1. NATURE OF OPERATIONS AND ACQUISITION OF CLAIRE’S STORES, INC.

Nature of Operations - Claire’s Stores, Inc., a Florida corporation, and subsidiaries (collectively the “Company”), is a leading retailer of value-priced fashion accessories targeted towards young women, teens, tweens and kids. The Company is organized into two segments: North America and Europe. The Company has company-operated stores throughout the United States, Puerto Rico, Canada and the U.S. Virgin Islands (North America segment) and the United Kingdom, Switzerland, Austria, Germany, France, Ireland, Spain, Portugal, Netherlands, Belgium, Poland, Czech Republic, Hungary, Italy and Luxembourg (Europe segment). In January 2014, we made a decision to close our China stores and closed all of our 17 company-operated stores in that country.

Acquisition of Claire’s Stores, Inc. - In May 2007, the Company was acquired by investment funds affiliated with, and co-investment vehicles managed by, Apollo Management VI, L.P. (“Apollo Management,” and such funds and co-investment vehicles, the “Apollo Funds”), and Claire’s Stores, Inc. became a wholly-owned subsidiary of Claire’s Inc. (the “Acquisition”).

The purchase of the Company and the payment of the related fees and expenses were financed through the Company’s borrowings under a bank credit facility (the “Former Credit Facility”), the Company’s issuance of senior and senior subordinated notes (the “Merger Notes”), equity contributions by the Apollo Funds and cash on hand at the Company. At the time of the Acquisition, the Company did not have any material indebtedness.

The closing of the Acquisition occurred simultaneously with:

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the closing of the Company’s Former Credit Facility, consisting of a senior secured term loan facility (the “Former Term Loan”) and a revolving Credit Facility (the “Former Revolver”) of $1.65 billion;

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the closing of the Company’s Merger Notes offering in the aggregate principal amount of $935.0 million; and

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the equity investment by the Apollo Funds, collectively, of approximately $595.7 million.

The aforementioned transactions, including the Acquisition, the incurrence of indebtedness pursuant to the Former Credit Facility and the Merger Notes and payment of costs related to these transactions, are collectively referred to as the “Transactions.”

Claire’s Inc. is an entity that was formed in connection with the Transactions and prior to the Merger had no assets or liabilities other than the shares of Bauble Acquisition Sub, Inc. and its rights and obligations under and in connection with the merger agreement. As a result of the Merger, all of the Company’s issued and outstanding capital stock is owned by Claire’s Inc.

The acquisition of Claire’s Stores, Inc. was accounted for as a business combination using the purchase method of accounting, whereby the purchase price was allocated to the assets and liabilities based on the estimated fair market values at the date of acquisition.