown) 
Carousel Center (Syracuse)

Nevada (4)Boulevard Mall (Las Vegas) 
Galleria (Henderson)
Meadows Mall (Las Vegas)

North Carolina (1)Concord Mills

Ohio (1)Tri-County Mall (Cincinnati)

Pennsylvania (3)Franklin Mills (Philadelphia)
Monroeville Mall
Ross Park Mall (Pittsburgh)

Puerto Rico (4)Plaza Carolina (Carolina)
Plaza Del Sol (Sierra Bayamon)
Plaza Las Americas (Hato Rey) 

Rhode Island (1)Providence Place

13

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South Carolina (1)Haywood Mall (Greenville)

Tennessee (1)Opry Mills (Nashville)

Texas (12)Collin Creek Mall (Plano)
Grapevine Mills
Highland Mall (Austin)
Houston Galleria (R) Katy Mills
Lakeline Mall (Cedar Park)
La Plaza Mall (McAllen)
Northpark Mall (Dallas) (R)
North East Mall (Hurst)
Stonebriar Center (Frisco) 
Valley View (Dallas)

Virginia (1)Dulles Town Center

Charlotte's Room (3)Del Amo Fashion Center (Torrance, CA)
Paradise Valley Mall (Phoenix, AZ)
Fiesta Mall (Mesa, AZ)

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ITEM 3. LEGAL PROCEEDINGS

From time to time, we may be involved in litigation relating to claims arising out of our operations. As of the date of this filing, we are not engaged in any
legal proceedings that are expected, individually or in the aggregate, to have a material adverse effect on our business, financial condition or results of operations.

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

Not applicable.

14

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PART II

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

Market Information and Holders

Our common stock began trading on the Nasdaq National Market under the symbol "CHIC" on October 20, 1999, following our initial public offering. The
following table sets forth the range of high and low closing sales prices of the common stock as reported by Nasdaq:

Fiscal Year 2000High

LowFirst Quarter (From October 20, 1999)

173/8

117/8Second Quarter

213/4

105/8Third Quarter

181/8

83/16Fourth Quarter

143/8

10


As
of December 11, 2000, the number of holders of record of our common stock was approximately 11 and the number of beneficial holders of our common stock was estimated to be
in excess of 600. On December 11, 2000, the closing price of our common stock as reported by Nasdaq was $13.50 per share.

Dividends

We have never declared nor paid dividends on our Common Stock and we do not intend to pay any dividends on our Common Stock in the foreseeable future. We
currently intend to retain earnings to finance future operations and expansions. Moreover, under the terms of our revolving credit facility, dividends, distributions and capital stock redemptions are
restricted to $5.0 million or less in any fiscal year, of which up to $2.5 million may be cash dividends paid on a non-cumulative basis.

15

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ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below is qualified in its entirety by, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto included elsewhere in this Annual Report. The selected consolidated balance sheet
data as of September 25, 1999 and September 30, 2000, and the selected consolidated statement of income data for the three years in the period ended September 30, 2000 have been
derived from our consolidated financial statements, which have been audited by Ernst & Young LLP, independent auditors, and are included elsewhere in this Annual Report. The selected
consolidated balance sheet data as of September 27, 1996, September 27, 1997 and September 26, 1998 and the selected consolidated statement of income data for each of the two
years in the period ended September 27, 1997 were derived from audited financial statements which are not included in this Annual Report. Fiscal 2000 included 53 weeks of operations while all
other years presented consisted of 52 weeks.

|                                                  |  | Predecessor
Year Ended |        |   |   | Charlotte Russe
Fiscal Year Ended |   |   |        
|------------------------------------------------- |  | ---------------------- | ------ | - | - | --------------------------------- | - | - | -------
|
|
|Statement of Income Data:                         |  |                        |        |   |   |                                   |   |   |        
|Net sales                                         |  | $                      | 70,663 |   | $ | 81,543                            |   | $ | 134,091
|Cost of goods sold                                |  |                        | 43,774 |   |   | 50,723                            |   |   | 93,142 
|                                                  |  |                        |        |   |   |                                   |   |   |        
|Gross profit                                      |  |                        | 26,889 |   |   | 30,820                            |   |   | 40,949 
|Selling, general and administrative expenses      |  |                        | 15,266 |   |   | 17,168                            |   |   | 26,989 
|Amortization of goodwill and other intangibles    |  |                        |       |   |   | 815                               |   |   | 895    
|Predecessor shareholders' salaries                |  |                        | 8,000  |   |   | 1,200                             |   |   |       
|                                                  |  |                        |        |   |   |                                   |   |   |        
|Operating income                                  |  |                        | 3,623  |   |   | 11,637                            |   |   | 13,065 
|Interest (expense) income, net                    |  |                        | 42     |   |   | (2,279                            | ) |   | (3,026 
|Other charges, net                                |  |                        | (143   | ) |   | (315                              | ) |   | (280   
|Income before income taxes and extraordinary item |  |                        | 3,522  |   |   | 9,043                             |   |   | 9,759  
|Income taxes (1)                                  |  |                        |       |   |   | 3,987                             |   |   | 4,245  
|                                                  |  |                        |        |   |   |                                   |   |   |        
|Income before extraordinary item                  |  |                        | 3,522  |   |   | 5,056                             |   |   | 5,514  
|Extraordinary loss from early debt retirement     |  |                        |       |   |   |                                  |   |   |       
|                                                  |  |                        |        |   |   |                                   |   |   |        
|Net income                                        |  | $                      | 3,522  |   | $ | 5,056                             |   | $ | 5,514  
|                                                  |  |                        |        |   |   |                                   |   |   |        

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|                                               |  | Predecessor
Year Ended |        |   |   | Charlotte Russe
Fiscal Year Ended |   |   |       
|---------------------------------------------- |  | ---------------------- | ------ | - | - | --------------------------------- | - | - | ------
|
|
|Earnings per share (2):                        |  |                        |        |   |   |                                   |   |   |       
|Basic earnings per share:                      |  |                        |        |   |   |                                   |   |   |       
|Income before extraordinary item               |  |                        |       |   | $ | 0.28                              |   | $ | 0.30  
|                                               |  |                        |        |   |   |                                   |   |   |       
|Net income                                     |  |                        |       |   | $ | 0.28                              |   | $ | 0.30  
|                                               |  |                        |        |   |   |                                   |   |   |       
|Diluted earnings per share:                    |  |                        |        |   |   |                                   |   |   |       
|Income before extraordinary item               |  |                        |       |   | $ | 0.25                              |   | $ | 0.27  
|                                               |  |                        |        |   |   |                                   |   |   |       
|Net income                                     |  |                        |       |   | $ | 0.25                              |   | $ | 0.27  
|                                               |  |                        |        |   |   |                                   |   |   |       
|Weighted average shares outstanding (2):       |  |                        |        |   |   |                                   |   |   |       
|Basic                                          |  |                        |        |   |   | 18,300                            |   |   | 18,300
|Diluted                                        |  |                        |        |   |   | 19,992                            |   |   | 20,668
|Selected Operating Data:                       |  |                        |        |   |   |                                   |   |   |       
|Number of stores open at end of period         |  |                        | 35     |   |   | 41                                |   |   | 74    
|Average square footage per store (3)           |  |                        | 8,290  |   |   | 8,206                             |   |   | 7,603 
|Comparable store sales increase (decrease) (4) |  |                        | 4.7    | % |   | 5.1                               | % |   | (5.8  
|Average stores sales (5)                       |  | $                      | 2,048  |   | $ | 2,219                             |   | $ | 2,097 
|Sales per square foot (6)                      |  | $                      | 247    |   | $ | 268                               |   | $ | 272   
|Balance Sheet Data:                            |  |                        |        |   |   |                                   |   |   |       
|Working deficiency                             |  | $                      | (3,589 | ) | $ | (2,676                            | ) | $ | (1,239
|Total assets                                   |  |                        | 49,641 |   |   | 57,128                            |   |   | 74,427
|Total debt                                     |  |                        | 21,900 |   |   | 22,325                            |   |   | 28,525
|Total stockholders' equity                     |  |                        | 18,923 |   |   | 23,980                            |   |   | 29,445

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17

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

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial Statements
and Notes thereto of the company included elsewhere in this Form 10-K. The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains
forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risks That May Affect Results" in this section.

OVERVIEW

We were founded in 1975 and opened our first store in Carlsbad, California. By September 1996, we had developed into a regional retailer with 35 stores
when two funds owned by Saunders Karp & Megrue, L.P. (SKM), a private equity investment firm, acquired the business from its founders. Bernard Zeichner, who had joined us as President in
May 1996, shared SKM's belief that a significant opportunity existed to leverage the strength of our new store economics by embarking on a national expansion program.

We
undertook several strategic initiatives to establish the necessary infrastructure to support the national expansion including the integration of key senior executives with national
retail experience with the existing management team. In addition, in fiscal 1998 we acquired 16 stores in a bankruptcy proceeding from Rampage Retailing, Inc. that provided us with a second
distinct retail concept and an additional vehicle for growth.

Our
strong operating performance in fiscal 1999 and 2000 reflects the benefits of the infrastructure building process that we undertook in fiscal 1997 and 1998, as well as the
successful execution of our national expansion program for the Charlotte Russe and Rampage chains.

RESULTS OF OPERATIONS

The following table sets forth our operating results, expressed as a percentage of sales, and store information for the periods indicated.

|                                                  |  | Fiscal Year |  
|------------------------------------------------- |  | ----------- | -
|
|Net sales                                         |  | 100.0       | %
|Cost of goods sold                                |  | 69.5        |  
|                                                  |  |             |  
|Gross profit                                      |  | 30.5        |  
|Selling, general and administrative expenses      |  | 20.1        |  
|Amortization of goodwill and other intangibles    |  | 0.7         |  
|                                                  |  |             |  
|Operating income                                  |  | 9.7         |  
|Interest income (expense), net                    |  | (2.2        | )
|Other charges, net                                |  | (0.2        | )
|                                                  |  |             |  
|Income before income taxes and extraordinary item |  | 7.3         |  
|Income taxes                                      |  | 3.2         |  
|                                                  |  |             |  
|Income before extraordinary item                  |  | 4.1         |  
|Extraordinary loss from early debt retirement     |  | 0.0         |  
|                                                  |  |             |  
|Net income                                        |  | 4.1         | %
|                                                  |  |             |  
|Number of stores open at end of period            |  | 74          |  
|                                                  |  |             |  

18

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Year Ended September 30, 2000 Compared to Year Ended September 25, 1999

Net Sales.Fiscal 2000 included 53 weeks of operations while fiscal 1999 consisted of 52 weeks. Net sales for the
fiscal year ended September 30, 2000, increased to $245.3 million from $177.5 million, an increase of $67.8 million or 38.2% over the year ended September 25, 1999.
This increase is attributable primarily to $63.0 million of net sales for the 40 new stores opened during fiscal 2000, as well as other stores opened in prior fiscal years that did not qualify
as comparable stores. Our comparable store sales increased 2.8% and contributed $4.8 million to the net sales increase during fiscal 2000. Excluding the additional week, total sales increased
35.6% over the comparable 52-week period of the prior year.

Gross Profit.Gross profit represents net sales less cost of goods sold, which includes buying, distribution and
occupancy costs. Gross profit increased to $79.3 million from $58.3 million, an increase of $21.0 million or 36.1% over last fiscal year. This increase is the result of higher net
sales, offset in part by decreased gross profit margins. As a percentage of net sales, gross profit decreased to 32.4% from 32.9%. The decrease in gross profit as a percentage of net sales was
principally due to higher markdowns, occupancy expenses and inventory shrinkage which were partially offset by higher initial markups and lower freight expenses.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased to
$46.1 million from $34.1 million, an increase of $12.0 million or 35.2% over last fiscal year. This increase is attributable to new store expansion, increased corporate expenses
and higher marketing expenses. As
a percentage of sales, selling, general and administration expenses dropped to 18.8% from 19.2%, primarily due to the impact of leveraging corporate expenses over a higher sales base.

Amortization of Goodwill and Other Intangibles.Amortization of goodwill and other intangibles expense remained
constant at $0.9 million during fiscal years 1999 and 2000.

Income Taxes.The effective tax rate of 40.5% for fiscal 2000 compares to an effective tax rate of 42.0% for fiscal
1999. Our effective tax rate exceeds statutory tax rates due to non-deductible amortization of goodwill associated with the acquisition of the business in September 1996. Since
amortization is a fixed amount, increases in pre-tax earnings reduce the effect of this tax difference as a percentage of pre-tax earnings.

Net Income.Net income increased to $18.8 million from $11.5 million, an increase of $7.3 million
or  63.2% over the prior fiscal year. This increase was primarily due to an increase in gross profit, and was partially offset by an increase in selling, general and administrative
expenses, an increase in income taxes, and a $0.3 million charge relating to the early repayment of the secured bank credit facility.

Year Ended September 25, 1999 Compared to Year Ended September 26, 1998

Net Sales.Net sales increased to $177.5 million from $134.1 million, an increase of $43.4 million
or 32.3% over the same period last year. This increase is attributable primarily to $35.3 million of net sales for the 22 new stores opened during fiscal 1999, as well as other stores opened in
prior fiscal years that did not qualify as comparable stores. Our comparable store sales increased 6.7% and contributed $8.1 million to the net sales increase during fiscal 1999.

Gross Profit.Gross profit represents net sales less cost of goods sold, which includes buying, distribution and
occupancy costs. Gross profit increased to $58.3 million from $40.9 million, an increase of $17.4 million or 42.4% over last fiscal year. This increase is the result of higher net
sales and improved gross profit margins. As a percentage of net sales, gross profit rose to 32.9% from 30.5%. The increase in gross profit as a percentage of net sales was principally due to higher
initial markups,

19

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improved inventory shrink expense and the impact of leveraging distribution center expenses over a higher sales base, partially offset by higher markdown expense.

Selling, General and Administrative Expenses.Selling, general and administrative expenses increased to
$34.1 million from $27.0 million, an increase of $7.1 million or 26.2% over last fiscal year. This increase is attributable to new store expansion, increased corporate expenses,
and a $722,000 impairment charge related to the plan to close two stores. The impairment loss includes $537,000 representing the net carrying value of leasehold improvements which will be abandoned
and $185,000 for estimated unamortized landlord allowances that are refundable upon closure. Employee termination benefits related to the store closures will be insignificant. As a percentage of
sales, selling, general and administration expenses dropped to 19.2% from 20.1%, primarily due to the impact of leveraging store operating expenses and corporate payroll expenses over a higher sales
base. The decline in expenses as a percentage of net sales was partially offset by management bonus plan accruals, for which no comparable charge was incurred during the same period of the prior year.

Amortization of Goodwill and Other Intangibles.Amortization of goodwill and other intangibles expense remained
constant at $0.9 million during fiscal years 1998 and 1999.

Income Taxes.The effective tax rate of 42.0% for fiscal 1999 compares to an effective tax rate of 43.5% for fiscal
1998. Our effective tax rate exceeds statutory tax rates due to non-deductible amortization of goodwill associated with the acquisition of the business in September 1996. Since
amortization is a fixed amount, increases in pre-tax earnings reduce the effect of this tax difference as a percentage of pre-tax earnings.

Net Income.Net income increased to $11.5 million from $5.5 million, an increase of $6.0 million
or 108.5% over the prior fiscal year. This increase was primarily due to an increase in gross profit, and was partially offset by an increase in selling, general and administrative expenses, an
increase in income taxes, and a $0.5 million charge relating to the early repayment of the 12.5% subordinated debt in June 1999.

QUARTERLY RESULTS AND SEASONALITY

We have historically experienced and expect to continue to experience seasonal and quarterly fluctuations in our net sales and operating income. As is the case
with many retailers of apparel and related merchandise, our business is subject to seasonal influences, characterized by strong sales during the back-to-school, Easter and
winter holiday seasons. The strength of each of these three seasons generally provides relatively balanced sales during our first, third and fourth fiscal quarters. We
typically experience lower net sales and net income during the second fiscal quarter ending in March of each year. Our quarterly results of operations may fluctuate significantly as a result of a
variety of factors, including the timing of new store openings, fashion trends and shifts in timing of certain holidays, as well as other factors discussed in the section entitled "Risks Relating to
Our Business."

The
following table includes our unaudited quarterly results of operations data for each of the four quarters in the fiscal years ended September 30, 2000 and
September 25, 1999. The fourth quarter of fiscal 2000 included 14 weeks of operations while all other quarters in fiscal 1999 and 2000 consisted of 13 weeks. We believe that this information
has been prepared on the same basis as our audited consolidated financial statements and that all necessary adjustments, consisting only of normal recurring adjustments, have been included to present
fairly the selected quarterly information when read in

20

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conjunction with our audited consolidated financial statements and the notes to those statements included elsewhere in the Annual Report.

|                                             |                             | Fiscal Year 1999
Three Months Ended |  | Fiscal Year 2000
Three Months Ended |       
|-------------------------------------------- | --------------------------- | ----------------------------------- |  | ----------------------------------- | ------
|
|
|Statement of Operations Data:                |                             |                                     |  |                                     |       
|                                             |                             | Net sales                           |  | $                                   | 46,007
|                                             |                             | Gross profit                        |  |                                     | 15,150
|                                             |                             | Operating income                    |  |                                     | 6,385 
|                                             |                             | Income before extraordinary item    |  |                                     | 3,223 
|                                             |                             | Net income                          |  |                                     | 3,223 
|Operating Data:                              |                             |                                     |  |                                     |       
|                                             |                             | Comparable store sales increase     |  |                                     | 4.4   
|                                             |                             | Stores open at end of period        |  |                                     | 80    
|Earnings per share:                          |                             |                                     |  |                                     |       
|                                             | Basic earnings per share:   |                                     |  |                                     |       
|                                             |                             | Income before extraordinary item    |  | $                                   | 0.18  
|                                             |                             | Net income                          |  | $                                   | 0.18  
|                                             | Diluted earnings per share: |                                     |  |                                     |       
|                                             |                             | Income before extraordinary item    |  | $                                   | 0.15  
|                                             |                             | Net income                          |  | $                                   | 0.15  
|Weighted Average Shares Outstanding (000's): |                             |                                     |  |                                     |       
|                                             |                             | Basic                               |  |                                     | 18,300
|                                             |                             | Diluted                             |  |                                     | 21,152

LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements result primarily from capital expenditures related to new store openings. We have historically satisfied our cash requirements
principally through cash flow from operations. Due to the rapid turnover of our inventory, we generate trade payables and other accrued liabilities sufficient to offset our working capital
requirements, and this allows us to operate with negative working capital. As of September 30, 2000, we had a working capital deficit of $4.6 million.

During
fiscal years 1998, 1999 and 2000, net cash provided by operations was $9.7 million, $27.8 million and $27.8 million. In fiscal 2000, cash flows from
operating activities increased as a result of increased operating earnings and increased current liabilities. In fiscal 1998 cash used in investing activities included $7.3 million related to
the acquisition of 16 stores from Rampage Retailing, Inc. Cash used for new store openings and the construction of our distribution center and corporate facility was $8.5 million,
$14.5 million and $24.0 million in fiscal 1998, 1999 and 2000.

21

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Excluding
the impact of financing activities related to the Rampage acquisition, the net repayment of borrowings under our revolving credit facility and capital lease obligations was
$2.6 million in fiscal 1998 and net borrowings of $1.0 million in 1999. During fiscal 1999, we repaid $11.0 million of our 12.5% subordinated debt to the SKM Funds, although net
borrowings under our revolving credit facility rose only $1.4 million during the same period. In fiscal 2000, we repaid the remaining $18.0 million balance under the revolving credit
facility using the $13.5 million net proceeds of our initial public offering and operational cash flows.

Based
on our experience with store openings, we estimate that the average net investment to open a new store is approximately $450,000, which includes capital expenditures, net of
landlord contributions, and initial inventory, net of payables. During the first year of operations, our new stores opened during fiscal years 1997 through 1999 generated store-level operating cash
flow in excess of $400,000, representing an average cash return on investment greater than 90% although there can be no assurance that our new stores will obtain these levels in fiscal years after
1999. After taking into account store remodeling, corporate capital projects and distribution center enhancements, total capital expenditures for fiscal 2001 are projected to be approximately
$25.0 million.

Our
unsecured revolving credit facility with BankBoston, N.A., as agent, provides us with a $15.0 million revolving line of credit under which borrowed funds bear interest at
either the bank's Eurodollar rate plus 1.00% or the bank's base rate at our option, subject to certain adjustments. At September 30, 2000, no outstanding balance existed under the revolving
credit facility. The revolving credit facility requires that we maintain certain financial ratios such as:



We
believe that cash flows from operations, current cash balance and funds available under our revolving credit facility will be sufficient to meet our working capital needs and
contemplated capital expenditure requirements for fiscal 2001. If our cash flow from operations should decline significantly,
or if we should accelerate our store expansion program, it may be necessary for us to seek additional sources of capital.

INFLATION

We do not believe that inflation has had a material adverse impact on our business or operating results during the periods presented. There can be no
assurance, however, that our business will not be affected by inflation in the future.

FORWARD-LOOKING STATEMENTS

We have made statements under the captions, "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative
and Qualitative Disclosures About Market Risk" and "Risks Relating to Our Business," as well as in other sections of this Annual Report, that are forward-looking statements. You can identify these
statements by forward-looking words such as "may," "will," "expect," "intend," "anticipate," "believe," "estimate" and "continue" or similar words. These forward-looking statements may also use
different phrases. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements, which are subject to risks,
uncertainties, and assumptions about us, may include, among other things, projections of our future results of operations or of our financial condition, our anticipated growth strategies, and general
and regional economic conditions, industry trends, consumer demands and preferences, competition from other retailers and uncertainties generally associated with women's apparel and accessory
retailing.

22

---

There may be events in the future that we are not able to accurately predict or which we do not fully control that could cause actual results to differ materially from those expressed
or implied in our forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially
from those expressed or implied by these forward-looking statements, including shopping mall traffic and shopping patterns, timing of openings for new shopping malls or our stores, fashion trends,
national or regional economic influences, and weather.

We
undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this Annual Report might not occur.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks relate primarily to changes in interest rates. We bear this risk in two specific ways. First, our revolving credit facility carries a variable
interest rate pegged to market indices and, therefore, our statement of income and our cash flows will be exposed to changes in interest rates. As of September 30, 2000, we had no borrowings
against our credit facility; however, we may borrow additional funds under our facility as needed.

The
second component of interest rate risk involves the short-term investment of excess cash in short-term, investment-grade interest-bearing securities. These
are considered to be cash equivalents and are shown that way on our balance sheet. Changes in interest rates affect the investment income we earn on these investments and, therefore, impact our cash
flows and results of operations.

Risks Relating to Our Business.

We will be opening new stores more rapidly than we have in the past, which could strain our resources and cause us to execute our business less effectively.

Our growth will largely be dependent on successfully opening and operating new stores. During fiscal 2000, we opened 40 new stores, including 12 stores in the
fourth quarter. The addition of 40 stores in fiscal 2000 represented an increase of approximately 42% from the number of stores open at the end of fiscal 1999. We plan to open at least 40 new stores
during fiscal 2001, an increase of at least 29% from the end of fiscal 2000. We intend to continue to increase our number of stores at approximately this rate for at least the next few years. Our
managerial and operational resources were significantly strained during our acquisition of the 16 Rampage stores in fiscal 1998. Our proposed expansion is more rapid than what we have experienced in
the past, including the Rampage acquisition, and will place increased demands on our managerial, operational and administrative resources. These increased demands could cause us to execute our
business less effectively, which in turn could cause deterioration in the financial performance of our individual stores and slow our new store growth.

Our planned expansion involves a number of risks that could prevent or delay the successful opening of new stores as well as impact the performance of our existing stores.

Our ability to open and operate new stores successfully depends on many factors, including, among others, our ability to:



23

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In
addition, many of our new stores will be opened in regions of the United States and its territories in which we currently have few or no stores. The expansion into new markets may
present competitive, merchandising and distribution challenges that are different from those currently encountered in our existing markets. Any of these challenges could adversely affect our business
and results of operations. In addition, to the extent our new store openings are in existing markets, we may experience reduced net sales volumes in existing stores in those markets.

Our stores are heavily dependent on the customer traffic generated by shopping malls.

Most of our store locations are not sufficiently concentrated to make significant marketing expenditures cost effective. As a result, we depend heavily on
locating our stores in prominent locations within successful shopping malls in order to generate customer traffic. We cannot control the development of new shopping malls, the availability or cost of
appropriate locations within existing or new shopping malls, or the success of individual shopping malls.

If at any time our comparable store sales and quarterly results of operations decline or do not meet the expectations of research analysts, the price of our common stock could
decline substantially.

Our quarterly results of operations for our individual stores have fluctuated in the past and can be expected to continue to fluctuate in the future. For
instance, while quarterly comparable store sales increased at least 4.1% in each quarter beginning with the fourth quarter of fiscal 1998 through the first quarter of fiscal 2000, we experienced
quarterly comparable store sales increases of 3.0% or less in each of the three subsequent quarters. Our net sales and operating results are typically lower in the second quarter of our fiscal year
due to the traditional retail slowdown immediately following the winter holiday season. Our comparable store sales and quarterly results of operations are affected by a variety of factors, including:



Our business and reputation may be adversely affected if our Rampage stores are associated with negative publicity related to the use of the Rampage trademark by other parties.

In connection with the acquisition of our Rampage stores, we acquired the exclusive right within the United States to use the Rampage trademark for use on
exterior or interior signages identifying our Rampage stores as well as the non-exclusive right within the United States to use the Rampage trademark for promotional and advertising
materials. We do not, however, have the right to use the

24

---

Rampage trademark on our merchandise. The right to market merchandise under the Rampage trademark was retained by Rampage Clothing Company. Further, nothing in our license agreement with Rampage
Clothing Company prohibits the sale of merchandise bearing the Rampage trademark by other parties or the licensing of the Rampage trademark to other parties. In fact, Rampage Clothing Company has
licensed the trademark to other parties. We believe a positive Rampage brand image is important to our success. Accordingly, if the merchandise sold by the Rampage Clothing Company or other parties
under the Rampage trademark is of low quality or if the Rampage Clothing Company or these parties otherwise engage in activities that negatively affect the Rampage trademark or are otherwise
inconsistent with our Rampage store concept, consumers could lose confidence in our merchandise and our reputation and business could be materially adversely affected.

Our success depends on our ability to identify and rapidly respond to consumers' fashion tastes.

The apparel industry is subject to rapidly evolving fashion trends and shifting consumer demands. Accordingly, our success is heavily dependent both on the
priority our target customers place on fashion and on our ability to anticipate, identify and capitalize upon emerging fashion trends. Current fashion tastes place significant emphasis on a
fashionable look. In the past this emphasis has increased and decreased through fashion cycles, and decreased emphasis has adversely affected our results. Although we rely on a
test-and-reorder merchandise strategy to minimize our exposure to misjudging fashion tastes and to reduce inventory risks, we have no assurance you that this strategy will
continue to be successful. Our failure to anticipate, identify or react appropriately to changes in styles, trends, desired images or brand preferences could lead to, among other things, excess
inventories and higher markdowns, as well as decreased appeal of our brands.

Our market share may be adversely impacted at any time by a significant number of competitors.

We operate in a highly competitive environment characterized by low barriers to entry. We compete against a diverse group of retailers, including national and
local specialty retail stores, regional retail chains, traditional department stores and, to a lesser extent, mall merchandisers. Our market share and results of operations may be adversely impacted
by this significant number of competitors. Many of our competitors also are larger and have substantially greater resources than we do.

We rely on our good relationships with vendors to implement our business strategy successfully.

Our business is dependent on continued good relations with our vendors. In particular, we believe that we generally are able to obtain attractive pricing and
other terms from vendors because we are perceived as a desirable customer. Our test-and-reorder merchandise strategy also relies in large part on our ability to obtain
merchandise from our vendors within three to six weeks from the date of order. Our failure to maintain good relations with our vendors could increase our exposure to changing fashion cycles, which may
in turn lead to increased inventory markdown rates.

Our southwestern United States concentration makes us susceptible to adverse conditions in this region.

A majority of our stores are located in the Southwest. As a result, our operations are more subject to regional factors than the operations of more
geographically diversified competitors. These factors
include, among others, economic and weather conditions, demographic and population changes and fashion tastes.

In
addition, our corporate offices and distribution center are located in San Diego, and we transact business with vendors at our offices in the CaliforniaMart in Los Angeles. A
natural disaster or other catastrophic event, such as an earthquake, affecting southern California could significantly disrupt our operations.

25

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Our failure to retain our existing senior management team could adversely affect our business.

Our business requires disciplined execution at all levels of our organization in order to timely deliver and display fashionable merchandise in appropriate
quantities in our stores. This execution requires experienced and talented management. We currently have a management team with a great deal of experience with us and in apparel retailing. If we were
to lose the benefit of this experience, and in particular if we were to lose the services of Bernard Zeichner, our President and Chief Executive Officer, or Harriet Sustarsic, our Executive Vice
President and General Merchandise Manager, our business could be adversely affected. We do not have employment agreements with any member of our senior management team other than Mr. Zeichner.
We do not maintain key man insurance on any of our management team.

We rely on third parties for upgrading and maintaining our management information systems. If these third parties do not adequately perform these functions appropriately, our
business could be disrupted.

The efficient operation of our business is heavily dependent on our information systems. In particular, we rely heavily on the automated sortation system used
in our distribution center and the merchandise management system used to track sales and inventory. We depend on our vendors to maintain and periodically upgrade these systems for the continued
ability of these systems to support our business as we expand. The software programs supporting our automated sorting equipment and processing our inventory management information were licensed to us
by independent software developers. The inability of these developers to continue to maintain and upgrade these software programs would disrupt our operations if we are unable to convert to alternate
systems in an efficient and timely manner.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Information with respect to this Item is indexed on page F-1 of this Report and is contained on pages F-2 through F-18.

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

Not applicable.

26

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to this item is incorporated by reference to the Registrant's definitive Proxy Statement to be filed with the Commission not later
than 120 days after the end of the Registrant's fiscal year.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to this item is incorporated by reference to the Registrant's definitive Proxy Statement to be filed with the Commission not later
than 120 days after the end of the Registrant's fiscal year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to this item is incorporated by reference to the Registrant's definitive Proxy Statement to be filed with the Commission not later
than 120 days after the end of the Registrant's fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to this item is incorporated by reference to the Registrant's definitive Proxy Statement to be filed with the Commission not later
than 120 days after the end of the Registrant's fiscal year.

27

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



There
were no reports on Form 8-K filed during the last quarter of the fiscal year covered by this Report.

28

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on the 21st day of December, 2000.

| |  | CHARLOTTE RUSSE HOLDING, INC.
| |  | -----------------------------
| |  | By:                          

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Bernard Zeichner and Daniel T. Carter, and
each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capabilities, to sign any
and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities
Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:

|Signature                             |  | Title                                                                                                |  | Date             
|------------------------------------- |  | ---------------------------------------------------------------------------------------------------- |  | -----------------
|                                      |  |                                                                                                      |  |                  
|/s/BERNARD ZEICHNERBernard Zeichner   |  | Chief Executive Officer, President and Director (Principal Executive Officer)                        |  | December 21, 2000
|/s/DANIEL T. CARTERDaniel T. Carter   |  | Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |  | December 21, 2000
|/s/ALLAN W. KARPAllan W. Karp         |  | Director                                                                                             |  | December 21, 2000
|/s/DAVID J. ODDIDavid J. Oddi         |  | Director                                                                                             |  | December 21, 2000
|/s/THOMAS W. GOULDThomas W. Gould     |  | Director                                                                                             |  | December 21, 2000
|/s/PAUL R. DEL ROSSIPaul R. Del Rossi |  | Director                                                                                             |  | December 21, 2000

29

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                 |  | Page
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Charlotte Russe Holding, Inc.                                                                                                    |  |     
|Report of Ernst & Young LLP, Independent Auditors                                                                                |  | F-2 
|Consolidated Balance Sheets as of September 30, 2000 and September 25, 1999                                                      |  | F-3 
|Consolidated Statements of Income for the years ended September 30, 2000, September 25, 1999 and September 26, 1998              |  | F-4 
|Consolidated Statement of Stockholders' Equity for the years ended September 30, 2000, September 25, 1999 and September 26, 1998 |  | F-5 
|Consolidated Statements of Cash Flows for the years ended September 30, 2000, September 25, 1999 and September 26, 1998          |  | F-6 
|Notes to Consolidated Financial Statements                                                                                       |  | F-7 

F-1

---

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The
Board of Directors
Charlotte Russe Holding, Inc.

We
have audited the accompanying consolidated balance sheets of Charlotte Russe Holding, Inc. as of September 30, 2000 and September 25, 1999, and the related
consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Charlotte Russe Holding, Inc., at
September 30, 2000 and September 25, 1999, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2000, in conformity
with accounting principles generally accepted in the United States.

ERNST &
YOUNG LLP

San
Diego, California
October 24, 2000

F-2

---



CHARLOTTE RUSSE HOLDING, INC.        CONSOLIDATED BALANCE SHEETS

|                                     |                                                                                                                                                                  | September 30,
2000                         |            | September 25,
1999 |            
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------- | ------------------ | -----------
|ASSETS                               |                                                                                                                                                                  |                                            |            |                    |            
|Current assets:                      |                                                                                                                                                                  |                                            |            |                    |            
|                                     | Cash and cash equivalents                                                                                                                                        |                                            | $          | 3,829,352          |            
|                                     | Inventories                                                                                                                                                      |                                            |            | 15,026,508         |            
|                                     | Other current assets                                                                                                                                             |                                            |            | 2,115,376          |            
|                                     | Deferred tax assets                                                                                                                                              |                                            |            | 2,160,000          |            
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total current assets                       |            |                    | 23,131,236 
|Fixed assets, net                    |                                                                                                                                                                  |                                            | 54,273,890 |                    |            
|Goodwill, net                        |                                                                                                                                                                  |                                            | 29,617,939 |                    |            
|Other assets                         |                                                                                                                                                                  |                                            | 1,482,345  |                    |            
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total assets                               |            | $                  | 108,505,410
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                  |                                            |            |                    |            
|Current liabilities:                 |                                                                                                                                                                  |                                            |            |                    |            
|                                     | Accounts payable trade                                                                                                                                           |                                            | $          | 12,767,401         |            
|                                     | Accounts payable other                                                                                                                                           |                                            |            | 4,780,008          |            
|                                     | Accrued payroll and related expense                                                                                                                              |                                            |            | 2,009,179          |            
|                                     | Income and sales taxes payable                                                                                                                                   |                                            |            | 3,494,327          |            
|                                     | Other current liabilities                                                                                                                                        |                                            |            | 4,705,033          |            
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total current liabilities                  |            |                    | 27,755,948 
|Notes payable to bank                |                                                                                                                                                                  |                                            |           |                    |            
|Deferred rent                        |                                                                                                                                                                  |                                            | 3,677,480  |                    |            
|Other liabilities                    |                                                                                                                                                                  |                                            | 278,098    |                    |            
|Deferred tax liabilities             |                                                                                                                                                                  |                                            | 2,300,000  |                    |            
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total liabilities                          |            |                    | 34,011,526 
|Commitments                          |                                                                                                                                                                  |                                            |            |                    |            
|Stockholders' equity:                |                                                                                                                                                                  |                                            |            |                    |            
|                                     | Preferred Stock $0.01 par value, 3,000,000 shares authorized, none issued and outstanding                                                                        |                                            |            |                   |            
|                                     | Common Stock $0.01 par value, 100,000,000 shares authorized, issued and outstanding shares 20,319,412 at September 30, 2000 and 18,310,800 at September 25, 1999 |                                            |            | 203,194            |            
|                                     | Additional paid-in capital                                                                                                                                       |                                            |            | 33,980,470         |            
|                                     | Deferred compensation                                                                                                                                            |                                            |            | (516,000           | )          
|                                     | Notes receivable from officers                                                                                                                                   |                                            |            |                   |            
|                                     | Retained earnings                                                                                                                                                |                                            |            | 40,826,220         |            
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total stockholders' equity                 |            |                    | 74,493,884 
|                                     |                                                                                                                                                                  |                                            |            |                    |            
|                                     |                                                                                                                                                                  | Total liabilities and stockholders' equity |            | $                  | 108,505,410
|                                     |                                                                                                                                                                  |                                            |            |                    |            

See
accompanying notes.

F-3

---



CHARLOTTE RUSSE HOLDING, INC.        CONSOLIDATED STATEMENTS OF INCOME

|                                                                       |                                  | Years Ended
|---------------------------------------------------------------------- | -------------------------------- | -----------
|
|Net sales                                                              |                                  | $          
|Cost of goods sold, including buying, distribution and occupancy costs |                                  |            
|                                                                       |                                  |            
|Gross profit                                                           |                                  |            
|Selling, general and administrative expenses                           |                                  |            
|Amortization of goodwill and other intangibles                         |                                  |            
|                                                                       |                                  |            
|Operating income                                                       |                                  |            
|Other expenses:                                                        |                                  |            
|                                                                       | Interest expense, net            |            
|                                                                       | Other charges, net               |            
|                                                                       |                                  |            
|                                                                       | Total other expenses             |            
|                                                                       |                                  |            
|Income before income taxes and extraordinary item                      |                                  |            
|Income taxes                                                           |                                  |            
|                                                                       |                                  |            
|Income before extraordinary item                                       |                                  |            
|Extraordinary loss from early debt retirement                          |                                  |            
|                                                                       |                                  |            
|Net income                                                             |                                  | $          
|                                                                       |                                  |            
|Basic earnings per share:                                              |                                  |            
|                                                                       | Income before extraordinary item |            
|                                                                       |                                  |            
|                                                                       | Net income                       |            
|                                                                       |                                  |            
|Diluted earnings per share:                                            |                                  |            
|                                                                       | Income before extraordinary item |            
|                                                                       |                                  |            
|                                                                       | Net income                       |            
|                                                                       |                                  |            
|Weighted average shares outstanding:                                   |                                  |            
|                                                                       | Basic                            |            
|                                                                       |                                  |            
|                                                                       | Diluted                          |            
|                                                                       |                                  |            

See
accompanying notes.

F-4

---



CHARLOTTE RUSSE HOLDING, INC.        CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

|                                                     |  | Common Stock |  |   |         |  |   |            |   |   |          |   |  
|---------------------------------------------------- |  | ------------ |  | - | ------- |  | - | ---------- | - | - | -------- | - | -
|
|
|Balance at September 27, 1997                        |  | 18,300,000   |  | $ | 183,000 |  | $ | 18,739,981 |   | $ |         |   | $
|Stock option transactions, net of tax benefit        |  |             |  |   |        |  |   | (48,600    | ) |   |         |   |  
|Net Income                                           |  |             |  |   |        |  |   |           |   |   |         |   |  
|                                                     |  |              |  |   |         |  |   |            |   |   |          |   |  
|Balance at September 26, 1998                        |  | 18,300,000   |  |   | 183,000 |  |   | 18,691,381 |   |   |         |   |  
|Stock option transactions, net of tax benefit        |  | 10,800       |  |   | 108     |  |   | 36,692     |   |   |         |   |  
|Deferred compensation related to stock options       |  |             |  |   |        |  |   | 720,000    |   |   | (720,000 | ) |  
|Amortization of deferred compensation                |  |             |  |   |        |  |   |           |   |   | 60,000   |   |  
|Notes receivable from officers                       |  |             |  |   |        |  |   |           |   |   |         |   |  
|Net Income                                           |  |             |  |   |        |  |   |           |   |   |         |   |  
|                                                     |  |              |  |   |         |  |   |            |   |   |          |   |  
|Balance at September 25, 1999                        |  | 18,310,800   |  |   | 183,108 |  |   | 19,448,073 |   |   | (660,000 | ) |  
|Initial public offering of stock                     |  | 1,450,000    |  |   | 14,500  |  |   | 13,519,000 |   |   |         |   |  
|Exercise of warrant by bank                          |  | 376,180      |  |   | 3,762   |  |   | (3,762     | ) |   |         |   |  
|Repayment of notes receivable                        |  |             |  |   |        |  |   |           |   |   |         |   |  
|Stock option transactions, net of tax benefit        |  | 156,500      |  |   | 1,565   |  |   | 785,845    |   |   |         |   |  
|Amortization of deferred compensation                |  |             |  |   |        |  |   |           |   |   | 144,000  |   |  
|Issuance of stock under employee stock purchase plan |  | 25,932       |  |   | 259     |  |   | 231,314    |   |   |         |   |  
|Net Income                                           |  |             |  |   |        |  |   |           |   |   |         |   |  
|                                                     |  |              |  |   |         |  |   |            |   |   |          |   |  
|Balance at September 30, 2000                        |  | 20,319,412   |  | $ | 203,194 |  | $ | 33,980,470 |   | $ | (516,000 | ) | $
|                                                     |  |              |  |   |         |  |   |            |   |   |          |   |  

See accompanying notes.

F-5

---



CHARLOTTE RUSSE HOLDING, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                  |                                               | Years Ended                         |            
|--------------------------------------------------------------------------------- | --------------------------------------------- | ----------------------------------- | -----------
|
|Operating Activities                                                              |                                               |                                     |            
|Net income                                                                        |                                               | $                                   | 18,760,092 
|Adjustments to reconcile net income to net cash provided by operating activities: |                                               |                                     |            
|                                                                                  | Depreciation and amortization                 |                                     |            
|                                                                                  | Deferred rent                                 |                                     |            
|                                                                                  | Amortization of deferred compensation         |                                     |            
|                                                                                  | Loss on disposal of asset                     |                                     |            
|                                                                                  | Extraordinary loss from early debt retirement |                                     |            
|                                                                                  | Deferred income taxes                         |                                     |            
|                                                                                  | Changes in operating assets and liabilities:  |                                     |            
|                                                                                  |                                               | Inventories                         |            
|                                                                                  |                                               | Other current assets                |            
|                                                                                  |                                               | Accounts payable trade              |            
|                                                                                  |                                               | Accounts payable other              |            
|                                                                                  |                                               | Accrued payroll and related expense |            
|                                                                                  |                                               | Income and sales taxes payable      |            
|                                                                                  |                                               | Other current liabilities           |            
|                                                                                  |                                               | Other liabilities                   |            
|                                                                                  |                                               |                                     |            
|Net cash provided by operating activities                                         |                                               |                                     | 27,834,215 
|Investing Activities                                                              |                                               |                                     |            
|Net cash invested in acquisition of Rampage assets                                |                                               |                                     |           
|Purchases of fixed assets                                                         |                                               |                                     | (24,038,529
|Other assets                                                                      |                                               |                                     | (132,753   
|                                                                                  |                                               |                                     |            
|Net cash used in investing activities                                             |                                               |                                     | (24,171,282
|Financing Activities                                                              |                                               |                                     |            
|Payments on capital leases                                                        |                                               |                                     | (368,089   
|Payments on notes payable to bank and revolving credit facility                   |                                               |                                     | (22,750,000
|Proceeds from notes payable to bank and revolving credit facility                 |                                               |                                     | 4,750,000  
|Payments on notes payable to related parties                                      |                                               |                                     |           
|Funding of notes receivable from officers                                         |                                               |                                     |           
|Repayments of notes receivable from officers                                      |                                               |                                     | 1,000,000  
|Proceeds from issuance of common stock                                            |                                               |                                     | 14,552,483 
|                                                                                  |                                               |                                     |            
|Net cash provided by (used in) financing activities                               |                                               |                                     | (2,815,606 
|                                                                                  |                                               |                                     |            
|Net increase (decrease) in cash and cash equivalents                              |                                               |                                     | 847,327    
|Cash and cash equivalents at beginning of the year                                |                                               |                                     | 2,982,025  
|                                                                                  |                                               |                                     |            
|Cash and cash equivalents at end of the year                                      |                                               | $                                   | 3,829,352  
|                                                                                  |                                               |                                     |            

See
accompanying notes.

F-6

---



CHARLOTTE RUSSE HOLDING, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies

Organization

Charlotte Russe Holding, Inc. (the "Company") was incorporated in Delaware in July 1996. On September 27, 1996, the Company was
capitalized through the issuance of Common Stock and long-term debt. Effective September 27, 1996, the Company acquired all of the stock of Lawrence Merchandising Corporation, a
California corporation, and its affiliates, Lawrence Merchandising Corporation of Nevada and Lawrence Merchandising Corporation of Nevada II, both Nevada corporations, (collectively, the "Predecessor"
companies) for approximately $35 million in cash. In addition, the Company repaid $5 million of the Predecessor's short-term borrowings concurrent with the consummation of
the purchase transaction. The acquisition was accounted for using the purchase
method of accounting. The excess of the aggregate purchase price over the fair value of net assets acquired of approximately $32.9 million was recognized as goodwill.

Description of Business

The Company operates in one segment, selling clothing and accessories for women through its mall-based retail stores that operate under the names
Charlotte Russe, Rampage, and Charlotte's Room. As of September 30, 2000, the Company operated 136 mall-based retail stores in 21 states and Puerto Rico.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

Fiscal Year

The Company's fiscal year is the 52/53 week period ending on the last Saturday in September. The fiscal year ended September 30, 2000
contained 53 weeks while the fiscal years ended September 25, 1999 and September 26, 1998 each contained 52 weeks.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash Equivalents

The Company considers all liquid investments with maturities of three months or less when purchased to be cash equivalents.

Inventories

Inventories are accounted for by the retail inventory method. The cost of inventory is determined at the lower of the first-in,
first-out (FIFO) method or market.

F-7

---

Fixed Assets

Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally
five to seven years. Leasehold improvements are amortized on a straight-line basis over the estimated useful lives of the respective assets or the term of
the lease, whichever is less. Depreciation expense for the years ended September 30, 2000, September 25, 1999 and September 26, 1998 was $6,758,446, $4,910,019 and $3,798,194,
respectively.

Goodwill and Other Intangibles

Goodwill represents the excess of the cost over the fair value of net assets acquired by the Company. Goodwill is amortized on a straight-line
basis over 40 years. The amortization period was determined based upon the following factors, among others: operating history, brand name recognition, merchandising strategy, vendor network,
proven portability to new markets and demographics of the junior women's market. Accumulated amortization for goodwill at September 30, 2000 and September 25, 1999 was $3,299,563 and
$2,471,179, respectively.

Other
intangibles, included in Other Assets in the accompanying balance sheet, result from the Company's acquisition of the assets of Rampage Retailing, Inc. (Rampage) and
represent amounts attributable to a license agreement allowing the Company to utilize the Rampage name and other intangibles. These assets are stated at cost and are amortized using the
straight-line method over the estimated useful life of 20 years. The amortization period was primarily determined based on the expectation that the Rampage license renewal options
would be exercised. (See Note 6). Accumulated amortization for other intangibles at September 30, 2000 and September 25, 1999 was $200,944 and $133,960, respectively.

Deferred Financing Costs

Debt issuance costs are amortized to interest expense using the straight-line method over the life of the related debt. Unamortized issuance costs
remaining upon early retirement of debt are expensed. Accumulated amortization at September 30, 2000 and September 25, 1999 was $13,476 and $488,898, respectively.

Deferred Rent

Rent expense on noncancellable leases containing known future scheduled rent increases are recorded on a straight-line basis over the term of the
respective leases. The excess rent expense over rent paid is accounted for as deferred rent.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.

Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date.

F-8

---

Impairment of Long-lived Assets

In accordance with Statement of Financial Accounting Standards No. 121,Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of, whenever events or changes in circumstances indicate that the carrying amount of its assets might not be
recoverable, the Company, using its best estimates based upon reasonable and supportable assumptions and projections, reviews
the carrying value of long-lived assets for impairment. Impairment for long-lived assets to be held is measured by comparing the carrying amount of the asset to its fair value.
Impairment is reviewed at the lowest levels for which there are identifiable cash flows that are independent of the cash flows of other groups of assets. The Company performs such analysis on an
individual store basis and estimates fair values based on sales prices for comparable assets. The Company measures impairment for long-lived assets to be disposed of at the lower of the
carrying amount or net realizable value (fair market value less cost to dispose). The Company has identified two under-performing stores and plans to close these locations by the end of fiscal 2001.
Accordingly, the Company recorded an impairment loss of $722,000, which is included in selling, general and administrative expenses in fiscal 1999. The impairment loss included $537,000 representing
the net carrying value of leasehold improvements that will be abandoned net of the expected future cash flows. In addition, the impairment loss included $185,000 for the estimated unamortized landlord
allowances that are refundable upon closure. Employee termination benefits related to the store closures will be insignificant. The operating results for the two stores was not significant for the
years ended September 30, 2000, September 25, 1999 and September 26, 1998, respectively.

Stock Based Compensation

Statement of Financial Accounting Standards (SFAS) No. 123,Accounting for Stock-Based Compensation,
establishes the use of the fair value based method of accounting for stock-based compensation arrangements, under which compensation cost is determined using the fair value of stock-based compensation
determined as of the grant date, and is recognized over the periods in which the related services are rendered. SFAS No. 123 also permits companies to elect to continue using the current
intrinsic value accounting method specified in Accounting Principles Board Opinion (APB) No. 25,Accounting for Stock Issued to Employees, to
account for stock-based compensation. The Company has decided to retain the current intrinsic value based method, and has disclosed the pro forma effect of using the fair value based method to account
for its stock-based compensation.

Revenue Recognition

Retail merchandise sales are recognized at the point of sale, less estimated sales returns. A reserve is provided for anticipated returns based on prior
experience.

Store Pre-opening Costs

Costs incurred in connection with the opening of a new store are expensed as incurred.

Earnings Per Share

Basic earnings per share is computed based on the weighted average outstanding common shares. Dilutive earnings per share is computed based on the weighted
average outstanding shares and potentially dilutive stock options and warrants.

F-9

---

Fair Value of Financial Instruments

Financial instruments, including cash and cash equivalents, accounts payable, accrued expenses, income tax payable and capital lease obligations are carried at
cost, which management believes approximates fair value because of the short-term maturity of these instruments. Interest on long-term debt is primarily based on variable
rates; therefore, management believes the carrying amounts for the outstanding borrowings approximate fair value. There was no long-term debt at September 30, 2000.

Comprehensive Income

In fiscal 1999, the Company adopted SFAS No. 130,Reporting Comprehensive Income. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its components. The Company did not have any component of other comprehensive income for any periods presented.

Advertising Costs

Advertising costs are expensed as incurred and were $106,314, $379,116 and $241,603, for the years ended September 30, 2000, September 25, 1999
and September 26, 1998, respectively.

Reclassifications

Certain amounts in the prior years financial statements have been reclassified to conform with the fiscal 2000 presentation.

2. Fixed Assets

Fixed assets consist of the following:

|                                               |  | September 30,
2000 |             | September 25,
1999 |  
|---------------------------------------------- |  | ------------------ | ----------- | ------------------ | -
|Leasehold improvements                         |  | $                  | 50,834,920  |                    | $
|Furniture and fixtures                         |  |                    | 13,497,799  |                    |  
|Equipment and vehicles                         |  |                    | 6,442,643   |                    |  
|                                               |  |                    |             |                    |  
|                                               |  |                    | 70,775,362  |                    |  
|Less accumulated depreciation and amortization |  |                    | (16,501,472 | )                  |  
|                                               |  |                    |             |                    |  
|                                               |  | $                  | 54,273,890  |                    | $
|                                               |  |                    |             |                    |  

3. Notes Receivable from Officers

In April 1999, the Company loaned $1,000,000 under a note agreement to its President and Chief Executive Officer. The full amount of the note was
secured by a pledge of 750,000 shares of Common Stock of the Company, plus any shares obtained by the officer in the future. The entire amount of outstanding principal and accrued interest was repaid
in October 1999.

F-10

---

4. Credit Arrangements

At September 30, 2000, the Company has an unsecured $15.0 million revolving credit agreement. Interest on the revolving facility is payable
quarterly at either (i) the Bank's Base Rate, as defined, or (ii) the Bank's Eurodollar Rate plus 1.00%, at the Company's option, subject to certain adjustments. All outstanding
borrowings under the revolving credit facility are due on the maturity date, December 23, 2004. At September 30, 2000, there was no outstanding debt under the revolving credit facility.
The bank credit agreement requires that the Company maintain certain financial ratios and restricts future liens and indebtedness, sales of assets and dividend payments. As of September 30,
2000, the Company is in compliance with the terms of the bank credit agreement.

During
fiscal 2000, the Company repaid the outstanding balance of a prior $32 million secured revolving credit facility primarily through proceeds from the Company's initial
public offering and from operational cash flows. In connection with the repayment of this borrowing and termination of the related agreement, unamortized deferred financing costs were written off in
December 1999 resulting in an extraordinary item charge of $311,314, net of taxes.

In
connection with the original bank credit agreement, the Company issued warrants to purchase approximately 413,560 shares of the Company's Common Stock at $1.00 per share. The
number of shares of Common Stock issuable under the warrant increased by an aggregate of 216 shares pursuant to certain anti-dilution provisions. On October 19, 1999, the warrants
were exercised in conjunction with the Company's initial public offering in a cashless transaction resulting in the issuance of 376,180 shares of the Company's Common Stock.

Pursuant
to the terms of the bank credit agreement, the Company can issue up to $5.0 million of documentary or standby letters of credit. The Company is charged a fee equal to
the Bank's Eurodollar Rate for the average daily face amount of outstanding letters of credit and customary issuance and amendment charges. Fees are paid quarterly in arrears and charges are paid as
incurred. At September 30, 2000 and September 25, 1999, there were outstanding letters of credit in the amount of $1.4 million and $1.6 million, respectively.

5. Subordinated Notes Payable to Related Parties

The Company had two senior subordinated note agreements with affiliated investors that were paid off in June 1999. Interest accrued at 12.5% and was due
semi-annually. Principal was due upon maturity of the notes, September 27, 2003. The Company recognized interest expense of $1,349,900 and $1,371,000 for the years ended
September 25, 1999 and September 26, 1998, respectively.

In
conjunction with the issuance of the two senior subordinated notes, the Company issued warrants to purchase approximately 1,964,410 shares of Common Stock at $1 per share. The
number of shares of Common Stock issuable under these warrants increased by an aggregate of 1,030 shares pursuant to certain anti-dilution provisions. The warrants are exercisable
immediately and expire on September 27, 2006. The warrants were valued at approximately $722,000, which were included in deferred financing costs and were being amortized on a  
straight-line basis over the term of the notes. The fair value of the warrants was estimated at the date of grant using the minimum value method with the following assumptions: risk free
interest rate of 6.0%; an expected warrant life of 7.5 years; and no annual dividends.

In
connection with the repayment of all outstanding principal under the two agreements in June 1999, the Company incurred a prepayment fee of $255,200, which was charged to
income in the accompanying statement of income for the year ended September 25, 1999 and accounted for as an extraordinary item. In addition, unamortized warrant issue costs of approximately
$263,900, were written off in June 1999 resulting in total extraordinary item charges of $519,100, net of taxes.

F-11

---

6. Commitments

Leases

The Company leases its retail stores, distribution center, and office facilities under various operating leases that expire between 2001 and 2013. Under
certain retail store leases, the Company is required to pay the greater of a minimum lease payment or 5% to 11% of annual sales volume. Rent expense, including reimbursement of our proportional share
of common area maintenance expenses, for the years ended September 30, 2000, September 25, 1999 and September 26, 1998 was $32,266,022, $22,837,051 and $17,049,570, respectively,
including $1,343,794, $1,122,680 and $610,267, respectively, of contingent rentals.

The
following is a summary of the annual future minimum capital and operating lease commitments as of September 30, 2000:

|                                                                                |  | Capital
Leases |         | Operating
Leases
|------------------------------------------------------------------------------- |  | -------------- | ------- | ----------------
|Year ending September:                                                          |  |                |         |                 
|2001                                                                            |  | $              | 104,436 |                 
|2002                                                                            |  |                | 28,548  |                 
|2003                                                                            |  |                |        |                 
|2004                                                                            |  |                |        |                 
|2005                                                                            |  |                |        |                 
|Thereafter                                                                      |  |                |        |                 
|                                                                                |  |                |         |                 
|Total minimum lease payments                                                    |  | $              | 132,984 |                 
|                                                                                |  |                |         |                 
|Less amount representing interest                                               |  |                | (8,357  | )               
|                                                                                |  |                |         |                 
|Present value of net minimum lease payments, including $96,553 which is current |  | $              | 124,627 |                 
|                                                                                |  |                |         |                 

License Agreement

In conjunction with the acquisition of Rampage assets on September 30, 1997, the Company entered into a license agreement enabling the Company to
operate stores under the Rampage name. The license fee is calculated as the greater of an annual fee (ranging between $300,000 to $450,000) or a percent of sales at stores operating under the Rampage
name (ranging between 1.0% and 1.5%). The license agreement is for an initial term of four years with an automatic option to renew for another four years. The agreement may be renewed for ten
additional four-year periods, provided certain conditions are met. Currently, management believes the license agreement will be renewed for at least four additional periods. License fees
are recorded monthly based on the greater of a percentage of sales or the annual fee, as defined. License fees incurred during the years ended September 30, 2000, September 25, 1999 and
September 26, 1998 were $608,439, $451,723 and $354,526, respectively and are included in selling, general and administrative expenses.

7. Equity

Stock Options

In 1996, the Company established a Long-Term Incentive Plan (the 1996 Plan). The 1996 Plan provides for the issuance of shares of Common Stock
under incentive and non qualified stock options. Options vest ratably at 20% per year over five years from the date of the grant, subject to certain acceleration provisions and are exercisable for a
period of up to ten years from the date of grant.

F-12

---

Incentive stock options are granted at prices that approximate the fair value of the common shares at the date of grant as determined by the Board of Directors.

In
May 1999, the Company established a 1999 Long-Term Incentive Plan (the 1999 Plan). The 1999 Plan provides for the issuance of shares of Common Stock under
non-qualified stock options and stock appreciation rights. The exercise price of options shall not be less than 85% of the fair market value at the date of grant, or 110% in the case of
any person possessing 10% combined voting power of all classes of stock of the Company. The Company's Board of Directors determines the vesting and other provisions of option and stock appreciation
rights granted under the 1999 Plan.

Pursuant
to the terms of the grant in October 1996, upon completion of the Company's initial public offering on October 19, 1999, vesting for options to purchase 274,500
shares of Common Stock related to the President and CEO was accelerated and the options became fully vested. The Company has determined the stock option award to be a fixed award and as such, no
compensation will be recorded.

In
July 1999, the Company's Board of Directors resolved that no further stock option grants will be made from the 1996 Plan or the 1999 Plan.

The
Company's Board of Directors and stockholders adopted the 1999 Equity Incentive Plan, effective as of the completion of its initial public offering. The 1999 Equity Incentive Plan
permits the grant of options that qualify as incentive stock options and non-qualified options. The option exercise price of each option shall be determined by the compensation committee
of the Board of Directors. In the case of incentive stock options, however, the exercise price shall not be less than 100% of the fair market value of the shares on the date of grant, or 110% in the
case of incentive stock options granted to an individual with ownership in excess of certain limits. Subject to adjustment for stock splits and similar events, the total number of shares of Common
Stock that can be issued under the 1999 Equity Incentive Plan is 750,000 shares. The terms of these options will be substantially the same as other options previously issued.

F-13

---

A summary of the Company's stock option activity and related information for the plans is as follows:

Options

Weighted Average
Exercise PriceOutstanding at September 27, 1997

1,758,000

$
1.16Granted

216,000


3.65Cancelled

(201,000
)

1.58Outstanding at September 26, 1998

1,773,000


1.41Granted

120,000


7.00Cancelled

(57,600
)

1.00Exercised

(10,800
)

1.00Outstanding at September 25, 1999

1,824,600


1.80Granted

270,000


11.19Cancelled

(10,500
)

11.00Exercised

(156,500
)

1.02Outstanding at September 30, 2000

1,927,600

$
3.12Exercisable, September 26, 1998

319,200

$
1.17Exercisable, September 25, 1999

648,600

$
1.31Exercisable, September 30, 2000

1,130,800

$
1.50


The
following table summarizes information about stock options outstanding as of September 30, 2000:

|              |  | Options Outstanding |  |     |  |  
|------------- |  | ------------------- |  | --- |  | -
|
|
|
|$1.00         |  | 1,098,100           |  | 6.0 |  | $
|$2.00-$3.50   |  | 423,000             |  | 6.6 |  | $
|$4.00-$7.00   |  | 147,000             |  | 8.3 |  | $
|$11.00-$13.50 |  | 259,500             |  | 9.1 |  | $

The
weighted average fair value of options granted was $11.19, $2.56 and $1.30 for the years ended September 30, 2000, September 25, 1999 and September 26, 1998,
respectively.

The
Company has recorded deferred compensation in connection with the grants of certain stock options to employees during the year ended September 25, 1999. The options were
granted at the then deemed fair value of $7 per share. In conjunction with the Company's initial public offering registration statement, the Company revised the estimate of the deemed fair value of
its Common Stock resulting in $720,000 of deferred compensation. The deemed fair value per share represents a discount from the initial public offering per share price and is attributable to
restrictions on the availability of these shares for sale (vesting provisions) and improved operating results since the date of their grant. The deferred compensation is being amortized ratably over
the vesting period of the respective options. No deferred compensation was recorded for option grants prior to this period which were granted at exercise prices equal to the deemed fair value, as
determined by the Company's Board of Directors based on valuation analyses of publicly traded peer companies.

Pro
forma information regarding net income is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair
value method of that Statement. For options granted through October 18, 1999, the fair value of options granted were estimated at the date of grant using the minimum value option pricing model
with the

F-14

---

following weighted-average assumptions: risk free interest rate of 6%, dividend yield of 0%, and weighted-average expected life of the option of five years. For options granted from October 19,
1999 to September 30, 2000, the fair value of the options was estimated at the date of grant using the Black-Scholes method for option pricing with the following weighted average assumptions:
risk-free interest rate of 6%, dividend yield of 0%, expected volatility of 70% and weighted average expected life of the option of five years.

The
minimum value option-pricing model is similar to the Black-Scholes option valuation model that was developed for use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable, except that it excludes the factor of volatility. In addition, option valuation models require the input of highly subjective assumptions. Because the
Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For
purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the vesting period of the related options. The Company's pro forma
information follows:

Years EndedSeptember 30,
2000

September 25,
1999

September 26,
1998Net income as reported

$
18,760,092

$
11,495,489

$
5,514,109Pro forma net income

$
17,863,372

$
11,392,119

$
5,396,784Net income per share basic as reported


$0.93


$0.63


$0.30Pro forma


$0.89


$0.62


$0.29Net income per share diluted as reported


$0.82


$0.54


$0.27Pro forma


$0.78


$0.53


$0.26


Stock Purchase Plan

On September 27, 1999, the Company approved the adoption of the 1999 Employee Stock Purchase Plan ("the Plan"), which authorized up to 350,000 shares of
Common Stock for employee purchase through payroll deductions at 85% of fair market value. All employees of the Company who have completed at least six months of employment and work at least
20 hours per week, are eligible to participate, except for employees who own Common Stock or options on such common stock which
represents 5% or more of the Company. During fiscal 2000 there were 25,932 shares issued under the Plan.

Shares Reserved for Future Issuance

September 30,
2000

September 25,
1999Conversion of warrants

1,965,440

2,379,216Stock options issued and outstanding

1,927,600

1,824,600Common shares authorized for future stock option grants

490,500

Shares authorized for issuance under Employee Stock Purchase Plan

324,068

Shares reserved for future issuance

4,707,608

4,203,816


F-15

---

Stock Split

In connection with the completion of its initial public offering on October 19, 1999, the Company approved a 100-for-1 stock
split. In addition, the Company's certificate of incorporation was amended upon completion of its initial public offering, to authorize the issuance of up to 100,000,000 shares of Common Stock and
3,000,000 shares of Preferred Stock. Consequently, the stock option data and per share data, throughout the consolidated financial statements and the notes to the consolidated financial statements,
have been restated to reflect the stock split.

8. Income Taxes

Income taxes consist of the following:

Years EndedSeptember 30,
2000

September 25,
1999

September 26,
1998Current:Federal

$
10,437,978

$
7,801,816

$
3,232,670State


1,813,000


1,523,576


844,65212,250,978


9,325,392


4,077,322Deferred:Federal


603,900


(526,703
)

143,054State


126,500


(98,297
)

25,000730,400


(625,000
)

168,054Income Taxes

$
12,981,378

$
8,700,392

$
4,245,376


F-16

---

A reconciliation of the calculated income tax provision based on statutory tax rates in effect and the effective tax rate follows:

|                                               |  |   |            | Years Ended |   |          
|---------------------------------------------- |  | - | ---------- | ----------- | - | ---------
|
|Tax at U.S. statutory rates                    |  | $ | 11,218,474 |             | $ | 7,250,183
|State income taxes, net of federal tax benefit |  |   | 1,260,476  |             |   | 908,862  
|Non-deductible expenses                        |  |   | 266,493    |             |   | 197,761  
|Other, net                                     |  |   | 235,935    |             |   | 343,586  
|                                               |  |   |            |             |   |          
|                                               |  | $ | 12,981,378 |             | $ | 8,700,392
|                                               |  |   |            |             |   |          

Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's deferred tax liabilities and assets are as follows:

|                                      |                            | September 30,
2000 |            | September 25,
1999 |  
|------------------------------------- | -------------------------- | ------------------ | ---------- | ------------------ | -
|Deferred tax assets:                  |                            |                    |            |                    |  
|                                      | Inventory                  |                    | $          | 1,055,750          |  
|                                      | Deferred rent              |                    |            | 1,507,767          |  
|                                      | State income taxes         |                    |            | 421,421            |  
|                                      | Employee benefit programs  |                    |            | 174,250            |  
|                                      | Other accrued expenses     |                    |            | 635,575            |  
|                                      |                            |                    |            |                    |  
|Total deferred tax assets             |                            |                    | 3,794,763  |                    |  
|Deferred tax liabilities:             |                            |                    |            |                    |  
|                                      | Tax over book depreciation |                    |            | (2,797,765         | )
|                                      | Intangibles                |                    |            | (1,136,998         | )
|                                      |                            |                    |            |                    |  
|Total deferred tax liabilities        |                            |                    | (3,934,763 | )                  |  
|                                      |                            |                    |            |                    |  
|Net deferred tax (liabilities) assets |                            | $                  | (140,000   | )                  | $
|                                      |                            |                    |            |                    |  

9. Supplemental Cash Flows Disclosures

|                                                          |                   |   |         | Years Ended |   |       
|--------------------------------------------------------- | ----------------- | - | ------- | ----------- | - | ------
|
|Income tax benefit of stock option transactions           |                   | $ | 627,160 |             | $ | 26,000
|Fixed assets acquired through assumption of capital lease |                   | $ |        |             | $ |      
|Cash paid during the year for:                            |                   |   |         |             |   |       
|                                                          | Interest          |   | $       | 348,142     |   | $     
|                                                          | Income taxes, net |   | $       | 6,636,600   |   | $     

10. Related Party Transactions

The Company expensed a management fee of $250,000 to its majority stockholder during each of the years ended September 30, 2000, September 25,
1999, and September 26, 1998. This fee terminates at any time when the majority stockholder owns less than 10% of the shares of common stock, including shares of common stock issuable upon
exercise of outstanding warrants at such date.

The
Company's majority stockholder and its CEO have entered into a stockholders agreement. This agreement provides that (1) as long as the majority stockholder owns more than
25% but less than

F-17

---

50% of the Company's outstanding shares, they will have the right to nominate three directors and (2) as long as the majority stockholder owns at least 10% of the shares of common stock held by
them immediately after the completion of the Company's initial public offering, they will have the right to nominate two directors. The stockholders agreement grants the Company's CEO certain tag
along rights in the event of a private sale by the majority stockholder of their shares of common stock. The stockholders agreement also grants, subject to limitations and exceptions, demand and
piggyback registration rights to the majority stockholder and piggyback registration rights to the CEO.

For
the years ended September 30, 2000, September 25, 1999 and September 26, 1998, the Company purchased approximately $275,000, $89,000 and $24,000,
respectively, of merchandise from a company primarily owned by family members of one of our officers.

11. Employee Savings Plan

The Company has an Internal Revenue Code Section 401(k) profit-sharing plan (the Plan) for eligible employees. The Plan is funded by employee
contributions and provides for the Company to make discretionary contributions. The Company matches 25% of participants contributions up to 4% of eligible compensation. Amounts contributed and
expensed under this plan were $65,000, $50,062 and $30,648 for the years ended September 30, 2000, September 25, 1999 and September 26, 1998, respectively.

12. Earnings Per Share

A reconciliation of the numerators and denominators used in basic and diluted earnings per share is as follows:

|                                            |                                             |   |            | Years Ended |   |            |           
|------------------------------------------- | ------------------------------------------- | - | ---------- | ----------- | - | ---------- | ----------
|
|Net income                                  |                                             | $ | 18,760,092 |             | $ | 11,495,489 |           
|Income before extraordinary item            |                                             | $ | 19,071,406 |             | $ | 12,014,589 |           
|Income before extraordinary item per share: |                                             |   |            |             |   |            |           
|                                            | Basic                                       |   | $          | 0.95        |   | $          | 0.66      
|                                            | Effect of dilutive securities stock options |   |            | (0.04       | ) |            | (0.03     
|                                            | Effect of dilutive securities warrants      |   |            | (0.08       | ) |            | (0.06     
|                                            |                                             |   |            |             |   |            |           
|Diluted                                     |                                             | $ | 0.83       |             | $ | 0.57       |           
|                                            |                                             |   |            |             |   |            |           
|Earnings per share:                         |                                             |   |            |             |   |            |           
|                                            | Basic                                       |   | $          | 0.93        |   | $          | 0.63      
|                                            | Effect of dilutive securities stock options |   |            | (0.04       | ) |            | (0.03     
|                                            | Effect of dilutive securities warrants      |   |            | (0.07       | ) |            | (0.06     
|                                            |                                             |   |            |             |   |            |           
|                                            | Diluted                                     |   | $          | 0.82        |   | $          | 0.54      
|                                            |                                             |   |            |             |   |            |           
|Weighted average number of shares:          |                                             |   |            |             |   |            |           
|                                            | Basic                                       |   |            | 20,084,000  |   |            | 18,304,000
|                                            | Effect of dilutive securities stock options |   |            | 924,000     |   |            | 844,000   
|                                            | Effect of dilutive securities warrants      |   |            | 1,837,000   |   |            | 2,086,000 
|                                            |                                             |   |            |             |   |            |           
|                                            | Diluted                                     |   |            | 22,845,000  |   |            | 21,234,000
|                                            |                                             |   |            |             |   |            |           

F-18

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EXHIBIT INDEX

(a) Exhibits marked with an asterisk are filed herewith. The remainder of the exhibits have heretofore been filed with the Commission and are incorporated
herein by reference.

|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                         
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1     |  | Stock Purchase Agreement dated as of August 26, 1996 by and among Charlotte Russe Holding, Inc., Daniel Lawrence, Frank Lawrence and Larry Lawrence (Exhibit 2.1 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                        
|3.1     |  | Certificate of Incorporation of Charlotte Russe Holding, Inc., as amended+ (Exhibit 3.1 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                 
|3.2     |  | Certificate of Amendment to the Certificate of Incorporation of Charlotte Russe Holding, Inc. (Exhibit 3.2 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                              
|3.3     |  | Amended and Restated By-laws of Charlotte Russe Holding, Inc.+ (Exhibit 3.3 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                             
|4.1     |  | Form of Common Stock Certificate (Exhibit 4.1 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                                                           
|10.1    |  | Revolving Credit Agreement, dated as of December 23, 1999, by and among Charlotte Russe, Inc. as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and BankBoston, N.A. as Agent (Exhibit 10.1 to Form 10-Q filed on February 8, 2000)                                                                                         
|10.2    |  | Guaranty, dated as of December 23, 1999, by Charlotte Russe Holding, Inc., Charlotte Russe Merchandising, Inc., and certain other Subsidiaries of the Borrower (as therein defined) which may become parties thereto, each as Guarantor, in favor of
BankBoston, N.A. as Agent (Exhibit 10.2 to Form 10-Q filed on February 8, 2000)
|10.3    |  | Stockholders Agreement by and among Charlotte Russe Holding, Inc., The SK Equity Fund, L.P., SK Investment Fund, L.P., and Bernard Zeichner (Exhibit 10.7 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                               
|10.4    |  | Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner dated October 1, 1996 (Exhibit 10.9 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                      
|10.5    |  | Amendment No. 1 to Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner (Exhibit 10.10 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                        
|10.6    |  | Trade Secret and Confidentiality Agreement dated as of October 1, 1996 by and between Charlotte Russe Holding, Inc. and Bernard Zeichner (Exhibit 10.11 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                 
|10.7    |  | Charlotte Russe Holding, Inc. 1999 Long-Term Incentive Plan (Exhibit 10.12 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                              
|10.8    |  | Charlotte Russe Holding, Inc. 1996 Long-Term Incentive Plan (Exhibit 10.13 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                              
|10.9    |  | Lease Agreement for San Diego Distribution Center dated July 24, 1997 by and between Price Enterprises, Inc. and Charlotte Russe, Inc. (Exhibit 10.14 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                   
|10.10   |  | Charlotte Russe Holding, Inc. 1999 Equity Incentive Plan (Exhibit 10.15 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                                                 
|10.11   |  | License Agreement dated September 30, 1997 by and between Rampage Clothing Company and Charlotte Russe, Inc. (Exhibit 10.16 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                             
|        |  |                                                                                                                                                                                                                                                                                                                                     

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|10.12 |  | Charlotte Russe Holding, Inc. 1999 Employee Stock Purchase Plan (Exhibit 10.17 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                     
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.13 |  | Common Stock Purchase Warrant No. 2 by and between Charlotte Russe Holding, Inc. and The SK Equity Fund, L.P., dated as of September 27, 1996 (Exhibit 10.19 to Registration Statement 333-84297 filed October 19, 1999)                                       
|10.14 |  | Common Stock Purchase Warrant No. 3 by and between Charlotte Russe Holding, Inc. and SK Investment Fund, L.P., dated as of September 27, 1996 (Exhibit 10.20 to Registration Statement 333-84297 filed October 19, 1999)                                       
|10.15 |  | First Amendment dated October 1, 1999 to the Common Stock Purchase Warrant by and between Charlotte Russe Holding, Inc. and The SK Equity Fund, L.P., dated as of September 27, 1996 (Exhibit 10.22 to Registration Statement 333-84297 filed October 19,
1999)
|10.16 |  | First Amendment dated October 1, 1999 to the Common Stock Purchase Warrant by and between Charlotte Russe Holding, Inc. and SK Investment Fund, L.P., dated as of September 27, 1996 (Exhibit 10.23 to Registration Statement 333-84297 filed October 19,
1999)
|10.17 |  | Form of Indemnification Agreement for Directors and Officers of Charlotte Russe Holding, Inc. (Exhibit 10.24 to Registration Statement 333-84297 filed October 19, 1999)                                                                                       
|10.18 |  | Stockholders Agreement dated as of October 1, 1999 by and among Charlotte Russe Holdings, Inc., The SK Equity Fund, L.P. and SK Investment Fund, L.P. (Exhibit 10.25 to Registration Statement 333-84297 filed October 19, 1999)                               
|21    |  | Subsidiaries (Exhibit 21 to Registration Statement 333-84297 filed October 19, 1999)                                                                                                                                                                           
|23.1  |  | Consent of Ernst & Young LLP*                                                                                                                                                                                                                                  
|24    |  | Power of Attorney (See Signature Page)                                                                                                                                                                                                                         
|27    |  | Financial Data Schedule*                                                                                                                                                                                                                                       

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All
financial statement schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because they are not
required under the related instructions or are inapplicable as the information has been provided in the consolidated financial statements or related notes thereto.

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