CHARLOTTE RUSSE HOLDING INC, S-1/A, 1999-09-17

CHARLOTTE RUSSE HOLDING INC
S-1/A, 1999-09-17
WOMEN'S CLOTHING STORES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1999

REGISTRATION NO. 333-84297

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

<TABLE>
<S> <C> <C>
DELAWARE 5621 33-0724325
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) No.)
</TABLE>

4645 MORENA BOULEVARD, SAN DIEGO, CA 92117, (858) 587-1500
(Address, including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

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BERNARD ZEICHNER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
4645 MORENA BOULEVARD, SAN DIEGO, CA 92117, (858) 587-1500
(Name, Address, including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)

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COPIES TO:

DANIEL S. EVANS, ESQ. FAYE H. RUSSELL, ESQ.
ROPES & GRAY BROBECK, PHLEGER & HARRISON, LLP
ONE INTERNATIONAL PLACE 550 WEST C STREET, SUITE 1200
BOSTON, MASSACHUSETTS 02110-2624 SAN DIEGO, CA 92101
(617) 951-7000 (619) 234-1966

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.

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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>

SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE AND
THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND WE AND THE SELLING
STOCKHOLDERS ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE>

[LOGO]

2,900,000 SHARES

COMMON STOCK

Charlotte Russe Holding, Inc. is offering 1,450,000 shares of its common
stock and the selling stockholders are selling an additional 1,450,000 shares.
This is our initial public offering and no public market currently exists for
our shares. Our common stock has been approved for quotation on the Nasdaq
National Market under the symbol "CHIC." We anticipate that the initial public
offering price will be between $13.00 and $15.00 per share.

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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public Offering Price..................................................................... $ $
Underwriting Discounts and Commissions.................................................... $ $
Proceeds to Charlotte Russe............................................................... $ $
Proceeds to the Selling Stockholders...................................................... $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Some of the selling stockholders have granted the underwriters a 30-day
option to purchase up to an additional 435,000 shares of common stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of common stock to purchasers on , 1999.

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BANCBOSTON ROBERTSON STEPHENS

BANC OF AMERICA SECURITIES LLC

PAINEWEBBER INCORPORATED

FIRST UNION CAPITAL MARKETS CORP.

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THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
THE FRONT COVER FEATURES A BRIEF DESCRIPTION OF THE CHARLOTTE RUSSE AND RAMPAGE
CONCEPTS, ILLUSTRATED WITH BOTH INTERIOR AND EXTERIOR PERSPECTIVES OF THE STORES
AND IMAGES OF THE CHARLOTTE RUSSE CUSTOMER.

THE BACK COVER DISPLAYS A COLLAGE OF YOUNG WOMEN DRESSED IN CHARLOTTE RUSSE AND
RAMPAGE FASHION APPAREL AND ACCESSORIES. ADDITIONALLY, A MAP IS PROVIDED TO SHOW
STORE LOCATIONS AND PAST AND FUTURE EXPANSION SITES. THERE WILL ALSO BE A GRAPH
SHOWING STORE PENETRATION THROUGHOUT MULTIPLE REGIONS OF THE UNITED STATES.

2
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE
UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON
THE FRONT COVER OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary.................................................................................................... 4
Risk Factors............................................................................................... 9
Forward-Looking Statements................................................................................. 14
Use of Proceeds............................................................................................ 15
Dividend Policy............................................................................................ 15
Capitalization............................................................................................. 16
Dilution................................................................................................... 17
Selected Consolidated Financial and Operating Data......................................................... 18
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 20
Business................................................................................................... 28
Management................................................................................................. 39
Principal and Selling Stockholders......................................................................... 45
Related Transactions....................................................................................... 47
Description of Capital Stock............................................................................... 49
Shares Eligible for Future Sale............................................................................ 50
Underwriting............................................................................................... 52
Validity of Common Stock................................................................................... 55
Experts.................................................................................................... 55
Available Information...................................................................................... 55
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>

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The Charlotte Russe-Registered Trademark- trademark referred to in this
prospectus is federally registered in the United States and the Z-TM- and
Charlotte's Room-TM- trademarks referred to in this prospectus are subject to
pending applications for registration. These trademarks are the property of
Charlotte Russe Holding, Inc. or it subsidiaries. The
Rampage-Registered Trademark- trademark referred to in this prospectus 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. See "Business-- Intellectual
Property." All other trademarks or trade names referred to in this prospectus
are the property of their respective owners.

3
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SUMMARY

THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION ABOUT OUR BUSINESS AND
THIS OFFERING CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU SHOULD READ THE ENTIRE
PROSPECTUS, INCLUDING "RISK FACTORS" AND THE FINANCIAL STATEMENTS AND RELATED
NOTES, BEFORE MAKING AN INVESTMENT DECISION. OUR FISCAL YEAR CONSISTS OF THE 52
OR 53 WEEK PERIOD ENDING ON THE LAST SATURDAY IN SEPTEMBER. ALL REFERENCES TO
FISCAL YEARS IN THIS PROSPECTUS REFER TO THE FISCAL YEAR ENDING IN THE CALENDAR
YEAR INDICATED. FOR EXAMPLE, FISCAL 1998 REFERS TO THE FISCAL YEAR ENDED
SEPTEMBER 26, 1998 AND OUR CURRENT FISCAL YEAR REFERS TO THE FISCAL YEAR ENDED
SEPTEMBER 25, 1999.

CHARLOTTE RUSSE HOLDING, INC.

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 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.

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 managed by
Saunders Karp & Mergrue, 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:

- hiring a number of senior executives with national retail experience to
complement our senior management team;

- substantially upgrading our management information systems;

- adding a second store concept by acquiring 16 Rampage stores in five
states; and

- consolidating our corporate and distribution center operations into a
modern 125,000 square foot facility in San Diego.

These initiatives, together with superior store economics that on average
have 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. As of
September 25, 1999, we expect to operate 96 stores throughout 15 states and
Puerto Rico, an increase of 61 stores since our acquisition at the beginning of
fiscal 1997. Our net sales increased to $134.1 million in fiscal 1998 from $70.7
million in fiscal 1996, representing a compound annual growth rate of 37.7%.
Additionally, for the nine months ended June 26, 1999, our net sales increased
to $126.4 million from $94.4 million, representing a 33.9% increase over the
same period last year.

4
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OUR BUSINESS STRATEGY

The elements of our business strategy combine to create a merchandise
assortment and overall shopping experience that has broad consumer appeal and
differentiates us from our competitors. The principal elements of our business
strategy include:

- offering fashionable, quality merchandise at prices generally 20% to 30%
below most of our direct mall-based competitors;

- maintaining distinct brand images based on fashion attitude, value pricing
and quality, especially through our proprietary Charlotte Russe and [Russe
label] private label merchandise;

- targeting a highly desirable market of 15 to 35 year old women, which
represents a large and growing consumer segment of the United States
population;

- offering a broad, exciting merchandise assortment that conveys a
consistent fashion attitude;

- capitalizing on strong store economics, which we have consistently
achieved across a variety of mall types throughout the United States;

- leveraging our highly experienced management team and existing
infrastructure to support continued national expansion; and

- actively managing inventory through a test-and-reorder strategy designed
to minimize our exposure to fashion cycles and to contribute to rapid
inventory turnover and strong gross margins.

OUR EXPANSION STRATEGY

Our long-term objective is to become a leading national specialty retailer
of fashion-forward, affordable apparel and accessories to youthful-minded women.
We intend to achieve this objective by pursuing the following initiatives:

- OPEN NEW STORES. Based on our successful track record of penetrating new
markets and solid infrastructure to support national expansion, we believe
we are well positioned for accelerated growth over the next several years.
Our plan is to open approximately 30 stores during fiscal 2000, for which
we have already completed our site selection and evaluation.

- 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
entire collections of related merchandise.

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We are incorporated in Delaware, and our principal executive offices are
located at 4645 Morena Boulevard, San Diego, CA 92117. Our telephone number is
(858) 587-1500.

5
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EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES:

- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION;

- A 100-FOR-ONE SPLIT OF OUR COMMON STOCK, EFFECTIVE UPON THE CLOSING OF
THIS OFFERING;

- AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, EFFECTIVE UPON THE
CLOSING OF THIS OFFERING, TO INCREASE OUR AUTHORIZED COMMON STOCK TO
100,000,000 SHARES; AND

- THE CASHLESS EXERCISE OF OUTSTANDING WARRANTS FOR 384,236 SHARES OF OUR
COMMON STOCK.

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Charlotte Russe...... 1,450,000 shares

Common stock offered by selling
stockholders............................... 1,450,000 shares
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Total.................................. 2,900,000 shares

Common stock outstanding after the
offering................................... 20,145,036 shares

Use of proceeds.............................. We intend to use these net proceeds to repay
secured indebtedness outstanding under our
revolving credit facility and for general
corporate purposes.

Nasdaq National Market symbol................ CHIC
</TABLE>

This information is based on shares of common stock outstanding as of June
26, 1999. This information excludes:

- 1,824,600 shares of our common stock subject to options outstanding as of
June 26, 1999 at a weighted average exercise price of $1.80 per share;

- 1,965,440 shares of our common stock subject to warrants outstanding as of
June 26, 1999 at an exercise price of $1.00 per share, subject to
adjustment; and

- 750,000 additional shares of our common stock that have been reserved for
issuance upon future grants of options under our stock option plans.

6
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SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR CHARLOTTE RUSSE
--------------------------------- -------------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------- --------------------- -------------------
SEPT. 24, SEPT. 30, SEPT. 27, SEPT. 27, SEPT. 26, JUNE 27, JUNE 26,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $59,307 $61,568 $70,663 $ 81,543 $ 134,091 $94,410 $126,378
Cost of goods sold................. 37,123 38,014 43,774 50,723 93,142 65,507 85,996
--------- --------- --------- --------- --------- -------- --------
Gross profit....................... 22,184 23,554 26,889 30,820 40,949 28,903 40,382
Selling, general and administrative
expenses......................... 12,223 12,652 15,266 17,168 26,989 19,052 24,743
Amortization of goodwill and other
intangibles...................... -- -- -- 815 895 712 672
Predecessor shareholders'
salaries......................... 9,000 10,200 8,000 1,200 -- -- --
--------- --------- --------- --------- --------- -------- --------
Operating income................... 961 702 3,623 11,637 13,065 9,139 14,967
Interest income (expense), net..... (159) (28) 42 (2,279) (3,026) (2,198) (2,043)
Other charges, net................. (94) (115) (143) (315) (280) (263) (204)
--------- --------- --------- --------- --------- -------- --------
Income before income taxes and
extraordinary item............... 708 559 3,522 9,043 9,759 6,678 12,720
Income taxes(1).................... -- -- -- 3,987 4,245 2,905 5,342
--------- --------- --------- --------- --------- -------- --------
Income before extraordinary item... 708 559 3,522 5,056 5,514 3,773 7,378
Extraordinary loss from early debt
retirement....................... -- -- -- -- -- -- (519)
--------- --------- --------- --------- --------- -------- --------
Net income......................... $ 708 $ 559 $ 3,522 $ 5,056 $ 5,514 $ 3,773 $ 6,859
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
Earnings per share(2):
Basic earnings per share
Income before extraordinary
item......................... $ 0.28 $ 0.30 $ 0.21 $ 0.40
--------- --------- -------- --------
--------- --------- -------- --------
Net income..................... $ 0.28 $ 0.30 $ 0.21 $ 0.37
--------- --------- -------- --------
--------- --------- -------- --------
Diluted earnings per share
Income before extraordinary
item......................... $ 0.25 $ 0.27 $ 0.18 $ 0.35
--------- --------- -------- --------
--------- --------- -------- --------
Net income..................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
--------- --------- -------- --------
--------- --------- -------- --------
Weighted average shares
outstanding(2):
Basic............................ 18,300 18,300 18,300 18,300
Diluted.......................... 19,992 20,668 20,688 21,207

SELECTED OPERATING DATA:
Number of stores open at end of
period........................... 30 33 35 41 74 69 85
Average square footage per
store(3)......................... 8,994 8,363 8,290 8,206 7,603 7,618 7,558
Comparable store sales increase
(decrease)(4).................... (6.0)% 0.0% 5.0% 5.1% (5.8)% (9.2)% 6.9%
Average store sales(5)............. $ 2,068 $ 2,031 $ 2,048 $ 2,219 $ 2,097 $ 1,542 $ 1,564
Sales per square foot(6)........... $ 228 $ 231 $ 247 $ 268 $ 272 $ 199 $ 206
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 26, 1999
--------------------------
ACTUAL AS ADJUSTED(7)
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(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency).......................................................................... $ (7,420) $ (7,420)
Total assets.......................................................................................... 76,239 76,239
Total debt............................................................................................ 18,860 881
Total stockholders' equity............................................................................ 36,314 54,293
</TABLE>

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(1) The Predecessor had elected S corporation status for federal and state
income tax reporting purposes. Accordingly, the income of the Predecessor
was included in the tax returns of the shareholders and no provision for
income taxes was made. We have elected to operate as a C corporation since
our inception.

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(2) See Notes 1, 8 and 12 of Notes to the consolidated financial statements for
the method used to calculate the net income per share and weighted average
shares outstanding.

(3) Our average square footage per store is based on open stores at the end of
the period.

(4) Our comparable store percentages are based on net sales, and stores are
considered comparable beginning on the first day of the month following the
fourteenth full month of sales.

(5) Our average store sales are based on the time weighted average of open
stores in the period.

(6) Our sales per square foot consists of net sales divided by the time weighted
average of gross square footage of open stores.

(7) This column reflects our receipt of the net proceeds from the offering,
assuming an initial public offering price of $14.00 per share, after
deducting estimated and underwriting discounts and commissions and estimated
offering expenses. See "Use of Proceeds" and "Capitalization."

8
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RISK FACTORS

INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY OWNERSHIP
INTEREST IN CHARLOTTE RUSSE. AS A CHARLOTTE RUSSE STOCKHOLDER, YOU WILL BE
SUBJECT TO RISKS INHERENT IN OUR BUSINESS. THE VALUE OF YOUR INVESTMENT MAY
INCREASE OR DECLINE AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY
OUR COMMON STOCK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS WELL AS
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK.

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. In the first three quarters of fiscal 1999, we opened 11 new stores,
and we plan to open an additional 11 stores in the fourth quarter. The addition
of 22 stores in fiscal 1999 will represent an increase of approximately 30% from
the number of stores open at the end of fiscal 1998. We plan to open
approximately 30 new stores during fiscal 2000, an increase of 31% from the end
of fiscal 1999. 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:

- identify suitable store locations;

- negotiate acceptable lease terms, including desired tenant improvement
allowances;

- source sufficient levels of inventory to meet the needs of new stores;

- hire and train store personnel;

- successfully integrate new stores into our existing operations; and

- satisfy the fashion preferences of new geographic areas.

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.

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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 of the fourth quarter of fiscal 1998 and the first three quarters
of fiscal 1999, we experienced quarterly comparable store sales decreases
ranging from 1.7% to 10.5% in each of the five quarters preceding the fourth
quarter of fiscal 1998. 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:

- the timing of new store openings and the relative proportion of new stores
to mature stores;

- fashion trends;

- calendar shifts of holiday or seasonal periods;

- the effectiveness of our test-and-reorder strategy in maintaining
appropriate inventory levels;

- changes in our merchandise mix;

- timing of promotional events;

- general economic conditions and, in particular, the retail sales
environment;

- actions by competitors or mall anchor tenants;

- weather conditions; and

- the level of pre-opening expenses associated with new stores.

You should refer to the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for more information.

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 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 may 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. You should refer to the section entitled "Business--Intellectual
Property" for more information.

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

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<PAGE>
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 can not assure 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 southern California, Arizona and
Nevada. 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
California Merchandise Mart in Los Angeles. A natural disaster or other
catastrophic event, such as an earthquake, affecting southern California could
significantly disrupt our operations.

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. You should refer to the section
entitled "Management" for more information.

11
<PAGE>
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. You should refer to the section entitled
"Business--Management Information Systems" for more information.

OUR BUSINESS MAY BE ADVERSELY AFFECTED IF OUR CRITICAL COMPUTER SYSTEMS DO NOT
PROPERLY HANDLE DATE INFORMATION AFTER DECEMBER 31, 1999.

Our operations may face risks associated with the fact that many computer
systems and software programs do not properly recognize dates after December 31,
1999. This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to receive shipments, process financial information or credit card transactions,
deliver our merchandise to our stores or engage in other normal business
activities.

Despite preliminary testing of the hardware and software used in our
accounting, point of sale and inventory control, and distribution information
systems indicating that the versions of those products now used by us are Year
2000 compliant, those systems may nevertheless contain errors or defects
associated with Year 2000 date functions. We are unable to predict to what
extent our business may be affected if our internal systems experience a
material Year 2000 failure. The computer systems of financial institutions,
major credit card processors, utility companies, telecommunications providers
and other third-party service providers outside of our control may not be Year
2000 compliant. The failure by such entities to achieve timely Year 2000
compliance could result in significant disruptions in the services provided to
us, which could adversely affect our business, operating results and financial
condition.

We currently purchase merchandise from a significant number of vendors, and
do not make purchases or otherwise exchange data with our vendors
electronically. Because we purchase from such a diverse group of vendors, we do
not believe that we are dependent on the operations of any single vendor or
group of vendors. As a result, we do not intend to inquire systematically about
the Year 2000 readiness of our vendors. You should refer to the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Readiness Disclosure Statement" for more information.

RISKS RELATING TO THIS OFFERING

WE ARE CONTROLLED BY A SMALL GROUP OF EXISTING STOCKHOLDERS WHOSE INTERESTS MAY
DIFFER FROM OTHER STOCKHOLDERS.

Two investment funds managed by Saunders Karp & Megrue, L.P. (collectively,
the "SKM Funds") will beneficially own approximately 84.1% of our common stock
after the offering. Accordingly, they will have significant influence in
determining the outcome of all matters submitted to stockholders for approval,
including the election of directors and significant corporate transactions. The
interests of these stockholders may differ from the interests of other
stockholders and their concentration of ownership may have the effect of
delaying or preventing a change in our control that may be favored by other
stockholders. As long as the SKM Funds own a majority of our common stock, they
will have

12
<PAGE>

the power to elect our entire board of directors. In addition, under a
stockholders agreement, the SKM Funds have the power to (1) while they hold at
least 25% of our outstanding common stock, nominate three directors and
designate the chairman of the board of directors and (2) while they hold at
least 10% of the shares of common stock held by them immediately after the
completion of the offering, including shares of common stock issuable upon
exercise of outstanding warrants at such date, nominate two directors and
include one director elected by the SKM Funds on each committee of the board of
directors. You should refer to the sections entitled "Principal and Selling
Stockholders" and "Related Transactions" for more information.

THE LIQUIDITY OF OUR STOCK IS UNCERTAIN BECAUSE IT HAS NEVER BEEN PUBLICLY
TRADED, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU
PAID.

There has not been a public market for our common stock. As a result, the
initial public offering price will be determined by negotiations among the
underwriters, the selling stockholders and us, and may not be indicative of
prices that will prevail in the public trading markets. Further, we cannot
predict the extent to which a trading market for our common stock will develop
or how liquid that market will be. You may not be able to resell your shares at
or above the initial public offering price.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE MATERIALLY ADVERSELY AFFECTED BY
MARKET VOLATILITY.

The market price of our common stock is likely to fluctuate, both because of
actual and perceived changes in our financial results and prospects and because
of general volatility in the stock market. The factors that could cause
fluctuations in our stock price may include, among other factors discussed in
this section:

- actual or anticipated variations in comparable store sales or quarterly
operating results;

- changes in financial estimates by research analysts;

- actual or anticipated changes in the United States economy or the
retailing environment;

- changes in the market valuations of other specialty apparel or retail
companies;

- announcements by us or our competitors of significant acquisitions,
strategic partnerships, divestitures, joint ventures or other strategic
initiatives; and

- actual or anticipated sales of common stock by existing stockholders,
whether in the market or in a public offering.

THE PUBLIC SALE OF OUR STOCK BY EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT THE
PRICE OF OUR COMMON STOCK.

The market price of our common stock could decline as a result of market
sales by our existing stockholders after the offering, or the perception that
such sales will occur. These sales also might make it difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. You should refer to the section entitled "Shares Eligible for
Future Sale" for more information.

YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT IN OUR COMMON STOCK.

The initial public offering price per share will significantly exceed our
net tangible book value per share. Accordingly, you will suffer immediate and
substantial dilution of $12.89 per share, assuming an initial public offering
price of $14.00 per share. This dilution is due in large part to the fact that
earlier investors paid substantially less than the public offering price when
they purchased their shares of our common stock. The exercise of outstanding
options and warrants to purchase our common stock will result in additional
dilution per share. You should refer to the section entitled "Dilution" for more
information.

13
<PAGE>
FORWARD-LOOKING STATEMENTS

We have made statements under the captions "Summary," "Risk Factors," "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in other sections of this prospectus 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 anticipated trends in our business.

We believe it is important to communicate our expectations to our investors.
However, 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 those factors discussed under the caption entitled "Risk
Factors."

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 prospectus might not occur.

14
<PAGE>
USE OF PROCEEDS

We estimate that the net proceeds from our sale of the 1,450,000 shares of
common stock we are offering will be approximately $18.0 million, assuming an
initial public offering price of $14.00 and after deducting the estimated
underwriting discounts and offering expenses payable. We will not receive any
proceeds from the sale of common stock by the selling stockholders.

We intend to use approximately $18.0 million of the net proceeds from this
offering to repay secured indebtedness outstanding under our revolving credit
facility with BankBoston, N.A, as agent. This debt has a maturity date of
September 30, 2002 and bears interest at a rate per annum equal to either (1)
the base rate established by BankBoston, N.A. plus 1.00% or (2) the Eurodollar
rate of BankBoston, N.A. plus 2.50%, at our option and subject to adjustments.
As of September 13, 1999, the interest rate on borrowings under our revolving
credit facility was 7.68%. We will use the remainder of the net proceeds from
this offering for general corporate purposes and, accordingly, we will have
significant flexibility in applying such proceeds. Pending any use, we will
invest the net proceeds of this offering in short-term, investment-grade
interest-bearing securities.

DIVIDEND POLICY

We do not intend to declare or pay a cash dividend on our common stock in
the foreseeable future. We currently intend to retain earnings to finance future
operations and expansions. We are prohibited by the terms of our revolving
credit facility from paying cash dividends without the prior written consent of
the lender.

15
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 26, 1999 on an
actual basis and as adjusted to reflect (1) a 100-for-one split of our common
stock, (2) an increase in our authorized common stock to 100,000,000 shares, (3)
the sale of the shares of common stock offered by us at an assumed initial
public offering price of $14.00 per share, after deducting the underwriting
discount and estimated offering expenses payable by us, (4) the application of
the estimated net proceeds as described in "Use of Proceeds" and (5) the
cashless exercise of warrants to purchase 384,236 shares of common stock by FSC
Corp., an affiliate of BankBoston Corporation. This table contains unaudited
information and should be read in conjunction with the consolidated financial
statements appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 26, 1999
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital leases, current portion.......................................................... $ 428 $ 428
---------- -----------
---------- -----------
Capital leases, net of current portion................................................... 182 182
Notes payable to bank.................................................................... 18,250 271
---------- -----------
Total long-term debt................................................................. 18,432 453
Stockholder's equity:
Preferred stock, par value $0.01 per share; 3,000,000 shares authorized, none issued or
outstanding.......................................................................... -- --
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 18,310,800
shares issued and outstanding; 20,145,036 shares issued and outstanding, as
adjusted............................................................................. 183 198
Additional paid-in capital............................................................. 19,422 37,386
Deferred compensation.................................................................. (720) (720)
Retained earnings...................................................................... 17,429 17,429
---------- -----------
Total stockholders' equity........................................................... 36,314 54,293
---------- -----------
Total capitalization............................................................... $ 54,746 $ 54,746
---------- -----------
---------- -----------
</TABLE>

The share information in the table is based on our shares of common stock
outstanding as of June 26, 1999. This table does not include:

- 1,824,600 shares of our common stock subject to options outstanding as of
June 26, 1999 at a weighted average exercise price of $1.80 per share;

- 1,965,440 shares of our common stock subject to warrants outstanding as of
June 26, 1999 at an exercise price of $1.00 per share, subject to
adjustment; and

- 750,000 additional shares of our common stock that have been reserved for
issuance under our stock plans.

16
<PAGE>
DILUTION

Our pro forma net tangible book value as of June 26, 1999 was approximately
$4.4 million or $0.24 per share of common stock. Our pro forma net tangible book
value per share represents our total tangible assets less total liabilities
divided by the pro forma total number of shares of common stock outstanding at
such date, assuming the cashless exercise of warrants to purchase 384,236 shares
of common stock at an exercise price of $1.00 per share.

Without taking into account any changes in net tangible book value after
June 26, 1999, other than to give effect to the sale of the shares of common
stock offered by us at an assumed initial public offering price of $14.00 per
share, after deducting the underwriting discount and estimated offering expenses
payable by us, our pro forma net tangible book value as of June 26, 1999 would
have been approximately $22.4 million or $1.11 per share of common stock. This
amount represents an immediate increase in pro forma net tangible book value of
$0.87 per share to the existing stockholders and an immediate dilution in pro
forma net tangible book value of $12.89 per share to new investors purchasing
shares in this offering. If the initial public offering price is higher or
lower, the dilution to new investors will be greater or less. The following
table illustrates the dilution in pro forma net tangible book value per share to
new investors.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $ 14.00
Pro forma net tangible book value per share as of June 26, 1999............ $ 0.24
Increase in net tangible book value per share attributable to new
investors................................................................ 0.87
---------
Pro forma net tangible book value per share after the offering............... 1.11
---------
Dilution per share to new investors.......................................... $ 12.89
---------
---------
</TABLE>

The following table summarizes on a pro forma basis, as of June 26, 1999,
the number of shares of common stock purchased from us, the aggregate cash
consideration paid to us and the average price per share paid by existing
stockholders and to be paid by new investors purchasing the shares of common
stock in this offering at an assumed initial public offering price of $14.00 per
share, before deducting underwriting discounts and commissions and estimated
offering expenses payable by us.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.............. 18,695,036 92.8% $18,310,800 47.4% $ 1.00
New Investors...................... 1,450,000 7.2 20,300,000 52.6 14.00
------- -------- ------- --------
Total............................ 20,145,036 100.0% $38,610,800 100.0%
------- -------- ------- --------
------- -------- ------- --------
</TABLE>

The above information assumes no exercise of (1) the underwriters'
over-allotment option and (2) stock options or warrants after June 26, 1999. As
of June 26, 1999, we had reserved 1,824,600 shares of our common stock for
issuance upon exercise of outstanding options at a weighted average exercise
price of $1.80 per share and 1,965,440 shares of our common stock for issuance
upon exercise of outstanding warrants at an exercise price of $1.00 per share.
To the extent any of these options or warrants are exercised, there will be
further dilution to new investors.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE 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
prospectus. The selected consolidated balance sheet data as of September 27,
1997 and September 26, 1998 and the selected consolidated statement of income
data for the three years in the period ended September 26, 1998 have been
derived from our consolidated financial statements, which have been audited by
Ernst & Young LLP, independent auditors, and are included elsewhere in this
prospectus. The selected consolidated balance sheet data as of September 24,
1994, September 30, 1995 and September 27, 1996 and the selected consolidated
statement of income data for each of the two years in the period ended September
30, 1995 were derived from audited financial statements which are not included
in this prospectus. The selected consolidated balance sheet data as of June 27,
1998 and June 26, 1999 and the consolidated statement of income data for the
nine months ended June 27, 1998 and June 26, 1999 have been derived from
unaudited consolidated financial statements included elsewhere in this
prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of our management are necessary for the fair presentation of our
consolidated financial position and results of operations for those periods. Our
results for the nine months ended June 26, 1999 are not necessarily indicative
of the results that may be expected for the entire year or for any future
period.

<TABLE>
<CAPTION>
PREDECESSOR CHARLOTTE RUSSE
------------------------------- ------------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------- -------------------- --------------------
SEPT. 24, SEPT. 30, SEPT. 27, SEPT. 27, SEPT. 26, JUNE 27, JUNE 26,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................................. $ 59,307 $ 61,568 $ 70,663 $ 81,543 $ 134,091 $ 94,410 $ 126,378
Cost of goods sold......................... 37,123 38,014 43,774 50,723 93,142 65,507 85,996
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................... 22,184 23,554 26,889 30,820 40,949 28,903 40,382
Selling, general and administrative
expenses................................. 12,223 12,652 15,266 17,168 26,989 19,052 24,743
Amortization of goodwill and other
intangibles.............................. -- -- -- 815 895 712 672
Predecessor shareholders' salaries......... 9,000 10,200 8,000 1,200 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Operating income........................... 961 702 3,623 11,637 13,065 9,139 14,967
Interest income (expense), net............. (159) (28) 42 (2,279) (3,026) (2,198) (2,043)
Other charges, net......................... (94) (115) (143) (315) (280) (263) (204)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and
extraordinary item....................... 708 559 3,522 9,043 9,759 6,678 12,720
Income taxes(1)............................ -- -- -- 3,987 4,245 2,905 5,342
--------- --------- --------- --------- --------- --------- ---------
Income before extraordinary item........... 708 559 3,522 5,056 5,514 3,773 7,378
Extraordinary loss from early debt
retirement............................... -- -- -- -- -- -- (519)
--------- --------- --------- --------- --------- --------- ---------
Net income................................. $ 708 $ 559 $ 3,522 $ 5,056 $ 5,514 $ 3,773 $ 6,859
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share(2):
Basic earnings per share:
Income before extraordinary item....... -- -- -- $ 0.28 $ 0.30 $ 0.21 $ 0.40
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income............................. -- -- -- $ 0.28 $ 0.30 $ 0.21 $ 0.37
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings per share:
Income before extraordinary item....... -- -- -- $ 0.25 $ 0.27 $ 0.18 $ 0.35
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income............................. -- -- -- $ 0.25 $ 0.27 $ 0.18 $ 0.32
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average shares outstanding(2):
Basic.................................... 18,300 18,300 18,300 18,300
Diluted.................................. 19,992 20,668 20,688 21,207
</TABLE>

18
<PAGE>

SELECTED OPERATING DATA:
Number of stores open at end of period..... 30 33 35 41 74 69 85
Average square footage per store(3)........ 8,994 8,363 8,290 8,206 7,603 7,618 7,558
Comparable store sales increase
(decrease)(4)............................ (6.0)% 0.0% 5.0% 5.1% (5.8)% (9.2)% 6.9%
Average stores sales(5).................... $ 2,068 $ 2,031 $ 2,048 $ 2,219 $ 2,097 $ 1,542 $ 1,564
Sales per square foot(6)................... $ 228 $ 231 $ 247 $ 268 $ 272 $ 199 $ 206

BALANCE SHEET DATA:
Working capital (deficiency)............... $ 952 $ 1,285 $ (3,589) $ (2,676) $ (1,239) $ (1,210) $ (7,420)
Total assets............................... 15,613 17,705 49,641 57,128 74,427 71,577 76,239
Total debt................................. 4,903 5,459 21,900 22,325 28,525 29,900 18,860
Total stockholders' equity................. 4,583 5,142 18,923 23,980 29,445 27,672 36,314
</TABLE>

- ----------

(2) See Notes 1, 8 and 12 of Notes to the consolidated financial statements for
the method used to calculate the net income per share and weighted average
shares outstanding.

(3) Our average square footage per store is based on open stores at the end of
the period.

(4) Our comparable store percentages are based on net sales, and stores are
considered comparable beginning on the first day of the month following the
fourteenth full month of sales.

(5) Our average store sales are based on the time weighted average of open
stores in the period.

(6) Our sales per square foot consists of net sales divided by the time weighted
average of gross square footage of open stores.

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We were founded in 1975 and opened our first store in Carlsbad, California.
As a result of the success achieved with this store, we gradually expanded our
business by adding 15 stores throughout southern California over the next 14
years. In 1990, we opened our first store in Arizona, and in 1994 we expanded
into the Nevada market. As of the end of fiscal 1996, we were operating a chain
of 35 stores in three states, generating over $70.0 million of net sales.

On September 26, 1996, two funds managed by Saunders Karp & Megrue, L.P., a
private equity investment firm, acquired Charlotte Russe from its founders with
the intention of pursuing an accelerated national new store expansion program.
Concurrent with the acquisition, Bernard Zeichner, who had joined us as
President in May 1996, acquired an ownership interest in the business from the
SKM Funds. The new owners believed a significant opportunity existed to leverage
the strength of our new store economics by further penetrating existing markets
and expanding the chain into other regions of the country. Mr. Zeichner
recognized the importance of developing the necessary infrastructure to execute
this strategic business plan and began hiring a number of key senior executives
with national retail experience to complement the existing management team.

In fiscal 1997, the first fiscal year under our new ownership, we opened
seven new stores compared to two new stores opened in the prior fiscal year, and
entered the northern California, Florida, Texas and Hawaii markets. As a result
of this new store growth and a 5.0% increase in our comparable store sales, our
net sales grew to $81.5 million in fiscal 1997 from $70.7 million in fiscal
1996, an increase of 15.4%.

In fiscal 1998, we undertook several strategic initiatives to enhance our
long-term national expansion plans. At the beginning of fiscal 1998, we acquired
16 stores in a bankruptcy proceeding from Rampage Retailing, Inc. for a total
purchase price of $10.5 million. These stores provided us with a second distinct
retail concept as well as an additional vehicle for growth. In addition, we
opened 17 new Charlotte Russe stores, primarily in markets we entered in the
prior fiscal year and in new markets such as Georgia and South Carolina.
Accordingly, our total store base increased by 80.5% during fiscal 1998.
Finally, we moved into new corporate offices and a larger, more automated
distribution center capable of supporting our expansion plans over the next
several years. These initiatives, particularly the Rampage acquisition,
significantly strained our managerial and other resources. Due to the expedited
timing of the Rampage acquisition, we initially diverted Charlotte Russe
merchandise to support the opening of these stores and devoted significant
managerial resources to integrating this new concept. As a result, our buying
department was distracted by having to purchase for two distinctly different
chains throughout much of the first half of fiscal 1998 until we were able to
establish separate and dedicated buying operations for each concept. While we
achieved significant growth in net sales during fiscal 1998, we were only able
to achieve a modest increase in our operating income.

Our strong operating performance in fiscal 1999 reflects the benefits of the
infrastructure building process that we undertook during fiscal 1998. Net sales
for the nine months ended June 26, 1999 increased to $126.4 million from $94.4
million, an increase of 33.9% over the same period last year. This increase
resulted from a rise in comparable store sales of 6.9% and our continued growth
of new stores. During the same period, our operating income grew to $15.0
million from $9.1 million, an increase of 63.8%. We opened 11 new stores during
the first nine months of fiscal 1999, and we anticipate opening 11 more stores
before the end of the fiscal year. These stores include our first locations in
Michigan, Illinois, Pennsylvania, Connecticut, North Carolina and Puerto Rico.

20
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth our operating results, expressed as a
percentage of sales, and store information for the periods indicated. We
acquired our Rampage stores in the beginning of fiscal 1998 and, accordingly,
our results for fiscal 1996 and 1997 consist only of the results for our
Charlotte Russe stores.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ------------------------
------------------------------- JUNE 27, JUNE 26,
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................................ 61.9 62.2 69.5 69.4 68.0
--------- --------- --------- ----- -----
Gross profit.................................................. 38.1 37.8 30.5 30.6 32.0
Selling, general and administrative expenses.................. 21.6 21.1 20.1 20.2 19.6
Amortization of goodwill and other intangibles................ 0.0 1.0 0.7 0.7 0.6
Predecessor shareholders' salaries............................ 11.4 1.4 0.0 0.0 0.0
--------- --------- --------- ----- -----
Operating income.............................................. 5.1 14.3 9.7 9.7 11.8
Interest income (expense), net................................ 0.1 (2.8) (2.2) (2.3) (1.6)
Other charges, net............................................ (0.2) (0.4) (0.2) (0.3) (0.2)
--------- --------- --------- ----- -----
Income before income taxes and extraordinary item............. 5.0 11.1 7.3 7.1 10.0
Income taxes.................................................. 0.0 4.9 3.2 3.1 4.2
--------- --------- --------- ----- -----
Income before extraordinary item.............................. 5.0 6.2 4.1 4.0 5.8
Extraordinary loss from early debt retirement................. 0.0 0.0 0.0 0.0 (0.4)
--------- --------- --------- ----- -----
Net income.................................................... 5.0% 6.2% 4.1% 4.0% 5.4%
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
Number of stores open at end of period........................ 35 41 74 69 85
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>

NINE MONTHS ENDED JUNE 26, 1999 COMPARED TO NINE MONTHS ENDED JUNE 27, 1998

NET SALES. Net sales increased to $126.4 million from $94.4 million, an
increase of $32.0 million or 33.9% over the same period last year. This increase
is attributable primarily to $26.2 million of net sales for the 11 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
6.9% and contributed $5.8 million to the net sales increase during this period.

GROSS PROFIT. Gross profit represents net sales less cost of goods sold,
which includes buying, distribution and occupancy costs. Gross profit increased
to $40.4 million from $28.9 million, an increase of $11.5 million or 39.7% over
the same period last 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 32.0% from 30.6%. The increase in gross profit as a percentage of net sales
was principally due to higher initial markups and the impact of leveraging
distribution center expenses over a higher sales base.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $24.7 million from $19.1 million, an
increase of $5.6 million or 29.9% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. As a
percentage of sales, these expenses dropped to 19.6% from 20.2%, 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.

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<PAGE>

AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles expense decreased to $712,000 from $672,000, a decrease of
$40,000 or 5.6% over the same period last year. This decrease is a result of
adjustments to the carrying value of assets recorded in connection with the
Rampage acquisition.

INCOME TAXES. The effective tax rate of 42.0% for the nine months ended
June 26, 1999 compares to an effective tax rate of 43.5% for the same period
last year. 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 $6.9 million from $3.8 million, an
increase of $3.1 million or 81.8% over the same period last 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 an increase of $0.7 million in net interest expense. The increase in
net interest expense reflects a $0.8 million charge relating to the early
repayment of the 12.5% subordinated debt in June 1999.

YEAR ENDED SEPTEMBER 26, 1998 COMPARED TO YEAR ENDED SEPTEMBER 27, 1997

NET SALES. Net sales increased to $134.1 million from $81.5 million, an
increase of $52.6 million or 64.4% over the prior fiscal year. The increase
reflects $35.5 million of net sales from the 17 Rampage stores that were
acquired or opened during fiscal 1998. An additional $21.6 million of net sales
increases are related to the 16 new Charlotte Russe stores opened in fiscal
1998, as well as other stores opened in prior fiscal years that did not qualify
as comparable stores. This increase was partially offset by a 5.8% decrease in
our comparable store sales, which resulted in decreased sales of $4.5 million
compared to the prior fiscal year.

GROSS PROFIT. Gross profit increased to $40.9 million from $30.8 million,
an increase of $10.1 million or 32.9% over the same period last year. This
increase is a result of increased net sales, offset in part by decreased gross
profit margins. As a percentage of net sales, gross profit decreased to 30.5%
from 37.8%. The decrease in gross profit as a percentage of sales resulted in
part from the inclusion of the Rampage stores acquired at the beginning of
fiscal 1998, which stores have higher occupancy costs. In addition, lower
comparable stores sales at our Charlotte Russe stores resulted in higher
markdowns and higher occupancy expenses as a percentage of net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $27.0 million from $17.2 million, an
increase of $9.8 million or 57.2% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. These
expenses as a percentage of net sales declined to 20.1% from 21.1% as corporate
expenses were leveraged by the significant increase in our sales base. This
decline was partially offset by an increase in store operating expenses
resulting from the inclusion of the Rampage stores, which have slightly higher
expense levels than our Charlotte Russe stores, and higher expenses for our
Charlotte Russe stores resulting from a drop in average store volumes.

AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles expense increased to $0.9 million from $0.8 million, an
increase of $0.1 million or 12.5% over the same period last year. This increase
is a result of our acquisition of a license agreement and other intangibles in
connection with the Rampage acquisition.

INCOME TAXES. The effective tax rate of 43.5% for the year ended September
26, 1998 compares to an effective tax rate of 44.1% for the prior fiscal year.

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<PAGE>
NET INCOME. Net income increased to $5.5 million from $5.1 million, an
increase of $0.4 million or 9.0% over the prior fiscal year. This increase was
primarily due to an increase in gross profit and a $1.2 million reduction in
salaries paid to predecessor shareholders pursuant to terms of the September
1996 acquisition. This increase in net income was largely offset by higher
selling, corporate and interest expenses associated with the Rampage
acquisition.

YEAR ENDED SEPTEMBER 27, 1997 COMPARED TO YEAR ENDED SEPTEMBER 27, 1996

NET SALES. Net sales increased to $81.5 million from $70.7 million, an
increase of $10.8 million or 15.4% over the prior fiscal year. The increase
reflects $7.4 million attributable to net sales for the seven new stores opened
during fiscal 1997, as well as other stores opened in prior fiscal years that
did not qualify as comparable stores. Our comparable store sales increased 5.1%
and contributed $3.4 million to the net sales increase.

GROSS PROFIT. Gross profit increased to $30.8 million from $26.9 million,
an increase of $3.9 million or 14.6% over the same period last year. This
increase is a result of increased net sales, offset in part by decreased gross
profit margin. As a percent of sales, gross profit decreased to 37.8% from
38.1%, primarily due to increased distribution center and related expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $17.2 million from $15.3 million, an
increase of $1.9 million or 12.5% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. As a
percentage of net sales, these expenses decreased to 21.1% from 21.6%, as a
result of the impact of leveraging store operating expenses over higher average
store sales volumes.

AMORTIZATION OF GOODWILL AND OTHER INTANGIBLES. Amortization of goodwill
and other intangibles expense increased to $0.8 million compared with no
amortization of goodwill and other intangibles expense during the prior year.
The increase is a result of our acquisition in September 1996.

PREDECESSOR SHAREHOLDERS' SALARIES. Predecessor shareholders' salaries
decreased to $1.2 million from $8.0 million, a decrease of $6.8 million or 85.0%
over the same period last year. The decrease is a result of our acquisition in
September 1996, which resulted in the substantial reduction in the salaries paid
to the predecessor shareholders. Salaries paid to the predecessor shareholders
subsequent to the acquisition date relate to services rendered to us during
fiscal 1997.

INCOME TAXES. The effective tax rate of 44.1% for the year ended September
27, 1997 compares to no income tax expense the prior year. We operated as an S
Corporation prior to fiscal 1997 and, as a result, had not been subject to
federal or certain state income taxes.

NET INCOME. Net income increased to $5.1 million from $3.5 million, an
increase of $1.6 million or 43.6% over the prior fiscal year. This increase was
primarily due to an increase in gross profit and the $6.8 million reduction in
salaries paid to predecessor shareholders pursuant to terms of the September
1996 acquisition. This increase in net income was partially offset by an
increase in selling, general and administrative expenses, the $0.8 million
increase in amortization of goodwill and other intangibles relating to our
acquisition, a $2.3 million increase in net interest expense primarily
attributable to higher levels of borrowing in connection with our acquisition,
and a $0.2 million increase in other charges relating to the payment of a
monitoring fee to Saunders Karp & Megrue, L.P.

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

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<PAGE>

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
"Risk Factors."

The following table includes our unaudited quarterly results of operations
data for each of the three quarters in the nine months ended June 26, 1999 and
for each of the four quarters in the year ended September 26, 1998. 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 conjunction with our audited
consolidated financial statements and the notes to those statements included
elsewhere in the prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR 1998 FISCAL YEAR 1999
--------------------------------------------- ---------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
--------------------------------------------- ---------------------------------
DEC. 27, MAR. 28, JUNE 27, SEPT. 26, DEC. 28, MAR. 27, JUNE 26,
1997 1998 1998 1998 1998 1999 1999
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... $ 35,251 $ 27,202 $ 31,957 $ 39,681 $ 46,007 $ 35,689 $ 44,682
Gross profit................ 12,158 7,482 9,263 12,046 15,150 10,625 14,607
Operating income............ 5,324 1,532 2,283 3,926 6,385 2,784 5,798
Net income.................. 2,605 333 835 1,741 3,223 1,204 2,432

AS A PERCENTAGE OF NET SALES:
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................ 34.5 27.5 29.0 30.4 32.9 29.8 32.7
Operating income............ 15.1 5.6 7.1 9.9 13.9 7.8 13.0
Net income.................. 7.4 1.2 2.6 4.4 7.0 3.4 5.4

OPERATING DATA:
Comparable store sales
increase (decrease)....... (10.5)% (10.4)% (6.7)% 4.1% 4.4% 4.5% 11.3%
Stores open at end of
period.................... 61 62 69 74 80 82 85
</TABLE>

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. We have used borrowings under our
revolving credit facility in the past for acquisitions, including our
acquisition by the SKM Funds and the acquisition of 16 stores from Rampage
Retailing, Inc. Due to the rapid turnover of our inventory, we generate trade
payables and other accrued liabilities sufficient to offset our working capital
requirements. As of June 26, 1999, we had negative working capital of $7.4
million.

During fiscal years 1997, 1998 and the first nine months of fiscal 1999, net
cash provided by operations was $8.3 million, $9.4 million and $17.4 million. In
the first nine months of fiscal 1999, cash flows from operating activities
increased as a result of increased operating earnings and increased current
liabilities. In fiscal 1997 and 1998 cash used in investing activities included
$2.0 million and $7.3 million related to the acquisition of 16 stores from
Rampage Retailing, Inc. Cash flows used for new store openings and the
construction of our distribution center and corporate facility were $5.2
million, $8.5 million and $7.6 million in fiscal 1997, 1998 and the nine months
ended June 26, 1999.

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<PAGE>
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 were $1.6 million and $2.6 million in fiscal 1997
and 1998. During the nine months ended June 26, 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 $1.7 million during the same period.

We estimate that the average net investment to open a new store is
approximately $450,000, which includes capital expenditures, exclusive of
landlord contributions, and initial inventory, net of payables. During the first
year of operations, our new stores opened during fiscal 1997 and 1998 generated
store-level operating cash flow in excess of $400,000, representing an average
cash return on investment greater than 90%. After taking into account store
remodelings, corporate capital projects and distribution center enhancements,
total capital expenditures for fiscal 2000 are projected to be approximately
$18.0 million.

Our revolving credit facility with BankBoston, N.A., as agent, provides us
with a $32.0 million revolving line of credit under which borrowed funds bear
interest at either the Eurodollar rate plus 2.50% or the base rate plus 1.00%.
The revolving credit facility restricts levels of capital expenditures and
indebtedness. For example, in fiscal 1999, capital expenditures are limited to
the greater of $13.0 million or 54.0% of consolidated earnings before interest,
taxes, depreciation and amortization, and our debt level, other than permitted
indebtedness, is limited to $750,000. The revolving credit facility also
requires us to maintain specified financial ratios such as:

- funded debt to earnings before interest, taxes, depreciation and
amortization;

- earnings before interest, taxes, depreciation and amortization to total
debt service;

- interest coverage; and

- inventory turns.

The revolving credit facility is secured by substantially all of our assets. The
revolving credit facility terminates and all outstanding borrowings are due on
September 30, 2002. At June 26, 1999, our outstanding balance under the
revolving credit facility was $18.3 million. We intend to apply the net proceeds
from our offering to the outstanding balance of our credit facility.

We believe that the proceeds from this offering, together with anticipated
cash flow from operations and funds anticipated to be available under our
revolving credit facility, will be sufficient to fund our store expansion
program and working capital requirements through fiscal 2000. If our cash flow
from operations should decline significantly, or if we accelerate our store
expansion program, it may be necessary for us to seek additional sources of
capital.

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, we have debt outstanding under our $32.0
million revolving credit facility. This debt has a maturity date of September
30, 2002 and bears interest at a rate per annum equal to either (1) the base
rate established by BankBoston, N.A. plus 1.00% or (2) the Eurodollar rate of
BankBoston, N.A. plus 2.50%, at our option and subject to adjustments. As of
September 13, 1999, the interest rate on outstanding borrowings was 7.68%. We
intend to use approximately $18.0 million of the net proceeds from this offering
to repay any of the secured indebtedness outstanding at the time of such
payment, but may borrow additional funds under our facility as needed. 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.

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

25
<PAGE>
and are shown that way on our balance sheet. Changes in interest rates affect
the investment income we earn on our investments and, therefore, impact our cash
flows and results of operations.

YEAR 2000 READINESS DISCLOSURE STATEMENT

The Year 2000 issue refers to the potential for system and processing
failures of date-related calculations after December 31, 1999, and is the result
of computer-controlled systems using two digits rather than four to define the
applicable year. For example, computer programs that have date sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000.

STATE OF READINESS. We have made a preliminary assessment of the Year 2000
readiness of our core management information systems, including the hardware
supporting those systems. We have either replaced or upgraded substantially all
of these systems within the past two years and we have been advised by the
vendors of the hardware and software used in our financial accounting,
point-of-sale and inventory management, and distribution center sortation
systems that the versions of their products now used by us are Year 2000
compliant. Each of these replacements and upgrades were part of our budgeted
expenses for upgrading our computer infrastructure and were not primarily part
of an attempt to address the Year 2000 issue. We have begun testing these
systems ourselves on a separate computer with simulated dates after December 31,
1999 to verify compliance, and plan to complete this testing by November 1,
1999. We believe that any issues identified will be corrected prior to December
31, 1999, although we cannot assure you that we will be able to complete any
necessary corrective actions in a timely manner.

We are also planning to investigate other less critical equipment and
machinery that may contain embedded technology with Year 2000 compliance
problems, such as our alarm system and uninterrupted power supply. We expect
that we will have completed our initial assessment and any corrective actions
with respect to these systems no later than November 30, 1999. We also have
material relationships with third-party service providers outside of our
control, such as financial institutions, major credit card processors,
telecommunications providers and public utilities, that may not have adequately
addressed the Year 2000 issue. We have been orally advised by our major credit
card processors and telecommunications providers that they believe their
operations will not be significantly disrupted by Year 2000 issues. Other than
minimal testing of the systems of our major credit card processors, however, we
have no assurance that our third-party service providers will be Year 2000
compliant or that they are correct in their Year 2000 assessments. Significant
disruptions in the services provided to us would adversely affect our
operations. We currently purchase merchandise from a significant number of
vendors, but do not make purchases or otherwise exchange data with our vendors
electronically. In addition, because we purchase merchandise from a diverse
group of vendors we do not believe that we are dependent on the operations of
any single vendor or group of vendors. As a result, we do not intend to inquire
systematically about the Year 2000 readiness of our vendors and their ability to
address Year 2000 issues.

OUR YEAR 2000 RISKS. We currently believe that our systems will be Year
2000 compliant and capable of functioning beyond December 31, 1999. In the most
reasonably likely worst case scenario, we could experience total system failure
for our management information systems. This would cause significant disruptions
in our operations, including a temporary inability to process financial
information or credit card transactions, receive shipments and timely deliver
our merchandise to our stores, execute our critical test-and-reorder strategy
effectively or otherwise engage in other normal business activities. We may also
suffer damage to our brand names if we are unable to execute our
test-and-reorder strategy to track changes in fashion trends, and we may
experience increased expenses associated with stabilization of operations after
critical systems failure and execution of contingency plans. In another
reasonably likely worst case scenario, a significant number of our vendors would
be unable to continue to supply adequate amounts of merchandise. Although the
adverse effects of any or all of these events are not quantifiable at this time,
any of these events would likely result in a loss of income and otherwise have a
material adverse effect on our business and operating results.

26
<PAGE>

OUR CONTINGENCY PLANS. We have not yet developed and do not expect to
develop contingency plans to handle the most likely worst case Year 2000
scenarios because we believe our systems will be Year 2000 compliant and capable
of functioning beyond December 31, 1999. We expect, however, that the worst case
scenario involving the failure of our management information systems over a
sustained period would necessitate reverting to a number of manual systems for
recording sales, ordering merchandise and replenishing our store level
inventory. Further, we expect that the worst case scenario for the loss of a
significant number of vendors would require us to seek alternative sources of
supply, although there can be no assurance that such alternative sources would
be available on reasonable terms or at all. We intend to take appropriate
actions to mitigate the effects of third party failures to remediate Year 2000
issues and for unexpected failures in our systems. If it becomes necessary for
us to take corrective actions, it is uncertain whether these actions would
result in significant interruptions in service or delays in business operations
or whether it would have a material adverse effect on our results of operations,
financial position or cash flow.

OUR YEAR 2000 REMEDIATION COSTS. As of June 26, 1999, we have spent less
than $50,000 addressing the Year 2000 issue and expect to spend a comparable
amount during the remainder of this calendar year. These amounts do not reflect
the cost of our employees that are responsible for testing our systems for Year
2000 compliance. We currently have nine employees spending a significant portion
of their time resolving Year 2000 compliance problems. Until we have completed
our compliance testing, however, we cannot be sure that the costs associated
with remediating Year 2000 issues will not be materially more than our current
estimate.

INFLATION

We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods presented.

27
<PAGE>
BUSINESS

GENERAL

We are a national 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 85 stores in 12 states as of June 26, 1999. Through our fashion
content, merchandise mix, exciting store layout and design, and striking
merchandise presentation, we project fashion attitudes that appeal to customers
across age and socioeconomic boundaries. 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 who are willing to
pay somewhat higher prices to create a cutting-edge look. Our stores are located
predominantly 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 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 20% to 30%
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 Z label. The remainder of our merchandise consists of
nationally-recognized brands popular with our customers.

OUR BUSINESS STRATEGY

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 20% to 30% 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 $18.75 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 Z 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. As

28
<PAGE>

reported by The NPD Group, Inc., our target population spent a total of $28.1
billion on apparel in 1998, up from $25.7 billion in 1995. 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 on average exceed 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. 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 1997 and 1998 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.

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 19 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 16 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. 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.

OUR EXPANSION STRATEGY

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

29
<PAGE>
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 doubled our store base from 35 stores
to 85 stores as of June 26, 1999. We anticipate operating 96 stores throughout
15 states and Puerto Rico as of the end of fiscal 1999. 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 approximately 30 stores during fiscal 2000, 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 underperforming stores
that we are considering closing prior to the end of fiscal 2000.

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 three 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. Our
sales of lingerie, as a percentage of net sales, increased from 1.6% to 5.4%
during this period. 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. To capitalize on this market opportunity, we intend to
test a new store concept called "Charlotte's Room," through which we will sell
themed products aimed at the teenage consumer. We initially plan to test this
concept in two stores later this calendar year.

OUR TARGET CUSTOMERS

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.

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

30
<PAGE>
to instituting corporate-wide markdowns. We also monitor recent selling history
within each store by merchandise classification, style, color and size.

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 $18.75, and
the average sales price for all of our merchandise, including accessories, is
$14.00.

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 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 Z 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 $23.00.

VISUAL MERCHANDISING

We believe that a dynamic in-store merchandising strategy is critical to
strengthening our brand images and creating a fresh and exciting shopping
environment for our customers. We rely on a combination of merchandise
presentation and complementary in-store signage to communicate a consistent
fashion point-of-view to our customers and to encourage 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
by grouping our fashionable merchandise into multiple in-store boutiques
centered around lifestyle themes. While shopping in our store, a customer will
observe separate and distinct areas devoted to her various lifestyle needs,
including casual, club and career wear, lingerie, shoes and accessories, each
offering a vast array of selections. Each lifestyle collection is complemented
by an extensive in-store image advertising campaign that reinforces the
lifestyles and aspirations of our target customers, while also strengthening our
brand image. We believe that this multi-boutique feel creates an attractive

31
<PAGE>
atmosphere for our customers and that the breadth and depth of our lifestyle
categories makes us a destination location for their shopping needs.

At our Rampage stores, we employ a different, but equally effective visual
merchandising strategy in order to capture our customers' interest. Our Rampage
merchandise is grouped by color and fashion trends to keep the stores looking
vibrant, hip and visually stimulating. We have implemented a comprehensive
marketing program that builds on our in-store sign graphics to accentuate the
fashion, quality and cutting-edge style of our merchandise.

MERCHANDISE SOURCING

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. Our buyers also work closely with our vendors
to secure affordable merchandise suited to the fashion tastes of our target
customers. We maintain a buying office in the California Merchandise Mart in Los
Angeles, the primary apparel center in southern California, to facilitate
constant dialogue and feedback between our buying staff and our vendors. During
the nine months ended June 26, 1999, our top five vendors accounted for less
than 12.2% of our total purchases and no single vendor accounted for more than
3.9% of our total purchases.

DISTRIBUTION

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 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 20% of our apparel merchandise is currently pre-ticketed by our
vendors, and we expect that this percentage will increase substantially over the
next twelve months. 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
infrastructure is sufficient to accommodate our expected store growth and
expanded product offerings over the next several years.

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<PAGE>
STORE LOCATIONS

As of September 25, 1999, we expect to operate 74 Charlotte Russe stores and
22 Rampage stores throughout 15 states and Puerto Rico. Each of these stores is
shown in the following map and store list according to the state or territory in
which such store is located.

[MAP OF UNITED STATES SHOWING STORE LOCATIONS]

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<PAGE>

ARIZONA (8)
- ----------------------------------------
Arizona Mills (Tempe)+
Arrowhead Center (Glendale)
Fashion Square (Scottsdale)
Fiesta Mall (Mesa)
Metro Center (Phoenix)
Paradise Valley Mall (Phoenix)
Tucson Mall
CALIFORNIA (40)
- ----------------------------------------
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)
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
Santa Rosa Plaza
Serramonte Center (Daly City)
Sun Valley (Concord) (R)
Valley Plaza (Bakersfield)

CONNECTICUT (1)
- ----------------------------------------
*Meriden Square

FLORIDA (15)
- ----------------------------------------
Aventura Mall (R)
Broward Mall (Plantation)
Citrus Park Center (Tampa)
Coral Square
Dadeland Mall (Miami) (R)
Edison Mall (Fort Meyers)
Melbourne Square
*Orange Park Mall
Orlando Fashion Square
Oviedo Marketplace
Regency Square (Jacksonville)
Shops at Sunset (South Miami)
The Falls (Miami) (R)
Tyrone Square (St. Petersburg)
West Oaks Mall (Ococe)

GEORGIA (6)
- ----------------------------------------
Augusta Mall
*Mall of Georgia at Mill Creek+
Northlake Mall (Atlanta)
Perimeter Mall (Atlanta)
Town Center at Cobb (Kennesaw)

HAWAII (1)
- ----------------------------------------
Pearlridge (Aiea)

ILLINOIS (2)
- ----------------------------------------
Stratford Square
*Water Tower Place (Chicago)(R)

MICHIGAN (1)
- ----------------------------------------
Great Lakes Crossing (Auburn Hill)

NEW JERSEY (1)
- ----------------------------------------
Garden State Plaza (Paramus) (R)

NEW YORK (6)
- ----------------------------------------
Palisades Center (West Nyack)+
Roosevelt Field (Garden City)+
Soho (R)
Walden Galleria (Buffalo)

NEVADA (4)
- ----------------------------------------
Boulevard Mall (Las Vegas)
*Boulevard Mall (Las Vegas)(R)
Galleria (Henderson)
Meadows Mall (Las Vegas)

NORTH CAROLINA (1)
- ----------------------------------------
*Concord Mills

PENNSYLVANIA (1)
- ----------------------------------------
*Franklin Mills (Philadelphia)

PUERTO RICO (1)
- ----------------------------------------
*Plaza Del Sol

SOUTH CAROLINA (1)
- ----------------------------------------
Haywood Mall (Greenville)

TEXAS (7)
- ----------------------------------------
Collin Creek Mall (Plano)
Grapevine Mills
*Highland Mall (Austin)
Houston Galleria (R)
Lakeline Mall (Cedar Park)
Northpark Mall (Dallas) (R)
Valley View (Dallas)

- ---------

(R) Rampage store only

+ Both a Charlotte Russe and Rampage store

* Store to be opened during fourth quarter of fiscal 1999

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<PAGE>
The following table highlights the number of stores, by geographic region,
opened in each of the last four fiscal years and expected to be opened during
the current fiscal year:

<TABLE>
<CAPTION>
NORTHEAST
CALIFORNIA SOUTHWEST SOUTHEAST & OTHER TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Actual store count as of October 1, 1994............. 24 6 -- -- 30

FISCAL 1995
Stores opened...................................... 3 1 -- -- 4
Store closed....................................... (1) 0 -- -- (1)
--------- --------- --------- --------- ---------
26 7 -- -- 33

FISCAL 1996
Stores opened...................................... 0 2 -- -- 2
--------- --------- --------- --------- ---------
26 9 -- -- 35

FISCAL 1997
Stores opened...................................... 3 1 2 1 7
Store 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 through third quarter................ 0 1 5 5 11
Stores to be opened in fourth quarter.............. 1 2 4 4 11
--------- --------- --------- --------- ---------
Expected store count at end of fiscal 1999........... 40 19 23 14 96
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

SITE SELECTION

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:

- a careful assessment of mall traffic;

- the performance of other retailers within the mall and in particular those
serving our target customers;

- the proposed location within the mall;

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<PAGE>
- population and demographic characteristics of the area; and

- projected profitability and cash return on investment.

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 organized into a Western region with six districts
and an Eastern region with six 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 eight stores. We expect to add two
additional district managers before the end of this fiscal year. 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
accelerated store expansion, we have increased the number of people in our store
manager training program.

MARKETING AND PROMOTION

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 the
future, we expect our marketing and promotional program will include national
and regional print advertising, radio and television advertising and billboard
and bus stop advertising. We also plan to develop an Internet site that we
believe will further enhance our brand image and that we may eventually use as a
new channel for selling our merchandise.

MANAGEMENT INFORMATION SYSTEMS

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

36
<PAGE>
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 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.

PROPERTIES

We expect to operate 96 stores throughout 15 states and Puerto Rico by the
end of our current fiscal year. 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 4,100 square feet at the California
Merchandise Mart in Los Angeles. This lease expires May 31, 2002.

COMPETITION

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 Contempo/Wet Seal and Express, and
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.

INTELLECTUAL PROPERTY

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

37
<PAGE>

pending with the United States Patent and Trademark Office for a number of
additional marks, including Z 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 for use on exterior
or interior signages identifying our Rampage stores, as well as for 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 thirty (30) days written notice. Furthermore, over 90% of the merchandise
in our Rampage stores is sold under our proprietary Z 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 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.

EMPLOYEES

As of June 26, 1999, we employed 651 full-time and 1,006 part-time
employees. Of our full-time employees, 127 were employed at our corporate
offices, 87 were employed at our distribution center and 437 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.

LEGAL PROCEEDINGS

We are party to various legal proceedings in the ordinary course of
business. There are currently no material legal proceedings pending against us.

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<PAGE>
MANAGEMENT

The following table sets forth information concerning our executive
officers, directors and other key employees. We expect to add two independent
directors shortly after the completion of this offering.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Bernard Zeichner............................ 55 Chairman of the Board, Chief Executive Officer, President
and Director

Harriet A. Bailiss-Sustarsic................ 41 Executive Vice President, General Merchandise Manager

Daniel T. Carter............................ 43 Executive Vice President, Chief Financial Officer

R. Tina Kernohan............................ 46 Executive Vice President, Store Operations

Allan W. Karp............................... 44 Director

David J. Oddi............................... 29 Director

OTHER KEY EMPLOYEES
Renee L. Bell............................... 37 Vice President, Rampage Apparel

Jennifer L. Bolinger........................ 42 Vice President, Human Resources

Sheri E. Coury.............................. 40 Vice President, Charlotte Russe Apparel

Graham P. Luck.............................. 46 Vice President, Real Estate and Store Planning

Rachel E. Luna.............................. 34 Vice President, Charlotte Russe and Rampage Accessories

Kalpana Makani.............................. 55 Vice President, Chief Information Officer

Nancy E. Mamann............................. 39 Vice President, Marketing

Jennifer D. Mitchell........................ 33 Vice President, Merchandise Planning and Allocation

Christopher M. Monier....................... 41 Vice President, Administration
</TABLE>

BERNARD ZEICHNER has been our President since May 1996. Mr. Zeichner also
serves as Chief Executive Officer and Chairman of the Board of Directors. Prior
to joining us, he was President of the retail division of Guess? from 1993 to
1995. Prior to that, Mr. Zeichner was employed by Contempo Casuals, serving as
President from 1982 to 1993 and as Chief Executive Officer from 1989 to 1993.
From 1977 to 1982, Mr. Zeichner was Executive Vice President of Joske's of
Texas, a department store chain.

HARRIET A. BAILISS-SUSTARSIC has been Executive Vice President and General
Merchandise Manager since October 1996. From 1993 to 1996, Ms. Sustarsic was
Director of Merchandising for the knits division of Rampage Clothing Company, a
junior apparel manufacturer. Previously, Ms. Sustarsic worked for Contempo
Casuals from 1987 to 1993, starting as a buyer and rising to a Divisional
Merchandise Manager. Ms. Sustarsic began her retail career in 1980 at The
Broadway department store chain and served in various merchandising positions.

DANIEL T. CARTER joined us in June 1998 as our Executive Vice President and
Chief Financial Officer. Prior to joining us, from September 1997 through May
1998, Mr. Carter was Chief Financial Officer for Advanced Marketing Services, a
public company that wholesales books to Costco and Sam's Club. From 1986 to
September 1997, Mr. Carter was employed by The Price Company, the operator of
Price Clubs, and follow-up entities, serving as Senior Vice President for
PriceCostco and Chief Financial Officer for Price Enterprises. Mr. Carter is a
Certified Public Accountant.

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<PAGE>

R. TINA KERNOHAN began her employment with us in June 1996 as Regional
Manager and was promoted to Executive Vice President, Store Operations in
October 1997. From 1991 to 1996, Ms. Kernohan held the title of District Manager
at Miller's Outpost, where she supervised the operation of 20 stores. Ms.
Kernohan was employed by Contempo Casuals from 1974 to 1990, where she advanced
from sales to regional management, supervising 40 stores across five states.

ALLAN W. KARP has been a Director since September 1996. Since 1990, Mr. Karp
has been a Partner of Saunders Karp & Megrue Partners, L.L.C., or its
predecessor, which serves as the general partner of SKM Partners, L.P., which
serves as the general partner of the SKM Funds and Saunders Karp & Megrue, L.P.
Before founding Saunders Karp & Megrue, L.P., Mr. Karp was a Principal in the
Merchant Banking Department at Morgan Stanley & Co., Inc.

DAVID J. ODDI has been a Director since September 1996. Mr. Oddi joined
Saunders Karp & Megrue, L.P. as an Associate in 1994 and is currently a Partner
of Saunders Karp & Megrue Partners, L.L.C., which serves as the general partner
of SKM Partners, L.P., which serves as the general partner of the SKM Funds and
Saunders Karp & Megrue, L.P. Prior to joining Saunders Karp & Megrue, L.P., Mr.
Oddi was a financial analyst in the Leveraged Finance Group at Salomon Brothers
Inc. Mr. Oddi also serves on the board of directors of The Children's Place
Retail Stores, Inc., a specialty retailer of apparel and accessories for
children.

RENEE L. BELL joined us in October 1997 and has served as Vice President of
the Rampage Buying division since May 1999. Ms. Bell has 12 years of buying
experience and was previously a buyer at Rampage Clothing Company from 1994 to
1996, Contempo Casuals from 1993 to 1994, and bebe from 1991 to 1993. At bebe,
Ms. Bell was also responsible for developing private label merchandise in the
sportswear, leather, coats, accessory and jewelry categories.

JENNIFER L. BOLINGER began her employment with us in 1977 as a store sales
associate, and has served as Vice President of Human Resources since September
1997. Ms. Bolinger also held various positions in store operations, including
District Manager, leading up to her promotion to Director of Human Resources in
1993.

SHERI E. COURY began her employment with us in 1985 as a District
Merchandiser, and has served as Vice President of Charlotte Russe Apparel since
September, 1997, overseeing all apparel merchandising for these stores. Ms.
Coury came to us with over five years of previous retailing experience and has
served in a variety of merchandising capacities for us over the past 14 years as
the business has become a national retailer. Ms. Coury's background encompasses
a variety of merchandising functions, including visual operations,
merchandising, and seven years as a buyer.

GRAHAM P. LUCK joined us in 1997 as Vice President of Design and
Construction. Mr. Luck served as a Vice President at Guess? from 1994 to 1997.
From November 1986 to July of 1994, Mr. Luck served as Director of Store
Planning and Operations at Contempo Casuals. During the course of his retail and
construction career, Mr. Luck has been involved in all phases of store
negotiation, design and construction in high-growth retail companies.

RACHEL E. LUNA began her employment with us in 1981 as a store sales
associate, and has served as Vice President of Accessories for our Charlotte
Russe and Rampage stores since September 1997. Ms. Luna currently oversees
accessories merchandising for our Charlotte Russe and Rampage stores. During the
past 15 years as we have developed our national presence, Ms. Luna has worked
exclusively within the accessory, gift and intimate apparel product categories.
Ms. Luna has held numerous positions such as visual merchandiser, buyer, and
Divisional Manager.

KALPANA MAKANI joined us as Director of Management Information Systems in
September 1996 and was named Vice President, Chief Information Officer in
September, 1997. Prior to joining us, Ms. Makani spent two years, from 1994 to
1996, as the Director of Management Information Systems at Guess? and 18 years,
from 1981 to 1994 and 1974 to 1978, at Contempo Casuals where she served as

40
<PAGE>
Vice President of M.I.S. Ms. Makani received a Master's Degree in Statistics and
a Master's Degree in Computer Science from the University of California at
Berkeley.

NANCY E. MAMANN has served as Vice President of Marketing since joining us
in May, 1999. Ms. Mamann served as Vice President of Marketing for Jonathan
Martin from 1997 to 1999. For the previous six years, Ms. Mamann was the
President of Brand Communications at Rampage Clothing Company. Ms. Mamann's
other experience includes Advertising Coordinator for Guess?, Advertising and
Marketing Director for Jimmy'z, and Leon Max. Ms. Mamann has 17 years of
marketing experience in both retail and wholesale environments and founded an
advertising agency in 1989 that focused on the fashion and entertainment
industries.

JENNIFER D. MITCHELL began her employment with us in 1983 and was named Vice
President of Merchandise Planning and Allocations in September 1997. Ms.
Mitchell was directly responsible for creating our Merchandise Planning and
Allocation department in 1993. During her tenure at Charlotte Russe, Ms.
Mitchell has served in several other capacities, including District Accessory
Merchandiser, Assistant Apparel Buyer, and Office Manager.

CHRISTOPHER M. MONIER joined us in March 1997 and has served as Vice
President of Administration since September, 1997 and currently oversees all
aspects of distribution, traffic, purchasing and loss prevention. Prior to
joining us, Mr. Monier served in the distribution division of Skechers from 1995
to 1997. Prior to that time, Mr. Monier was a distribution center manager with
Contempo Casuals. Mr. Monier, who holds a Bachelor of Science Degree in
Industrial Engineering and Operation Research, has 19 years of experience in the
design and management of distribution centers, including such other companies as
LA. Gear and The Gap Stores.

BOARD OF DIRECTORS

Our by-laws provide for a board of directors of one or more directors, but
may consist of no more than seven or less than three persons. The number of
directors is currently fixed at three. Messrs. Karp, Oddi and Zeichner were
elected to serve as directors pursuant to the Stockholders Agreement. See
"Related Transactions--Stockholders Agreement" We expect to add two directors
shortly after the completion of this offering. Our executive officers are
elected by the board of directors and serve at the discretion of the board of
directors. In addition, our directors and officers have contractual rights under
indemnification agreements that obligate us to indemnify them against certain
claims in their capacities as agents of Charlotte Russe.

COMMITTEES

We have a compensation committee comprised of Messrs. Karp and Oddi and the
board of directors intends to establish an audit committee shortly after the
completion of this offering. The compensation committee has the authority to
approve salaries and bonuses and other compensation matters for our officers, to
approve employee health and benefit plans and to administer our stock option
plans. The audit committee, which will be comprised of a majority of independent
directors, will have the authority to recommend the appointment of our
independent auditors and to review the results and scope of audits, internal
accounting controls and other accounting related matters.

DIRECTOR COMPENSATION

Upon the completion of this offering, our by-laws require that each
non-employee director will be entitled to an annual fee of $10,000 plus $500 for
each meeting attended, which fee may be waived by any such director. Our
directors currently in office have indicated that they intend to waive these
fees. Our directors will also be eligible to participate in the 1999 Equity
Incentive Plan.

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<PAGE>
EXECUTIVE COMPENSATION

The following table shows the cash compensation paid or accrued for the
fiscal year ended September 26, 1998, to our Chief Executive Officer and the
only other executive officer other than the Chief Executive Officer who received
more than $100,000 in salary and bonus during the fiscal year ended September
26, 1998. We did not make any restricted stock awards or long-term incentive
plan payments in the fiscal year ended September 26, 1998. The amount of cash
compensation does not include the aggregate value of personal benefits or
securities, property or other non-cash compensation paid or distributed other
than pursuant to a plan which was less than the lesser of $50,000 and ten
percent (10)% of the cash compensation received by such officer.

<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------------
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)
- ------------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Bernard Zeichner
Chief Executive Officer and President................................................... $ 275,001 --

Harriet A. Bailiss-Sustarsic
Executive Vice President, General Merchandise Manager................................... 161,231 --
</TABLE>

FISCAL YEAR-END OPTION VALUES

The table below sets forth information for the officers indicated below with
respect to options held as of September 26, 1998. There was no public trading
market for our common stock as of September 26, 1998. Accordingly, the values in
the table have been calculated on the basis of an initial public offering price
of $14.00 per share less the applicable exercise price.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)
-------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Bernard Zeichner......................................... 183,000 732,000 $ 2,324,100 $ 9,296,400
Harriet A. Bailiss-Sustarsic............................. 21,600 86,400 $ 280,800 $ 1,123,200
</TABLE>

EMPLOYMENT CONTRACT

We have entered into an employment agreement with Bernard Zeichner that will
remain effective through September 30, 2001. Under the terms of the employment
agreement, Mr. Zeichner has agreed to serve as the President and Chief Executive
Officer of our operating subsidiary and as a member of the board of directors of
such subsidiary. Mr. Zeichner will receive an annual base salary of $350,000, an
annual incentive bonus, lump sum cash payments in the amount of $25,000 in each
of fiscal years 2000 and 2001 and medical and other benefits. Such bonus will be
based on a percentage, up to 0.75%, of our earnings before interest, taxes,
depreciation and amortization, depending on the growth in such earnings. Upon
completion of the offering, the vesting for 75% of Mr. Zeichner's outstanding
unvested options will accelerate. This will result in accelerated vesting for
options to purchase 274,500 shares of our common stock. If Mr. Zeichner's
employment is terminated without cause or Mr. Zeichner resigns his position as a
consequence of a material alteration of his responsibilities, movement of our
headquarters outside San Diego or a material breach of the employment agreement
or the Stockholders Agreement, he will be entitled to one year of his base
salary at the time of termination, payable in 12 equal monthly installments.

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<PAGE>
STOCK OPTION PLANS

We have historically granted options for the purchase of our common stock
pursuant to our 1996 Long-Term Incentive Plan and our 1999 Long-Term Incentive
Plan. The board of directors has resolved, however, that no further grants may
be made under either the 1996 Long-Term Incentive Plan or the 1999 Long-Term
Incentive Plan. Each of these plans provides that, so long as the SKM Funds own
more than 25% of our outstanding common stock, the option holders have tag along
rights in the event of a private sale by the SKM Funds of their shares of common
stock. There are currently options to purchase 1,824,600 shares of our common
stock outstanding under these plans.

Our board of directors and stockholders adopted the 1999 Equity Incentive
Plan, effective as of the completion of this offering. Our 1999 Equity Incentive
Plan was adopted by the board of directors and our stockholders on July 29,
1999. The 1999 Equity Incentive Plan will be administered by the compensation
committee of our board of directors. The 1999 Equity Incentive Plan provides for
the grant of a variety of stock and stock-based awards and related benefits,
including stock options, restricted and unrestricted shares, deferred stock,
performance awards, rights to receive cash or shares with respect to an increase
in the value of the common stock. The 1999 Equity Incentive Plan's eligibility
criteria are intended to encompass those employees, officers, directors and
consultants who are in a position to make a significant contribution to the
success of Charlotte Russe.

The 1999 Equity Incentive Plan permits the grant of options that qualify as
incentive stock options and nonqualified options. The option exercise price of
each option shall be determined by the compensation committee of our 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.

In general, and except as otherwise determined by the compensation committee
of our board of directors, all rights under awards granted pursuant to the 1999
Equity Incentive Plan to which the participant has not become irrevocably
entitled will terminate upon termination of the participant's employment,
consulting or service relationship with us. No award granted under the 1999
Equity Incentive Plan, other than an award in the form of an outright transfer
of cash or unrestricted stock, may be transferred other than by will or by the
laws of descent and distribution. During a participant's lifetime an award
requiring exercise may be exercised only by the participant, or in the event of
the participant's incapacity, the person legally appointed to act on the
participant's behalf.

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. No options have been issued under the 1999 Equity
Incentive Plan. However, upon the completion of the offering, we expect to issue
options to purchase 250,000 shares of our common stock at an exercise price
equal to the initial public offering price of our common stock.

STOCK PURCHASE PLAN

We have adopted an employee stock purchase plan that is anticipated to be
implemented following the completion of this offering. The employee stock
purchase plan is designed to enable eligible employees to purchase shares of our
common stock at a discount on a periodic basis through payroll deductions. We
have reserved an aggregate of 350,000 shares of our common stock for issuance
pursuant to this plan. The purchases under the stock purchase plan will occur at
the beginning of each option period. The first option period will commence on
the date of this prospectus and will end on December 31, 1999. Thereafter, each
option period will be six months in duration. Our employees are eligible to
participate if they have been employed by us or our subsidiaries for at least
six months, as of the first day of any option period, and are scheduled to work
for at least 20 hours per week. Under the stock purchase plan, eligible
employees, including executive officers, are permitted to purchase on an

43
<PAGE>
after-tax basis our common stock through payroll deductions that may not exceed
15% of their base compensation, including commissions, bonuses, and overtime.
Notwithstanding the foregoing, no employee who is a 5% or greater holder of our
voting stock is eligible to participate in the plan. The amount contributed by
each participant over the course of an option period will be used to purchase
shares of our common stock at a purchase price equal to 85% of the fair market
value of the common stock at the beginning or the end of a purchase period,
whichever is lower. Unless terminated sooner, the stock purchase plan will
terminate ten years from its effective date. The employee stock purchase plan is
intended to qualify for favorable tax treatment under Section 423 of the
Internal Revenue Code. The board of directors has authority to amend or
terminate the stock purchase plan, provided no such action may adversely affect
the rights of any participant.

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of our common stock as of June 26, 1999 and as adjusted to reflect the
sale of the shares in this offering for:

(1) each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock;

(2) each director and executive officer;

(3) all directors and executive officers as a group; and

(4) each selling stockholder.

As of June 26, 1999, there were 18,310,800 shares of outstanding common
stock prior to giving effect to the shares to be sold in this offering. Unless
otherwise indicated below, to our knowledge, all persons listed below have sole
voting and investment power with respect to their shares of common stock, except
to the extent authority is shared by spouses under applicable law. Unless
otherwise indicated, each entity or person listed below maintains a mailing
address of c/o Charlotte Russe Holding, Inc., 4645 Morena Boulevard, San Diego,
CA 92117.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
NUMBER OF TO OFFERING OFFERING
SHARES ------------------------- -------------------------
NAME OF BENEFICIAL OWNER OFFERED NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------- ---------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Bernard Zeichner(1)................................. 142,857 1,573,500 8.22% 1,430,643 6.82%
Harriet A. Bailiss-Sustarsic(2)..................... -- 64,800 * 64,800 *
Daniel T. Carter(3)................................. -- 20,000 * 20,000 *
R. Tina Kernohan(4)................................. -- 32,400 * 32,400 *
Allan W. Karp(5).................................... 922,907 19,515,440 96.25 18,592,533 84.09
David J. Oddi(5).................................... 922,907 19,515,440 96.25 18,592,533 84.09
All Directors and Executive Officers
as a Group........................................ 1,065,764 21,206,140 99.95 20,140,376 87.37

SELLING STOCKHOLDERS
SKM Funds(5)........................................ 922,907 19,515,440 96.25 18,592,533 84.09
Bernard Zeichner(1)................................. 142,857 1,573,500 8.22 1,430,643 6.82
FSC Corp.(6)(7)
100 Federal Street
Boston, Massachusetts 02110....................... 384,236 384,236 2.06 -- --

FIVE PERCENT (5%) STOCKHOLDERS
John F. Megrue(5)................................... 922,907 19,515,440 96.25 18,592,533 84.09
Thomas A. Saunders, III(5).......................... 922,907 19,515,440 96.25 18,592,533 84.09
</TABLE>

- ---------

* Less than one percent

(1) Includes 549,000 shares of common stock subject to options exercisable
within sixty days after August 31, 1999 and options to purchase 274,500
shares of common stock which vest immediately upon the closing of the
offering.

(2) Includes 64,800 shares of common stock subject to options exercisable within
sixty days after August 31, 1999.

(3) Includes 20,000 shares of common stock subject to options exercisable within
sixty days after August 31, 1999.

(4) Includes 32,400 shares of common stock subject to options exercisable within
sixty days after August 31, 1999.

45
<PAGE>

(5) Includes (a) 17,369,250 shares of common stock owned by The SK Equity Fund,
L.P., (b) 180,750 shares of common stock owned by SK Investment Fund, L.P.
(collectively with The SK Equity Fund, L.P., the "SKM Funds") and (3)
1,965,440 shares of common stock which may be acquired by the SKM Funds
pursuant to the exercise of warrants. SKM Partners, L.P. is the general
partner of each of The SK Equity Fund, L.P. and SK Investment Fund, L.P.
Messrs. Karp, Megrue, Oddi and Saunders are general partners of Saunders
Karp & Megrue Partners, L.L.C., which serves as the general partner of SKM
Partners, L.P. and, therefore, may be deemed to have beneficial ownership of
the shares of common stock shown as being owned by the SKM Funds above.
Messrs. Karp, Megrue, Oddi and Saunders disclaim beneficial ownership of
such shares, except to the extent that any of them has a limited partnership
interest in such funds. The address for each of these entities or persons is
262 Harbor Drive, Stamford, CT 06902.

(6) Represent shares being offered by SKM Funds to which Messrs. Karp, Megrue,
Oddi and Saunders disclaim beneficial ownership.

(7) Includes 384,236 shares of common stock subject to warrants exercisable
within sixty days after August 31, 1999.

The number of shares beneficially owned by each stockholder is determined in
accordance with the rules of the Securities and Exchange Commission and are not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes those share of common stock that the
stockholder has sole or shared voting of investment power and any shares of
common stock that the stockholder has right to acquire within sixty (60) days
after August 31, 1999 through the exercise of any option, warrant or other
right. The percentage ownership of the outstanding common stock, however, is
based on the assumption, expressly required by the rules of the Securities and
Exchange Commission, that only the person or entity whose ownership is being
reported has converted options or warrants into shares of common stock.

46
<PAGE>

RELATED TRANSACTIONS

TRANSACTIONS WITH AFFILIATES

In September 1996, in connection with our formation and the acquisition of
our business by the SKM Funds, Charlotte Russe issued shares of its common stock
to the following stockholders:

<TABLE>
<CAPTION>
NAME OF INVESTOR NUMBER OF SHARES PRICE PER SHARE
- ----------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
The SK Equity Fund, L.P.................................... 18,119,250 $ 1.00
SK Investment Fund, L.P.................................... 180,750 $ 1.00
</TABLE>

To partially fund our acquisition by the SKM Funds, we issued subordinated
notes to the SKM Funds in the aggregate principal amount of $11.0 million and
bearing interest, payable semi-annually, at the rate of 12.5% per annum. The
subordinated notes had a maturity date of September 27, 2003. On June 11, 1999,
we repaid the aggregate principal amount outstanding on the subordinated notes,
together with accrued interest and a prepayment premium of $440,000. In
connection with the issuance of the subordinated notes, we issued to (1) The SK
Equity Fund, L.P., warrants to purchase 1,945,010 shares of our common stock, at
an exercise price of $1.00 per share, and (2) SK Investment Fund, L.P., warrants
to purchase 19,400 shares of our common stock, at an exercise price of $1.00 per
share. Each of these warrants expires on September 27, 2006, and are subject to
adjustment for stock dividends, stock splits and combinations and other
dividends and distributions. The number of shares of common stock issuable under
these warrants increased by an aggregate of 1,030 shares pursuant to
anti-dilution provisions.

Mr. Bernard Zeichner, our Chief Executive Officer and President, purchased
750,000 shares of our common stock from the SKM Funds for $1.00 per share, or an
aggregate consideration of $750,000, shortly after their acquisition described
above.

In April, 1999, we agreed to loan Mr. Zeichner $1.5 million to fund the
purchase of a home. To date, Mr. Zeichner has borrowed an aggregate of $1.0
million. The loan is evidenced by a promissory note due April 26, 2004 and the
loan bears interest at a rate of 7.47% per annum. Mr. Zeichner intends to use
the net proceeds from the sale of shares of common stock in this offering to
repay the promissory note in full.

In March, 1999, we loaned Ms. Bailiss-Sustarsic $120,000 to fund the
purchase of a home. The loan was evidenced by a promissory note due March 12,
2004 bearing interest at a rate of 8.5% per annum. This loan was repaid in full
on July 1, 1999.

During fiscal 1998 and the nine months ended June 26, 1999, we purchased an
aggregate of approximately $110,000 of merchandise from Slant, Inc., a
manufacturer of women's apparel. Mr. Zeichner's daughter is the President and
Chief Executive Officer of Slant and his wife is also a principal officer. Mr.
Zeichner's wife and daughter also own a majority of the outstanding equity
interests in Slant, Inc. We believe that our transactions with Slant have been
no more favorable to Slant than could have been obtained from a disinterested
third party.

STOCKHOLDERS AGREEMENT

Charlotte Russe, the SKM Funds and Mr. Bernard Zeichner have entered into a
stockholders agreement. This agreement provides that (1) so long as the SKM
Funds own at least 25% of our total outstanding shares of common stock, they
will have the right to nominate three directors and designate the chairman of
the board of directors and (2) so long as the SKM Funds own at least 10% of the
shares of common stock held by them immediately after the completion of this
offering, including shares of common stock issuable upon exercise of outstanding
warrants at such date, they will have the right to nominate two directors and
include one director elected by the SKM Funds on each committee of the board of
directors. The stockholders agreement grants Mr. Zeichner tag along rights in
the event

47
<PAGE>

of a private sale by the SKM Funds of their shares of common stock. The
stockholders agreement also grants, subject to limitations and exceptions,
demand and piggyback registration rights to the SKM Funds and piggyback
registration rights to Mr. Zeichner. See "Shares Eligible for Future Sale--
Registration Rights."

The stockholders agreement provides for Saunders Karp & Megrue, L.P., an
affiliate of the SKM Funds, to render financial advisory services, including
review and analysis of operational results and budgets, to us in exchange for an
annual fee of $250,000, payable in advance, plus reimbursement for out-of-pocket
expenses. This fee terminates when the SKM Funds own less than 10% of the shares
of common stock held by them immediately after the completion of this offering,
including shares of common stock issuable upon exercise of outstanding warrants
at such date.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

Our certificate of incorporation, which will become effective upon the
closing of this offering, authorizes the issuance of up to 100,000,000 shares of
common stock, par value $0.01 per share, and 3,000,000 shares of preferred
stock, par value $0.01 per share, the rights and preferences of which may be
established from time to time by our board of directors. As of June 26, 1999,
18,310,800 shares of common stock were outstanding, held of record by four
stockholders.

COMMON STOCK

Under our certificate of incorporation, holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders, including the election of directors. They do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding series of preferred stock, holders of our common stock are entitled
to share ratably in any dividends that may be declared by the board of directors
out of legally available funds. In case of a liquidation, dissolution or winding
up of Charlotte Russe, the holders of common stock will be entitled to share
ratably in the net assets legally available for distribution to shareholders, in
each case after payment of all of our liabilities and subject to preferences
that may be applicable to any series of preferred stock then outstanding. The
holders of common stock have no preemptive or conversion rights or other
subscription rights. See "Related Transactions--Stockholders Agreement." There
are no redemption or sinking fund provisions applicable to the common stock. The
rights, preferences and privileges of holders of common stock are subject to the
rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.

PREFERRED STOCK

Under our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue from time to
time, shares of preferred stock in one or more series. The board of directors
may fix the number of shares, designations, preferences, powers and other
special rights of the preferred stock. The preferences, powers, rights and
restrictions of different series of preferred stock may differ. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of common stock. The issuance
may also have the effect of discouraging, delaying or preventing a change in
control of Charlotte Russe, regardless of whether the transaction may be
beneficial to stockholders. There are no shares of preferred stock outstanding
and we have no current plans to issue any shares of preferred stock.

LIABILITY OF DIRECTORS

Our certificate of incorporation provides that our directors shall not be
liable to Charlotte Russe or its stockholders for monetary damages for any
breach of fiduciary duty, except to the extent otherwise required by the
Delaware General Corporation Law. This provision will not prevent our
stockholders from obtaining injunctive or other relief against our directors.
This provision also does not shield our directors from liability under federal
or state securities laws.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, this statue prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other

49
<PAGE>

transactions resulting in a financial benefit to the interested stockholder.
Subject to stated exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years prior to
the determination of such status did own, 15% or more of the voting stock of the
corporation, other than interested stockholders prior to the time our common
stock was listed in the Nasdaq National Market. This provision may be deemed to
have an anti-takeover effect and may discourage, delay or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders. In accordance with Section 203, the SKM
Funds and their affiliates are not considered interested stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, LLC.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial amount of our common stock in the public market
after this offering could adversely affect the prevailing market price of our
common stock. Furthermore, because only a limited number of shares will be
available for sale shortly after this offering due to the contractual
restrictions on resale described in the section entitled "Underwriting" and the
legal restrictions on resale described below, the sale of a substantial amount
of common stock in the public market after these restrictions lapse could
adversely affect the prevailing market price of our common stock and our ability
to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of
20,145,036 shares of our common stock. Of these shares, all of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act, unless the shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act. Any
shares purchased by an affiliate may not be resold except pursuant to an
effective registration statement or an applicable exemption from registration,
including an exemption under Rule 144 of the Securities Act. The remaining
shares of common stock held by existing stockholders are "restricted securities"
as that term is defined in Rule 144 under the Securities Act. These restricted
securities may be sold in the public market only if they are registered or if
they qualify for an exemption from registration under Rule 144 or Rule 701 under
the Securities Act. These rules are summarized below.

Upon the expiration of the lock-up agreements described in the section
entitled "Underwriting" and subject to the provisions of Rule 144 and Rule 701,
20,433,076 restricted shares, assuming the exercise of outstanding warrants and
vested stock options, will be available for sale in the public market 180 days
after the date of this prospectus. The sale of these restricted securities is
subject, in the case of shares held by affiliates, to the volume restrictions
contained in Rule 144.

RULE 144

In general, under Rule 144 as currently in effect, beginning ninety (90)
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year from the later of the date
those shares of common stock were acquired from us or from an affiliate of ours
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:

(1) one percent of the number of shares of common stock then outstanding,
which will equal approximately 201,450 shares immediately after this
offering; or

50
<PAGE>
(2) the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common
stock.

The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us. Affiliates may sell shares not constituting
restricted securities in accordance with the foregoing volume limitations and
other restrictions, but without regard to the one-year holding period.

In addition, under Rule 144(k), a person who is not one of our affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date such shares of common stock were acquired from us or from an affiliate
of ours, including the holding period of any prior owner other than an
affiliate, is entitled to sell those shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the lock-up agreements or
otherwise, those shares may be sold immediately upon the completion of this
offering.

RULE 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.

REGISTRATION RIGHTS

Under the terms of a stockholders agreement, the SKM Funds are entitled to
unlimited demand registration rights that require us to register under the
Securities Act up to a total of 19,515,440 shares of their common stock,
including shares issuable pursuant to warrants currently held by the SKM Funds.
Of this amount, 922,907 shares of common stock are being registered in this
offering. This right exists so long as the SKM Funds own at least 10% of the
shares of common stock held by them immediately after the completion of this
offering. Mr. Zeichner has the right to participate in any demand registrations
initiated by the SKM Funds. Mr. Zeichner currently owns 750,000 shares of common
stock and options to purchase 915,000 shares of common stock. We are obligated
to pay all fees, cash and expenses in connection with any such registration. By
exercising their registration rights and causing a large number of shares to be
registered and sold in the public market, these holders may cause the price of
the common stock to fall. Notwithstanding these demand registration rights, we
are not obligated to effect more than one demand registration in any six-month
period.

The stockholders agreement also grants, subject to limitations and
exceptions, piggyback registration rights to the SKM Funds and Mr. Zeichner in
the event we register any shares of common stock under the Securities Act. We
are obligated to pay all fees, costs and expenses in connection with any such
registration, other than underwriting discounts and commissions and transfer
taxes. The managing underwriters, however, of any such offering may exclude for
marketing reasons some or all of these shares of common stock from registration.

STOCK OPTIONS

At June 26, 1999, there were options to purchase 1,824,600 shares
outstanding under our stock option plans and otherwise. Shortly after the
effective date of this offering, we expect to file a registration statement
under the Securities Act covering 2,574,600 shares of common stock reserved for
issuance under our stock option plans. Upon the filing of this registration
statement and upon expiration of 180-day lock-up agreements, approximately
1,233,400 shares of common stock issuable upon exercise of stock options will be
immediately eligible for sale in the public market, subject to, Rule 144 volume
limitations applicable to our affiliates.

51
<PAGE>
UNDERWRITING

The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Banc of America Securities LLC, PaineWebber
Incorporated, and First Union Capital Markets Corp. have severally agreed with
us and the selling stockholders, subject to the terms and conditions of the
underwriting agreement, to purchase from us and the selling stockholders the
number of shares of common stock set forth opposite their respective names. The
underwriters are committed to purchase and pay for all of these shares if any
are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
BancBoston Robertson Stephens Inc.................................................
Banc of America Securities LLC....................................................
PaineWebber Incorporated..........................................................
First Union Capital Markets Corp..................................................
-----------
Total.......................................................................
-----------
-----------
</TABLE>

The underwriters' representatives have advised us and the selling
stockholders that the underwriters propose to offer the shares of common stock
to the public at the public offering price located on the cover page of this
prospectus and to some dealers at such price less a concession of not more than
$ per share, of which $ may be reallowed to other
dealers. After the completion of this offering, the public offering price,
concession, and reallowance to dealers may be reduced by the representatives.
This reduction will not change the amount of proceeds to be received by us or
the selling stockholders as indicated on the cover page of this prospectus. The
common stock is offered by the underwriters as stated in this prospectus,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part.

OVER-ALLOTMENT OPTION. Some of the selling stockholders have granted to the
underwriters an option, exercisable during the 30-day period after the date of
this prospectus, to purchase up to additional shares of common stock at
the price per share, less the underwriting discount, indicated on the cover of
this prospectus. To the extent that the underwriters exercise this option, each
of the underwriters will have a firm commitment, subject to conditions, to
purchase approximately the same percentage of the additional shares that the
number of shares of common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered hereby. If
purchased, those additional shares will be sold by the underwriters on the same
terms as those on which the shares are being sold. The relevant selling
stockholders will be obligated, pursuant to the option, to sell shares to the
extent the option is exercised. The underwriters may exercise this option only
to cover over-allotments made in connection with the sale of the shares of
common stock offered in this prospectus.

52
<PAGE>
The following table shows the per share and total underwriting discounts and
commissions to be paid by us and the selling stockholders to the underwriters.
This information is presented assuming either no exercise or full exercise by
the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
----------- ------------ ------------

<S> <C> <C> <C>
Public offering price......................................................... $ $ $
Underwriting discounts and commissions paid by Charlotte Russe................ $ $ $
Proceeds, before expenses, to Charlotte Russe................................. $ $ $
Underwriting discounts and commissions paid by the selling stockholders....... $ $ $
Proceeds, before expenses, to the selling stockholders........................ $ $ $
</TABLE>

The expenses of the offering, other than underwriting discounts and commissions
referred to above, are estimated at $900,000 and are payable entirely by us.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common stock
to purchasers on , 1999.

DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to 125,000 shares of common stock to be issued by us and offered for sale in
this prospectus, at the initial public offering price, to our directors,
officers, employees, business associates and persons otherwise related to us and
Saunders Karp & Megrue, L.P. The number of shares of common stock available for
sale to the general public will be reduced to the extent these individuals
purchase these reserved shares. The underwriters will offer any reserved shares
that are not so purchased to the general public on the same basis as the other
shares offered in this prospectus.

The underwriters have advised us that they do not intend to confirm sales of
more than 5% of the common stock offered in this offering to any accounts over
which they exercise discretionary authority.

INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, us and the selling stockholders against various civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.

LOCK-UP AGREEMENTS. All of our directors and executive officers,
substantially all existing stockholders, and all holders of outstanding options
and warrants have agreed, during the period ending 180 days after the date of
this prospectus, subject to various exceptions, not to offer to sell, contract
to sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock or any options or warrants to purchase any
shares of common stock, or any securities convertible into or exchange for
shares of common stock owned as of the date of this prospectus or thereafter
acquired directly by these holders or with respect to which they have the power
of disposition, without the prior written consent of BancBoston Robertson
Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its sole
discretion and at any time or from time to time, without notice, release all or
any portion of the securities subject to the lock-up agreements. There are no
existing agreements between the representatives and any of our stockholders who
have executed a lock-up agreement providing consent to the sale of shares of
common stock before the expiration of the lock-up period.

In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of BancBoston Robertson Stephens Inc., subject
to various exceptions:

- consent to the disposition of any shares held by stockholders subject to
lock-up agreements before the expiration of the lock-up period; or

53
<PAGE>
- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance
of common stock upon the exercise of outstanding options and warrants, the
issuance of options under existing stock option and incentive plans
provided the options do not vest before the expiration of the lock-up
period.

See "Shares Eligible for Future Sale."

LISTING. The common stock has been approved for quotation on the Nasdaq
National Market under the symbol "CHIC."

STABILIZATION. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, some persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering transaction" is the bid for or the
purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
these transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus has been determined through
negotiations between us, the selling stockholders, and the representatives of
the underwriters. Among the factors considered in these negotiations were
prevailing market conditions, our financial information, market valuations of
other companies that we and the representatives of the underwriters believe to
be comparable to us, estimates of our business potential, the present state of
our development and other factors deemed relevant.

CERTAIN RELATIONSHIPS. FSC Corp., an affiliate of BancBoston Robertson
Stephens Inc., owns a warrant to purchase 413,776 shares of our common stock,
which represents less than 2.5% of our outstanding common stock. In connection
with the offering, FSC Corp. plans to exercise its warrant and to sell all of
its shares of our common stock as a selling stockholder in the offering. See
"Principal and Selling Stockholders."

QUALIFIED INDEPENDENT UNDERWRITER. We intend to use more than 10% of the
net proceeds of the sale of our common stock to repay indebtedness under our
existing credit facilities owed by us to BankBoston, N.A., an affiliate of
BancBoston Robertson Stephens Inc., one of the underwriters' representatives.
You should refer to "Use of Proceeds" for more information. Accordingly, the
offering must comply with the requirements of Rule 2710(c)(8) of the National
Association of Securities Dealers, Inc. Conduct Rules. This rule provides
generally that if more than 10% of our net proceeds from the sale of our common
stock is paid to the underwriters or their affiliates, the initial public
offering price of the common stock may not be higher than recommended by a
"qualified independent underwriter" meeting specified standards. Accordingly,
PaineWebber Incorporated is assuming the responsibilities of acting as the
qualified independent underwriter in pricing the offering and

54
<PAGE>

conducting due diligence. The initial public offering price of the shares of our
common stock will be no higher than the price recommended by PaineWebber
Incorporated.

VALIDITY OF COMMON STOCK

The validity of the common stock offered by this prospectus will be passed
upon for Charlotte Russe Holding, Inc. by Ropes & Gray, Boston, Massachusetts.
Brobeck, Phleger & Harrison, LLP, San Diego, California, has acted as counsel
for the underwriters in connection with certain legal matters related to this
offering.

EXPERTS

The consolidated financial statements of Charlotte Russe Holding, Inc. at
September 27, 1997 and September 26, 1998, for each of the two years in the
period ended September 26, 1998 and for our Predecessor for the year ended
September 27, 1996, appearing in this prospectus and the registration statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given on the authority of such firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement or the
exhibits and schedules which are part of the Registration Statement. The rules
and regulations of the Securities and Exchange Commission allow us to omit
certain information included in the Registration Statement from this prospectus.
Accordingly, any statements made in this prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement, we refer you to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus shall
be deemed qualified in its entirety by this reference. You may read and copy all
or any portion of the Registration Statement or any reports, statements or other
information in the files at the following public reference facilities of the
Securities and Exchange Commission:

<TABLE>
<S> <C> <C>
WASHINGTON, D.C. NEW YORK, NEW YORK CHICAGO, ILLINOIS
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>

You can request copies of these documents upon payment of a duplicating fee
by writing to the Securities and Exchange Commission. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of its public reference rooms. Our filings, including the
Registration Statement, will also be available to you on the Internet web site
maintained by the Securities and Exchange Commission at http://www.sec.gov.

We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each year containing unaudited interim financial
information.

55
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2

Consolidated Balance Sheets as of September 27, 1997, September 26, 1998 and June 26, 1999 (unaudited)..... F-3

Consolidated Statements of Income of the Predecessor for the year ended September 27, 1996 and of the
Company for the years ended September 27, 1997 and September 26, 1998 and the nine months ended June 27,
1998 (unaudited) and June 26, 1999 (unaudited)........................................................... F-4

Consolidated Statement of the Predecessor's Retained Earnings for the year ended September 27, 1996........ F-5

Consolidated Statement of Stockholders' Equity for September 27, 1996 (date of initial capitalization) and
for the years ended September 27, 1997 and September 26, 1998, and the nine months ended June 26, 1999
(unaudited).............................................................................................. F-5

Consolidated Statements of Cash Flows of the Predecessor for the year ended September 27, 1996 and of the
Company for the one day period ended September 27, 1996 and the years ended September 27, 1997 and
September 26, 1998, and the nine months ended June 27, 1998 (unaudited) and June 26, 1999 (unaudited).... F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>
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 27, 1997 and September 26, 1998, and the
related consolidated statements of stockholders' equity for September 27, 1996
(date of initial capitalization) and for each of the two years in the period
ended September 26, 1998, the consolidated statements of income for each of the
two years in the period ended September 26, 1998, the consolidated statements of
cash flows for the one day period ended September 27, 1996 and each of the two
years in the period ended September 26, 1998; and the statements of income,
retained earnings and cash flows of the Company's predecessor for the year ended
September 27, 1996. 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 generally accepted auditing
standards. 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 27, 1997 and September 26, 1998, the consolidated
results of its operations for each of the two years in the period ended
September 26, 1998 and its cash flows for the one day period ended September 27,
1996 and each of the two years in the period ended September 26, 1998 and the
results of operations and cash flows of the Company's predecessor for the year
ended September 27, 1996 in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

San Diego, California

November 12, 1998, except for Note 5,
as to which the date is December 30, 1998
and for the last two paragraphs of Note 8,
as to which the date is , 1999

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

The foregoing report is in the form that it will be signed upon the completion
of the restatement of the capital accounts described in Note 8 to the financial
statements.

/s/ ERNST & YOUNG LLP

San Diego, California

September 14, 1999

F-2
<PAGE>
CHARLOTTE RUSSE HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 27, SEPTEMBER 26, JUNE 26,
1997 1998 1999
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 2,816,658 $ 1,003,906 $ 112,323
Inventories....................................................... 3,800,035 8,864,789 7,544,295
Other current assets.............................................. 856,768 2,013,474 1,369,058
Deferred tax assets............................................... 972,249 1,190,000 1,382,000
------------- ------------- -------------
Total current assets.............................................. 8,445,710 13,072,169 10,407,676

Fixed assets, net................................................... 15,439,623 27,625,046 32,136,530
Goodwill, net....................................................... 32,103,091 31,274,707 30,653,419
Deferred financing costs, net....................................... 1,111,961 1,100,159 600,430
Notes receivable from officers...................................... -- -- 1,020,000
Other assets........................................................ 27,410 1,354,886 1,421,031
------------- ------------- -------------
Total assets...................................................... $ 57,127,795 $ 74,426,967 $ 76,239,086
------------- ------------- -------------
------------- ------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade........................................... $ 3,519,030 $ 7,398,038 $ 9,021,613
Accounts payable--other........................................... 2,101,135 2,914,331 2,247,882
Accrued payroll and related expense............................... 819,370 1,153,010 896,419
Income taxes payable.............................................. 320,782 615,163 145,141
Other accrued expenses............................................ 2,899,049 1,803,064 5,088,456
Notes payable to bank, current portion............................ 1,462,500 -- --
Capital leases, current portion................................... -- 428,000 428,000
------------- ------------- -------------
Total current liabilities......................................... 11,121,866 14,311,606 17,827,511

Notes payable to bank, net of current portion....................... 9,862,500 16,600,000 18,250,000
Subordinated notes payable to related parties....................... 11,000,000 11,000,000 --
Capital leases, net of current portion.............................. -- 496,874 182,087
Deferred rent....................................................... 218,024 955,633 1,681,206
Other liabilities................................................... 166,699 452,834 478,801
Deferred tax liabilities............................................ 779,195 1,165,000 1,505,000
------------- ------------- -------------
Total liabilities................................................. 33,148,284 44,981,947 39,924,605
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 18,300,000 shares at September 27, 1997
and September 26, 1998, 18,310,800 at June 26, 1999............. 183,000 183,000 183,108
Additional paid-in capital........................................ 18,739,981 18,691,381 19,422,073
Deferred compensation............................................. -- -- (720,000)
Retained earnings................................................. 5,056,530 10,570,639 17,429,300
------------- ------------- -------------
Total stockholders' equity........................................ 23,979,511 29,445,020 36,314,481
------------- ------------- -------------
Total liabilities and stockholders' equity........................ $ 57,127,795 $ 74,426,967 $ 76,239,086
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes.

F-3
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMPANY
PREDECESSOR -------------------------------------------------------------
(NOTE 1)
------------- YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ----------------------------- -----------------------------
SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
Net sales.......................... $ 70,663,065 $ 81,543,232 $ 134,091,459 $ 94,409,890 $ 126,378,315
Cost of goods sold, including
buying, distribution and
occupancy costs.................. 43,774,147 50,722,934 93,142,372 65,506,640 85,996,435
------------- ------------- ------------- ------------- -------------
Gross profit....................... 26,888,918 30,820,298 40,949,087 28,903,250 40,381,880
Selling, general and administrative
expenses......................... 15,265,607 17,168,370 26,988,510 19,052,243 24,743,176
Amortization of goodwill and other
intangibles...................... -- 814,411 895,360 711,538 671,526
Predecessor shareholders'
salaries......................... 8,000,000 1,200,000 -- -- --
------------- ------------- ------------- ------------- -------------
Operating income................... 3,623,311 11,637,517 13,065,217 9,139,469 14,967,178
Other income (expense):
Interest income (expense), net... 42,001 (2,278,730) (3,025,378) (2,198,298) (2,042,507)
Other charges, net............... (143,594) (315,363) (280,354) (262,791) (204,393)
------------- ------------- ------------- ------------- -------------
Total other income (expense)... (101,593) (2,594,093) (3,305,732) (2,461,089) (2,246,900)
------------- ------------- ------------- ------------- -------------
Income before income taxes and
extraordinary item............... 3,521,718 9,043,424 9,759,485 6,678,380 12,720,278
Income taxes....................... -- 3,986,894 4,245,376 2,905,096 5,342,517
------------- ------------- ------------- ------------- -------------
Income before extraordinary item... 3,521,718 5,056,530 5,514,109 3,773,284 7,377,761
Extraordinary loss from early debt
retirement....................... -- -- -- -- (519,100)
------------- ------------- ------------- ------------- -------------
Net income......................... $ 3,521,718 $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Basic earnings per share:
Income before extraordinary
item........................... $ 0.28 $ 0.30 $ 0.21 $ 0.40
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income....................... $ 0.28 $ 0.30 $ 0.21 $ 0.37
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted earnings per share:
Income before extraordinary
item........................... $ 0.25 $ 0.27 $ 0.18 $ 0.35
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income....................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average shares
outstanding:
Basic............................ 18,300,000 18,300,000 18,300,000 18,300,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted.......................... 19,992,300 20,668,000 20,688,000 21,207,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
PREDECESSOR (NOTE 1)

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

<TABLE>
<CAPTION>
RETAINED EARNINGS
-----------------
<S> <C>
Balance at September 30, 1995.......................................... $ 5,079,691
Net income........................................................... 3,521,718
Distributions to Predecessor Shareholders............................ (6,300,000)
Retained earnings on September 27, 1996, date of sale................ (2,301,409)
-----------------
Balance at September 27, 1996.......................................... $ --
-----------------
-----------------
</TABLE>

CHARLOTTE RUSSE HOLDING, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN DEFERRED RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS EQUITY
------------ ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization of Charlotte
Russe Holding, Inc. on September 27,
1996:
Issuance of Common Stock............ 18,300,000 $ 183,000 $ 17,866,465 $ -- $ -- $ 18,049,465
Issuance of warrants to purchase
Common Stock...................... -- -- 873,516 -- -- 873,516
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 27, 1996......... 18,300,000 183,000 18,739,981 -- -- 18,922,981

Net income.......................... -- -- -- -- 5,056,530 5,056,530
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 27, 1997......... 18,300,000 183,000 18,739,981 -- 5,056,530 23,979,511

Stock option transactions, net of
tax benefit....................... -- -- (48,600) -- -- (48,600)
Net income.......................... -- -- -- -- 5,514,109 5,514,109
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 26, 1998......... 18,300,000 183,000 18,691,381 -- 10,570,639 29,445,020

Stock option transactions
(unaudited)....................... 10,800 108 10,692 -- -- 10,800
Deferred compensation related to
stock options (unaudited)......... -- -- 720,000 (720,000) -- --
Net income (unaudited).............. -- -- -- -- 6,858,661 6,858,661
------------ ---------- ------------- ------------- ------------- -------------
Balance at June 26, 1999
(unaudited)......................... 18,310,800 $ 183,108 $ 19,422,073 $ (720,000) $ 17,429,300 $ 36,314,481
------------ ---------- ------------- ------------- ------------- -------------
------------ ---------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
(NOTE 1) --------------------------------------------------------------------------
------------- YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ONE DAY ENDED ----------------------------- --------------------------
SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1996 1996* 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Reconciliation of net income to net
cash provided by (used in)
operating activities:
Net income....................... $ 3,521,718 $ -- $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and
amortization................. 1,726,281 -- 2,838,168 4,959,105 3,561,550 4,425,276
Deferred rent.................. (67,831) (848,338) 218,024 737,609 784,206 725,573
Loss on disposal of asset...... -- -- -- -- -- 49,720
Changes in operating assets and
liabilities:
Inventories.................. (186,589) -- (1,016,955) (5,064,754) (3,494,767) 1,320,494
Other current assets......... (718,349) -- 369,464 (1,156,706) (1,214,538) 644,416
Deferred financing costs..... -- (449,718) (4,319) (254,748) (254,748) (166,591)
Other assets................. 13,262 -- (6,542) (54,930) (55,764) (116,383)
Accounts payable............. 1,471,934 -- 356,192 4,692,204 2,700,238 957,126
Accrued payroll and related
expense.................... (265,897) -- 159,545 333,640 (561,606) (256,591)
Income taxes payable......... -- -- 320,782 294,381 343,096 (470,022)
Other accrued expenses....... 397,632 1,018,302 141,314 (1,095,985) (2,716,823) 3,285,392
Other liabilities............ 9,029 -- 30,000 286,136 427,522 25,967
Deferred taxes............... -- -- (193,054) 168,054 1,066,534 148,000
------------- ------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
operating activities............. 5,901,190 (279,754) 8,269,149 9,358,115 4,358,184 17,431,038
INVESTING ACTIVITIES
Net cash invested in acquisition of
Rampage assets................... -- -- (2,046,000) (7,276,463) (7,276,463) --
Purchases of fixed assets.......... (1,357,369) -- (5,245,194) (8,537,486) (6,996,405) (7,648,634)
Funding of notes receivable from
officers......................... -- -- -- -- -- (1,120,000)
Repayments of notes receivable from
officers......................... -- -- -- -- -- 100,000
Net cash invested in acquisition of
predecessor...................... -- (32,836,417) (419,591) -- -- --
Sale of marketable securities...... 100,000 -- -- -- -- --
------------- ------------- ------------- ------------- ------------ ------------
Net cash used in investing
activities....................... (1,257,369) (32,836,417) (7,710,785) (15,813,949) (14,272,868) (8,668,634)
FINANCING ACTIVITIES
Payments on capital leases......... -- -- -- (631,918) (361,461) (314,787)
Payments on notes payable to bank
and revolving credit facility.... -- (5,000,000) (2,575,000) (18,925,000) (11,100,000) (21,150,000)
Proceeds from notes payable to bank
and revolving credit facility.... 1,250,000 10,900,000 3,000,000 24,200,000 18,675,000 22,800,000
Proceeds from notes payable to
related parties.................. -- 11,000,000 -- -- -- --
Payments on notes payable to
related parties.................. (1,709,434) -- -- -- -- (11,000,000)
Proceeds from issuance of Common
Stock............................ -- 18,049,465 -- -- -- 10,800
Cash distributions to Predecessor
shareholders..................... (6,300,000) -- -- -- -- --
------------- ------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
financing activities............. (6,759,434) 34,949,465 425,000 4,643,082 7,213,539 (9,653,987)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents................. (2,115,613) 1,833,294 983,364 (1,812,752) (2,701,145) (891,583)
Cash and cash equivalents at
beginning of period.............. 4,140,516 -- 1,833,294 2,816,658 2,816,658 1,003,906
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Cash and cash equivalents at end of
period........................... $ 2,024,903 $ 1,833,294 $ 2,816,658 $ 1,003,906 $ 115,513 $ 112,323
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH
ACTIVITIES
Issuance of warrants to purchase
Common Stock..................... $ -- $ 873,516 $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Stock option transactions, net of
tax benefit $ -- $ -- $ -- $ 48,600 $ 48,600 $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Fixed assets acquired through
assumption of capital leases..... $ -- $ -- $ -- $ 1,567,313 $ -- $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest........................... $ 159,603 $ -- $ 2,211,966 $ 2,947,606 $ 2,450,496 $ 2,901,653
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Income taxes, net.................. $ 86,061 $ -- $ 4,088,756 $ 3,751,000 $ 2,561,999 $ 5,436,638
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
</TABLE>

- ------------
* The Company's cash flow activity for September 27, 1996 (date of initial
capitalization) relates to the acquisition (see Note 1). Cash flow activity
relating to store operations on the date of acquisition have been included
in the Predecessor's cash flow statement for the year ended September 27,
1996.

See accompanying notes.

F-6
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

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.

As the acquisition occurred on the last day of fiscal 1996, the accompanying
consolidated statements of retained earnings, income and cash flows of the
Predecessor for the year ended September 27, 1996 reflect the activity of the
Company. In addition, due to the capitalization of the Company on September 27,
1996, the Statement of Cash Flows of the Company for the one day period ended
September 27, 1996 relates to the initial capitalization and the acquisition of
the Predecessor.

DESCRIPTION OF BUSINESS

The Company operates in one segment selling clothing and accessories for
women through its retail stores that operate under the names Charlotte Russe and
Rampage (Note 2). As of June 26, 1999, the Company operated 85 mall-based retail
stores in Arizona, California, Florida, Georgia, Hawaii, Illinois, Michigan,
Nevada, New Jersey, New York, South Carolina, and Texas.

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 (and its Predecessor's fiscal year was) the
52/53 week period ending on the last Saturday in September. Fiscal years ended
September 27, 1996 and 1997 and September 26, 1998 each contained 52 weeks.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles 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.

F-7
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERIM FINANCIAL DATA

The consolidated financial statements as of June 26, 1999 and for the nine
months ended June 27, 1998 and June 26, 1999 are unaudited. The unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary to state fairly the financial information set forth therein, in
accordance with generally accepted accounting principles. The results of
operations for the interim period ended June 26, 1999 are not necessarily
indicative of the results which may be reported for any other interim period or
for the year ending September 25, 1999.

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 method. The cost of inventory is
determined at the lower of the first-in, first-out (FIFO) method or market.
During fiscal 1997, the Company changed from the last-in, first-out (LIFO)
method to the FIFO method. The change did not have a material effect on fiscal
1997 results of operations.

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
27, 1996, September 27, 1997 and September 26, 1998 was $1,726,281 and
$1,808,165 and $3,797,195, respectively, and $2,702,428 and $3,542,107 for the
nine months ended June 27, 1998 and June 26, 1999, 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. Accumulated amortization for goodwill at September 27, 1997, September
26, 1998 and June 26, 1999 was $814,411, $1,642,795 and $2,264,083,
respectively.

Other intangibles, included in Other Assets in the accompanying balance
sheet, are the result of the Company's acquisition of the Rampage assets and are
stated at cost and amortized using the straight-line method over the estimated
useful life of 20 years. Other intangibles represent amounts attributed to a
license agreement allowing the Company to utilize the Rampage name and other
intangibles. Accumulated amortization for other intangibles at September 26,
1998 and June 26, 1999 was $66,976 and $117,214, respectively.

F-8
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS

Debt issuance costs are amortized to interest expense using the straight
line method over the life of the related debt, ranging from September 30, 2002
to September 27, 2003. Unamortized issuance costs remaining upon early
retirement of debt are expensed. Accumulated amortization at September 27, 1997,
September 26, 1998 and June 26, 1999 was $216,000, $482,142 and $427,481,
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 Predecessor had elected S corporation status for federal income tax
reporting purposes and for those states which recognize S corporation status.
Accordingly, the income of the Predecessor was included in the tax returns of
the shareholders and no provision for federal income taxes was made in the
accompanying Predecessor's statement of income. The Company has elected to
operate as a C corporation from the date of its inception.

Upon completion of the purchase price allocation, deferred tax liabilities
were recognized for the tax effect of certain book to tax differences existing
at the acquisition date, with the offset recorded as an adjustment to goodwill.

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.

The provision for income taxes for the nine month periods presented is based
on the effective tax rate estimated to be in effect for the respective year.

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. The
Company has identified two underperforming stores and plans to close these
locations by the end of fiscal 2000. The estimated carrying amount of the
impaired assets is $722,000. Accordingly, the Company recorded an impairment

F-9
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

loss of $722,000, which is included in selling, general and administrative
expenses for the nine months ended June 26, 1999. The operating results for the
two stores is not material for the year ended September 26, 1998 or nine months
ended June 26, 1999.

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 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 on projected 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.

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 at September 27, 1997, September 26, 1998
and June 26, 1999 approximate fair value.

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.

F-10
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS

Advertising costs are expensed as incurred and were $50,704, $15,758 and
$241,603 for the years ended September 27, 1996, September 27, 1997 and
September 26, 1998, and $169,251 and $313,401 for the nine months ended June 27,
1998 and June 26, 1999, respectively.

RECLASSIFICATIONS

Certain amounts in the prior years financial statements have been
reclassified to conform with the 1999 presentation.

2. ACQUISITION OF RAMPAGE ASSETS

On September 30, 1997, the Company completed the acquisition of certain
assets of Rampage Retailing, Inc. (Rampage), a retailer of women's apparel, for
a purchase price of $10,500,000, consisting of cash of which $2,000,000 was
prepaid in fiscal year 1997 as a deposit, and the assumption of certain capital
lease obligations. The transaction was accounted for under the purchase method
and the purchase price was primarily allocated to fixed assets. The cash portion
of the purchase price was funded from the Company's credit facilities.

The Company's accompanying statements of income reflect the operating
results of Rampage since the date of acquisition. Prior to the acquisition,
Rampage operated in various business activities which consisted of manufacturing
operations and the sale of clothing through retail locations. The Company
acquired certain assets related to 16 retail store locations. The operating
results of the retail locations were computed through the retail location
operating profit level and combined into the operating results of a consolidated
entity. Therefore, the operating results of the retail locations did not include
any corporate expenses or other costs, such as interest, general and
administration, distribution or buying costs. The pro forma unaudited net sales
and gross profit for the year ended September 27, 1997, assuming the purchase of
Rampage had occurred on September 28, 1996 were $109,006,043 and $34,400,758,
respectively.

3. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 27, SEPTEMBER 26, JUNE 26,
1997 1998 1999
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements.............................................. $ 11,444,071 $ 23,690,119 $ 28,253,154
Furniture and fixtures.............................................. 1,740,892 6,764,970 8,851,340
Equipment and vehicles.............................................. 2,354,904 3,113,396 3,450,789
Prepaid Rampage acquisition costs................................... 2,046,000 -- --
------------- ------------- -------------
17,585,867 33,568,485 40,555,283
Less accumulated depreciation and amortization...................... (2,146,244) (5,943,439) (8,418,753)
------------- ------------- -------------
$ 15,439,623 $ 27,625,046 $ 32,136,530
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

F-11
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

4. 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 is secured by
a pledge of 750,000 shares of Common Stock of the Company, plus any shares
obtained by the officer in the future. All principal and accrued interest (7.47%
per annum) is due and payable on April 26, 2004, except in the event that all or
any part of the pledged Common Stock is sold, the net proceeds of the sale of
such shares of Common Stock must be used to repay any outstanding principal and
interest.

In March 1999, the Company loaned $120,000 under a note agreement to an
Executive Vice President of the Company. The full amount of the note is secured
by a pledge of all shares of Common Stock of the Company obtained by the officer
in the future. All principal and accrued interest (8.5% per annum) is due and
payable on March 12, 2004. As of June 26, 1999, $20,000 was outstanding.

5. CREDIT ARRANGEMENTS

At September 26, 1998, the Company had a bank credit agreement which
provided a $17.0 million term loan and a $10.0 million revolving credit
facility. In December 1998, the bank credit agreement was amended. The amended
agreement eliminated the $17.0 million term loan and increased the revolving
credit facility. The amended revolving credit facility provides for aggregate
commitments of $26.0 million through September 1999; $24.5 million from October
1999 through September 2000; $20.0 million from October 2000 through September
2001; and $14.5 million from October 2001 through maturity. All outstanding
borrowings under the amended revolving credit facility are due on September 30,
2002. Substantially all of the Company's assets secure the amended bank credit
agreement. At June 26, 1999, there was $18.3 million outstanding under the
revolving credit facility.

Interest on the amended revolving credit facility is payable quarterly at
either (i) the bank's Base Rate, as defined, plus 1.00% or (ii) the bank's
Eurodollar rate plus 2.50%, at the Company's option, subject to certain
adjustments.

Pursuant to the terms of the amended bank credit agreement, the Company can
issue up to $5.0 million of commercial or standby letters of credit. The annual
fee incurred is 2.00% for commercial and standby letters of credit plus
customary issuance and amendment charges. Fees are paid quarterly in arrears and
charges are paid as incurred. At September 26, 1998 and June 26, 1999, there
were outstanding letters of credit in the amount of $1.3 million and $0.5
million, respectively.

In June 1999, the bank credit agreement was amended to provide for aggregate
commitments of $32.0 million through September 1999; $30.5 million from October
1999 through September 2000; $25.0 million from October 2000 through September
2001; and $18.0 million from October 2001 through maturity, which remained
unchanged. In addition, the credit agreement was amended to permit the
redemption of the senior subordinated note agreements with affiliated investors.
(See Note 6)

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 June 26, 1999, the Company is in compliance with
the terms of the bank credit agreement.

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

F-12
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

5. CREDIT ARRANGEMENTS (CONTINUED)

shares of common stock issuable under the warrant increased by an aggregate of
216 shares pursuant to anti-dilution provisions. The warrants are exercisable
immediately and expire on September 27, 2006. The warrants were valued at
approximately $152,000, which is included in deferred financing costs and the
warrants are being amortized on a straight-line basis over the life of the
agreement, as amended. 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.

The Company has entered into an interest rate swap agreement to manage
certain of its interest rate exposure. The notional amount associated with this
agreement was established at $11.0 million with annual reductions of $2.0
million during the contract life until expiration in May 2001. The notional
amount is used to measure interest to be paid or received and does not represent
the exposure to credit loss. As a result of the agreement, a portion of the
Company's variable rate bank debt is effectively converted to fixed rate debt
and has a pay rate of 8.56%, subject to certain adjustments. The interest rate
differential to be received or paid is recognized as a component of interest
expense over the life of the agreement. This instrument is not recorded on the
balance sheet. However, if the instrument was recorded based on its fair value,
the Company would have recorded a liability of $260,000 and $28,000 at September
26, 1998 and June 26, 1999, respectively. Subsequent to June 26, 1999, the
Company paid approximately $20,000 to terminate the interest swap agreement.

6. SUBORDINATED NOTES PAYABLE TO RELATED PARTIES

The Company had two senior subordinated note agreements with affiliated
investors which were paid off in 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 $1,375,000 and $1,371,000 for the
years ended September 27, 1997 and September 26, 1998, and $1,042,707 and
$973,754 for the nine months ended June 27, 1998 and June 26, 1999,
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 anti-dilution
provisions. The warrants are exercisable immediately and expire on September 27,
2006. The warrants are valued at approximately $722,000, which is 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 nine
months ended June 26, 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.

F-13
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

7. COMMITMENTS

LEASES

The Company leases its retail stores, warehouse, and office facilities under
various operating leases which expire between 1999 and 2010. 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 27, 1996, September 27, 1997 and September 26, 1998
and the nine months ended June 27, 1998 and June 26, 1999 was $7,992,576,
$8,766,335, $17,049,570, $12,229,746 and $16,601,497, respectively, including
$1,428,780, $452,564, $610,267, $130,340 and $745,441, respectively, of
contingent rentals.

The following is a summary of the annual future minimum capital and
operating lease commitments as of September 26, 1998:

<TABLE>
<CAPTION>
CAPITAL
LEASES OPERATING LEASES
------------ ----------------
<S> <C> <C>
Year ending September:
1999.......................................................... $ 478,430 $ 14,714,057
2000.......................................................... 402,253 14,883,845
2001.......................................................... 92,922 15,021,579
2002.......................................................... 28,484 14,643,125
2003.......................................................... -- 13,980,522
Thereafter.................................................... -- 51,183,932
------------ ----------------
Total minimum lease payments.................................. 1,002,089 $ 124,427,060
----------------
----------------
Less amount representing interest............................. (77,215)
------------
Present value of net minimum lease payments, including
$428,000 which is current................................... $ 924,874
------------
------------
</TABLE>

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, however, the agreement
may be renewed for additional four year terms, provided certain conditions are
met. License fees are included in selling, general and administrative expenses
in the period incurred. License fees incurred during the years ended September
27, 1997 and September 26, 1998 and during the nine months ended June 27, 1998
and June 26, 1999 totaled $0, $354,526, $272,703 and $325,187, respectively.

F-14
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

8. 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. Incentive stock options are granted at prices which 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.

Upon completion of the Company's initial public offering, vesting for
options to purchase 274,500 shares of Common Stock related to the President and
CEO will accelerate and become fully vested.

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

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

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Outstanding at September 27, 1996.............................. -- $ --
Granted...................................................... 1,815,000 1.15
Cancelled.................................................... (57,000) 1.00
---------- -----
Outstanding at September 27, 1997.............................. 1,758,000 1.16
Granted...................................................... 216,000 3.65
Cancelled.................................................... (201,000) 1.58
---------- -----
Outstanding at September 26, 1998.............................. 1,773,000 1.41
Granted (unaudited).......................................... 120,000 7.00
Cancelled (unaudited)........................................ (57,600) 1.00
Exercised (unaudited)........................................ (10,800) 1.00
---------- -----
Outstanding at June 26, 1999 (unaudited)....................... 1,824,600 $ 1.80
---------- -----
---------- -----
Exercisable, September 27, 1997................................ -- --
Exercisable, September 26, 1998................................ 319,200 $ 1.17
</TABLE>

F-15
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

8. EQUITY (CONTINUED)
The following table summarizes information about stock options outstanding
as of June 26, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE ------------------------------
NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- -------------------------------- ----------- --------------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$1.00-$2.00..................... 1,527,600 7.3 $ 1.18 611,000 $ 1.18
$3.50........................... 150,000 8.9 3.50 30,000 3.50
$4.00........................... 27,000 8.3 4.00 5,400 4.00
$7.00........................... 120,000 9.9 7.00 -- 7.00
</TABLE>

The weighted average fair value of options granted was $.36, $1.30 and $2.56
for the years ended September 27, 1997 and September 26, 1998 and the nine
months ended June 26, 1999, respectively.

The Company has recorded deferred compensation in connection with the grants
of certain stock options to employees during the nine months ended June 26,
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. No deferred compensation was
recorded for option grants prior to this period. The deferred compensation will
be amortized ratably over the vesting period of the respective options. The
remaining options to purchase Common Stock were granted at exercise prices equal
to the deemed fair value.

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. The fair value of these
options was estimated at the date of grant using the minimum value option
pricing model with the following weighted-average assumptions for 1997 and 1998:
risk-free interest rate of 6%; dividend yields of 0%; and a weighted-average
life of the option of 7.6 years.

The minimum value option pricing model is similar to the Black-Scholes
option valuation model which 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.

F-16
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

8. EQUITY (CONTINUED)
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:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
<S> <C> <C>
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
Net income as reported................................ $ 5,056,530 $ 5,514,109
Pro forma net income.................................. $ 4,950,679 $ 5,396,784

Net income per share--basic as reported............... $ 0.28 $ 0.30
Pro forma............................................. $ 0.27 $ 0.29
Net income per share--diluted as reported............. $ 0.25 $ 0.27
Pro forma............................................. $ 0.25 $ 0.26
</TABLE>

1999 EQUITY INCENTIVE 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 nonqualified 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. Upon
completion of the offering, the Company expects to issue options to purchase
250,000 shares of its common stock at an exercise price equal to the initial
public offering price of its common stock. The terms of these options will be
substantially the same as other options previously issued.

STOCK SPLIT

In connection with the filing of an initial public offering, the Company
approved a 100-for-1 stock split. In addition, the Company's certificate of
incorporation will be 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.

F-17
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

9. INCOME TAXES

Income taxes consist of the following:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Current:
Federal............................................. $ 3,505,000 $ 3,232,670
State............................................... 870,000 844,652
------------------ ------------------
4,375,000 4,077,322

Deferred:
Federal............................................. (369,984) 143,054
State............................................... (18,122) 25,000
------------------ ------------------
(388,106) 168,054
------------------ ------------------
Income taxes.......................................... $ 3,986,894 $ 4,245,376
------------------ ------------------
------------------ ------------------
</TABLE>

A reconciliation of income taxes at the federal statutory rate of 34% with
the provision for income taxes follows:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Tax at U.S. statutory rates........................... $ 3,074,795 $ 3,318,225
State income taxes, net of federal tax benefit........ 574,200 573,970
Non deductible expenses............................... 187,222 161,256
Other, net............................................ 150,677 191,925
------------------ ------------------
$ 3,986,894 $ 4,245,376
------------------ ------------------
------------------ ------------------
</TABLE>

F-18
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

9. INCOME TAXES (CONTINUED)
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:

<TABLE>
<CAPTION>
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Deferred tax assets:
Inventory........................................... $ 184,726 $ 525,547
Deferred rent....................................... 223,035 378,274
State income taxes.................................. 273,456 208,293
Employee benefit programs........................... 124,978 176,520
Other accrued expenses.............................. 389,089 279,640
------------------ ------------------
Total deferred tax assets............................. 1,195,284 1,568,274

Deferred tax liabilities:
Tax over book depreciation.......................... (743,193) (1,102,251)
Intangibles......................................... (259,037) (441,023)
------------------ ------------------
Total deferred tax liabilities........................ (1,002,230) (1,543,274)
------------------ ------------------
Net deferred tax assets............................... $ 193,054 $ 25,000
------------------ ------------------
------------------ ------------------
</TABLE>

10. RELATED PARTY TRANSACTIONS

The Company expensed a management fee of $250,000 to an affiliated investor
during each of the years ended September 27, 1997 and September 26, 1998 and
$187,500 during each of the nine month periods ended June 27, 1998 and June 26,
1999. For the year ended September 26, 1998 and the nine months ended June 26,
1999, the Company purchased approximately $24,000 and $86,000, respectively, of
merchandise from a company primarily owned by family members of one of our
officers.

The Company's majority shareholder and its CEO have entered into a
stockholders agreement. This agreement provides that (1) as long as the majority
shareholder owns more than 25% but less than 50% of the Company's outstanding
shares, they will have the right to nominate three directors and (2) as long as
the majority shareholder own at least 10% of the shares of common stock held by
them immediately after the completion of this 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
shareholder of their shares of common stock. The stockholders agreement also
grants, subject to limitations and exceptions, demand and piggyback registration
rights to the majority shareholder and piggyback registration rights to the CEO.

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 $0 and $30,648 for the

F-19
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

11. EMPLOYEE SAVINGS PLAN (CONTINUED)
years ended September 27, 1997 and September 26, 1998, respectively and $7,458
and $7,964 for the nine-month periods ended June 27, 1998 and June 26, 1999,
respectively.

12. EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1997 1998 1998 1999
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)

Net income.......................................... $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Income before extraordinary item.................... $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 7,377,761
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Income before extraordinary item per share:
Basic............................................. $ 0.28 $ 0.30 $ 0.21 $ 0.40
Effect of dilutive securities--stock options...... (0.02) (0.02) (0.02) (0.02)
Effect of dilutive securities--warrants........... (0.01) (0.01) (0.01) (0.03)
------------- ------------- ------------- -------------
Diluted........................................... $ 0.25 $ 0.27 $ 0.18 $ 0.35
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings per share:
Basic............................................. $ 0.28 $ 0.30 $ 0.21 $ 0.37
Effect of dilutive securities--stock options...... (0.02) (0.02) (0.02) (0.04)
Effect of dilutive securities--warrants........... (0.01) (0.01) (0.01) (0.01)
------------- ------------- ------------- -------------
Diluted........................................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of shares:
Basic............................................. 18,300,000 18,300,000 18,300,000 18,300,100
Effect of dilutive securities--stock options...... 444,000 627,000 633,000 839,000
Effect of dilutive securities--warrants........... 1,248,300 1,741,000 1,755,000 2,068,000
------------- ------------- ------------- -------------
Diluted........................................... 19,992,300 20,668,000 20,688,000 21,207,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

F-20
<PAGE>

[LOGO]

UNTIL , 1999, WHICH IS THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission Registration Fee and the National
Association of Securities Dealers, Inc. Filing Fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
- --------------------------------------------------------------------------- -------------
<S> <C>
Securities and Exchange Commission Registration Fee........................ $ 12,788
National Association of Securities Dealer, Inc. Filing Fee................. 5,100
Nasdaq National Market Listing Fee......................................... 17,500
Blue Sky Fees and Expenses................................................. 5,000
Transfer Agent and Registrar Fees.......................................... 3,000
Accounting Fees and Expenses............................................... 250,000
Legal Fees and Expenses.................................................... 300,000
Printing Expenses.......................................................... 225,000
Miscellaneous.............................................................. 81,612
-------------
Total.................................................................. $ 900,000
-------------
-------------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation authorizes a court to award,
or the board of directors of a corporation to grant, indemnity to directors and
officers in terms sufficiently broad to permit indemnification under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the Securities Act of 1933.

As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation provides that its directors shall not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that the exculpation from liabilities
is not permitted under the Delaware General Corporation Law as in effect at the
time such liability is determined. As permitted by the Delaware General
Corporation Law, the By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.

The Registrant currently has an insurance policy in place covering its
directors and officers from losses arising from the performance of their duties
with or on behalf of the Registrant. The maximum aggregate coverage amount under
such policy on an annual basis is $5.0 million and such policy is in effect
until March 1, 2000. The Registrant is in the process of obtaining additional
policies of insurance under which coverage will be provided (a) to its directors
and officers against loss arising from claims made by reason of breach of
fiduciary duty or other wrongful act and (b) to the Registrant with respect to
payments which may be made by the Registrant to such officers and directors
pursuant to the above indemnification provision or otherwise as a matter of law.

The Registrant has also entered into indemnification agreements with its
directors and officers obligating the Registrant to indemnify such directors and
officers against losses incurred in connection with certain claims in their
capacities as agents of the Registrant. The Underwriting Agreement provides for
the indemnification of officers and directors of the Registrant by the
Underwriters against certain liabilities.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since July 13, 1996, the Registrant has issued the following securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act"):

(1) On September 27, 1996, The SK Equity Fund, L.P. purchased 18,119,250
shares of common stock for $18,119,250 in cash and SK Investment Fund, L.P.
purchased 180,750 shares of common stock for $180,750 in cash.

(2) On September 27, 1996, the Registrant issued (A) to The SK Equity
Fund, L.P., a 12.5% Senior Subordinated Note due 2003 in the aggregate
principal amount of $10,891,354 and (B) to SK Investment Fund, L.P., a 12.5%
Senior Subordinated Note due 2003 in the aggregate principal amount of
$108,646. In connection with the issuance of the Senior Subordinated Notes
due 2003, the Registrant issued warrants (A) to FSC Corp., an affiliate of
BankBoston, N.A., for the purchase of 413,560 shares of its common stock at
an initial exercise price of $1.00 per share, (B) to The SK Equity Fund,
L.P. for the purchase of 1,945,010 shares of its common stock at an initial
exercise price of $1.00 per share, and (C) to SK Investment Fund, L.P. for
the purchase of 19,400 shares of its common stock at an initial exercise
price of $1.00 per share.

(3) During the three year period ended September 26, 1998 and the nine
months ended June 26, 1999, the Registrant granted options to purchase a
total of 2,151,000 shares of its common stock at a weighted average exercise
price of $1.79. Of this amount, options to purchase 10,800 shares of common
stock have been exercised for an aggregate consideration of $10,800 and
options to purchase 315,600 shares of common stock have been forfeited or
repurchased by the Registrant.

The sale and issuance of securities listed above in (1) and (2) were deemed
to be exempt from registration under Section 4(2) of the Securities Act or
Regulation D thereunder as transactions not involving a public offering. The
sale and issuance of securities listed above in (3) were deemed to be exempt
from registration under the Securities Act by virtue of Rule 701 promulgated
thereunder. All of the foregoing securities are deemed restricted securities for
purposes of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement*

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+

3.1 Certificate of Incorporation of Charlotte Russe Holding, Inc., as amended+

3.2 Certificate of Amendment to the Certificate of Incorporation of Charlotte Russe Holding, Inc. to be in
effect upon the closing of this offering*

3.3 By-laws of Charlotte Russe Holding, Inc.+

4.1 Form of Common Stock Certificate*

5.1 Form of Opinion of Ropes & Gray

10.1 The Second Amended and Restated Revolving Credit Agreement dated as of December 23, 1998, as amended, by
and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and
BankBoston, N.A.+
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.2 The Second Amended and Restated Security Agreement dated as of December 23, 1998 by and among the
Charlotte Russe, Inc., Charlotte Russe Holding, Inc., Charlotte Russe Merchandising, Inc. of Charlotte
Russe Inc. and BankBoston, N.A.+

10.3 The Second Amended and Restated Trademark Collateral Security and Pledge Agreement dated as of December
23, 1998 by and between Charlotte Russe, Inc. and BankBoston, N.A.+

10.4 The Second Amended and Restated Stock Pledge Agreement dated as of December 23, 1998 by and between
Charlotte Russe Holding, Inc. and Bank Boston, N.A.+

10.5 The Stock Pledge Agreement, dated as of December 23, 1998 by and between Charlotte Russe, Inc. and
BankBoston, N.A.+

10.6 The Second Amended and Restated Guaranty dated as of December 23, 1998 by Charlotte Russe Holding, Inc.
in favor of BankBoston, N.A.+

10.7 Stockholders Agreement by and among Charlotte Russe Holding, Inc., The SK Equity Fund, L.P., SK
Investment Fund, L.P., and Bernard Zeichner*

10.8 Charlotte Russe, Inc. Agency Account Agreement dated December 5, 1997 by and between Charlotte Russe,
Inc. and BankBoston, N.A.+

10.9 Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner dated October 1, 1996+

10.10 Amendment No. 1 to Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner*

10.11 Trade Secret and Confidentiality Agreement dated as of October 1, 1996 by and between Charlotte Russe
Holding, Inc. and Bernard Zeichner+

10.12 Charlotte Russe Holding, Inc. 1999 Long-Term Incentive Plan+

10.13 Charlotte Russe Holding, Inc. 1996 Long-Term Incentive Plan+

10.14 Lease Agreement for San Diego Distribution Center dated July 24, 1997 by and between Price Enterprises,
Inc. and Charlotte Russe, Inc.+

10.15 Charlotte Russe Holding, Inc. 1999 Equity Incentive Plan*

10.16 License Agreement dated September 30, 1997 by and between Rampage Clothing Company and Charlotte Russe,
Inc.+

10.17 Charlotte Russe Holding, Inc. 1999 Employee Stock Purchase Plan*

10.18 Common Stock Purchase Warrant No. 1 by and between Charlotte Russe Holding, Inc. and FSC Corp., dated as
of September 27, 1996*

10.19 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*

10.20 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*

10.21 First Amendment dated October 1, 1999 to the Common Stock Purchase Warrant by and between Charlotte Russe
Holding, Inc. and FSC Corp., dated as of September 27, 1996*

10.22 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*

10.23 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*
</TABLE>

II-3

<PAGE>

10.25 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.*

21 Subsidiaries+

23.1 Consent of Ernst & Young LLP

23.2 Consent of Ropes & Gray (See Exhibit 5.1)*

24 Power of Attorney (See Signature Page)+

27 Financial Data Schedule+
</TABLE>

- ---------

* To Be Filed With Amendment

+ Previously Filed

(b) Financial Statement Schedules

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.

ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions described under "Item
14--Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

(c) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the purchase agreements, certificates in
such denominations and registered in such names as required by the underwriters
to permit prompt delivery to each purchaser.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California on this 16th day of September, 1999.

<TABLE>
<S> <C> <C>
CHARLOTTE RUSSE HOLDING, INC.

By: /s/ BERNARD ZEICHNER
-----------------------------------------
Bernard Zeichner
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
Chief Executive Officer,
/s/ BERNARD ZEICHNER President and Director
- ------------------------------ (Principal Executive September 16, 1999
Bernard Zeichner Officer)

Chief Financial Officer
/s/ DANIEL T. CARTER and Treasurer (Principal
- ------------------------------ Financial Officer and September 16, 1999
Daniel T. Carter Principal Accounting
Officer)

*
- ------------------------------ Director September 16, 1999
Allan W. Karp

*
- ------------------------------ Director September 16, 1999
David J. Oddi
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ DANIEL T. CARTER
-------------------------
Daniel T. Carter
ATTORNEY-IN-FACT
</TABLE>

II-5

<PAGE>

September 16, 1999

Charlotte Russe Holding, Inc.
4645 Morena Boulevard
San Diego, CA 92117

Ladies and Gentlemen:

This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (the "Registration Statement") filed with the
Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended, for the registration of 2,700,000 shares of Common
Stock, par value $.01 per share (the "Shares"), of Charlotte Russe Holding,
Inc., a Delaware corporation (the "Company"). The shares are to be sold
pursuant to an underwriting agreement (the "Underwriting Agreement") to be
entered into by and among the Company, the selling stockholders named therein
(the "Selling Stockholders") and BancBoston Robertson Stephens, Inc., Banc of
America Securities, LLC, PaineWebber Incorporated, and First Union Capital
Markets Corp., as representatives of the several underwriters named in
Schedule A to the Underwriting Agreement (the "Underwriters"). The Shares
consist of 1,300,000 shares being sold by the Company, 1,400,000 shares being
sold by the Selling Stockholders and 405,000 shares subject to an
over-allotment option granted by certain Selling Stockholders to the
Underwriters.

We have acted as counsel for the Company and certain Selling
Stockholders in connection with the issue and sale by the Company and such
Selling Stockholders of the Shares. For purposes of our opinion, we have
examined and relied upon such documents, record, certificates and other
instruments as we have deemed necessary.

We express no opinion as to the applicability or compliance with or
effect of Federal law or of the law of any jurisdiction other than The
Commonwealth of Massachusetts and the General Corporation Law of the State of
Delaware (the "Delaware General Corporation Law").

Based on the foregoing, we are of the opinion that (i) the Shares
have been duly authorized, (ii) when issued and sold in accordance with the
terms of the Underwriting Agreement, the Shares being sold by the Company
will be validly issued, fully paid and nonassessable and (iii) the Shares

<PAGE>

Charlotte Russe Holding, Inc. -2- September 16, 1999

to be received by certain Selling Stockholders upon exercise of warrants,
when issued upon exercise of such warrants in accordance with the these
terms, will be validly issued, fully paid and nonassessable.

We hereby consent to the filing of this opinion as part of the
Registration Statement and to the use of our name therein and in the related
prospectus under the caption "Validity of Common Stock."

This opinion is to be used only in connection with the offer and sale
of the Shares while the Registration Statement is in effect.

Very truly yours,

/s/ Ropes & Gray

Ropes & Gray

<PAGE>

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" and to the use of
our report dated November 12, 1998 (except for Note 5, as to which the date
is December 30, 1998 and for the last two paragraphs of Note 8, as to which
the date is _______, 1999) in the Amendment No. 1 to the Registration
Statement to be filed on or about September 15, 1999 and related Prospectus
of Charlotte Russe Holding, Inc. for the registration of 2,900,000 shares of
its common stock.

ERNST & YOUNG LLP

San Diego, California

________________________________________________________________________________

The foregoing consent is in the form that will be signed upon the completion
of the restatement of the capital accounts described in Note 8 to the
financial statements.

/s/ ERNST & YOUNG LLP

San Diego, California
September 14, 1999