YON FASHION GROUP BUSINESS PLAN

YFG

YON FASHION GROUP

Execu ve Summary

pg 2-3

Vision

pg 4

Mission

pg 4

Business Plan

pg 5

Strategy

pg 6

Management Team

pg 17

Financials

pg 18 - 23

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EXECUTIVE SUMMARY “An entrepreneurial vision to merge the vibrancy of Italian fashion, embodied in style, elegance and quality, with the discerning sophistication of a niche South African market” After experiencing the energy generated by the shopping experience in the Via Del Corso in Rome, the Vittorio Emanuele in Milan and the Champs Elysees in Paris at the beginning of 2012, the dream of creating Yon Fashion Group was born. This dream is about to be transformed into a reality. Yon Fashion Group (YFG) seeks to identify carefully selected International Brands, whose designs and quality will appeal to a very specific target market in South Africa, and to conclude a partnership by way of either a franchise or license agreement and in this way position these brands in all the major South African Malls through a speciality mono brand branch network retail format. The objective is to create a diverse portfolio of independent International Brands comprising urban brands (casual to smart casual) and premium brands (semi-formal to formal) catering for both males and females. The value proposition is to leverage the skills, expertise, experience, infrastructure and capabilities of the International Brands which will allow for a quick "go to market" strategy without having to invest in specialised resources at a significant cost. The cost to import merchandise which includes transport costs and import duties is more than offset by the benefit realised as a result of not having to invest in specialised skills, resources and infrastructure. Retail business has performed extremely well on a consistent basis in South Africa and the clothing, footwear and textile industry has been one of the main contributors to this trend. Fashion retail companies have shown solid, consistent and incremental growth in turnover and earnings over a number of years. Most of the major chain stores like Truworths, Woolworths, Mr Price and Foschini continue to enjoy double digit growth year after year. The business model of YFG does not intend to compete directly with the major chain stores in South Africa. The company has identified a gap in the apparel sector which comprises a niche target market within the upper LSM 8 to the LSM 10 segments. While some of the population in these groups shop in the chain stores, they do demonstrate an interest in international brands as the chain stores generally stock merchandise having very little differentiation, mostly in-house brands or select foreign brands or brands with foreign labels but manufactured in China. There is an opportunity to shift market share by developing a branch network of select mono brand specialty stores that would provide differentiation in terms of product design and quality and evoke interest in these upper end LSM groups. The interest in International Brands is very evident following the entry of Zara, Cotton On and Top Shop (to mention a few) into South Africa which generated immense interest and attracted significant footfall in the first few months. This target segment consists of a population of approximately 8 million people representing about 35 % of the economically active consumers in South Africa. YFG has concluded its first franchise agreement with an International Brand, NADINE an Italian premium ladies fashion brand based in Milan. As covered in the business case Nadine has a compelling value proposition underpinned by style, class and quality. It is a successful brand in Italy comprising 24 stores mostly located in the Lombardy region in Italy and brings with it expertise, skills, infrastructure and resources to provide the support needed to ensureYFG achieves success in serving its chosen market. The focus for YFG will be predominantly sourcing and distribution logistics and also retail operations which will include store operations, merchandising, sales and marketing, and financial management. YFG has a strong, experienced and qualified management team to drive these functions and the strategic focus will be to integrate the first brand successfully before progressing to introducing new brands into the South African market. An analysis of the industry which includes market conditions reflects trends indicating strong growth and good performance enjoyed by the major retailers. Both macroeconomic and industry specific conditions have favoured retail and in particular the fashion retailers. Activity in all major shopping malls and the scarcity of retail space within the shopping malls is reflective of the positive trends. In terms of competition there is, quite surprising, only one major competitor adopting the International Brands business model which is the House of Busby. While the Surtee Group also follow this model, their strategy is focused on the upper end more expensive brands. With regard to competition at a brand level, four primary competitors were identified that would compete directly with Nadine. However, only one brand, Forever New, has been identified as serious competition. This will work in Nadine's favour as it will have limited competition on the one hand, but provide choice on the other hand. By sourcing locations close to Forever New will ensure that NADINE will benefit from foot traffic already visiting those branches. An external and internal analysis was completed quite comprehensively in the business case to assess Advantages and Opportunities as opposed to Challengers and Risks. The analysis reflects that there are more advantages and opportunities and that most challengers and risks can be overcome or mitigated. PAGE 2

A very detailed and comprehensive financial analysis was undertaken and comprises a 5 year view for:

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Cash flow projection Income Statement projection Balance Sheet projection

The business case was built on a projection of opening one store per year over 5 years which translates to 5 stores in total by the end of year 5 - a very conservative approach. In calculating turnover projections by year, by store a conservative to moderate approach was applied supported by carefully thought through assumptions to drive key metrics such as average price per unit, trading space, units and revenue per square metre as well as rental cost per square metre. Despite the conservative basis applied, the economics reflect attractive growth in net profit year on year as well as very strong cash flows which will fund new store openings as well as bringing new brands on board as the business scales. In conclusion, it is apparent that there is a niche target market that has a demand for international brands. YFG's key differentiators include product appeal, quality and customer service. There is limited competition with regard to the business model and strategy. The metrics indicate that YFG's strategy does not face risks similar to that experienced by chain fashion stores that depend on credit sales and face a real threat of customer over indebtedness. YFG intends to scale the business however in a well-planned manner and not to the same extent as the major players. YFG's mono brands will remain niche and sought-after. This strategy also allows for proper financial management to ensure the achievement of desired margins. Depending on long-term financial performance, options to partner with dominant fashion players or to expand theYFG business aggressively will be evaluated. The purpose of this Business Plan is to source adequate funding to enable YFG to take the first step of opening the first NADINE mono brand specialty store.

YFG PAGE 3

INTRODUCTION Yon Fashion Group (YFG) is a privately owned company established with the purpose to introduce renewed sophistication and fashion elegance to a dynamic, fashion conscious and discerning South African market. Presenting trendy and exciting international brands, YFG brings choice to South African fashion while becoming a leading niche fashion retailer within the clothing, footwear and textile industry sectors.

VISION To become a successful and innovative niche retail apparel business comprising a portfolio of international brands carefully selected so as to be relevant to our chosen target market segments through the creation of two distinct trading divisions – premium brands and urban brands.

MISSION In partnering with International brands, the company's mission is to introduce fashion with sophistication and elegance to the fashion conscious market in South Africa that encapsulates both urban and premium brand designs retailed at an optimal quality-price ratio and distributes these through a national branch network of specialty mono brand stores.

VALUES INTEGRITY YFG is honest, truthful, ethical and transparent in everything we do.

EXCELLENCE YFG is passionate about what we do and committed to providing quality, choice and value for our customers.

Paul Yon - MD

CUSTOMER-FOCUSED YFG is customer and fashion orientated. In our quest to bring the two together, we are committed to meet and exceed our customers' expectations.

COLLABORATION YFG's business success depends on our long-term relationships with our partners and customers alike. Working closely with our strategic partners we stay ahead of new and trendy developments and continue to optimise our South African brand offering.

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BUSINESS PLAN YON FASHION GROUP ESTABLISHED Yon Fashion Group (Pty) Ltd is a fashion retail business started by the Yon Family with the purpose being to introduce trendy, sophisticated and elegant brands to high-end South African market segments through partnering with selected international brands. Yon Fashion Group is also referred to asYFG. YFG was registered on 23 March 2012 (Registration Number: 2012/057091/07) as a private company with two founding directors, Paul Yon and JeanYon.

BUSINESS MODEL

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Business Expertise Brand Success Effective go-to-market strategy

Network of Speciality Mono Brand Stores with compelling VALUE PROPOSITION

Partnering with International Brands

YFG's business model is based on partnering with relevant and well-established international fashion brands. Combining proven business expertise, international brand success and brand awareness with an effective go-to-market strategy, YFG's objective is to replicate international market achievements in niche South African market segments. The business model's concept of partnering entails the careful selection of European and international brands to be promoted and retailed in South Africa through partnership agreements, including franchise, distributor licensing and / or joint venture agreements. An effective go-to-market strategy comprises the development (over time) of a national branch network of specialty mono brand stores, diverse in its offering of premium and urban fashion brands, located in selected and upmarket shopping malls. The right location of stores is critical to ensure desired brand association, optimum brand exposure and target market segment awareness. Focusing on high-end South African market segments, i.e. LSM 8 to LSM 10, trendy and fashion-conscious consumers, taking into account specific buying preferences and behaviours of these segments, promotional and pricing strategies will be customised to ensure brand preference and adoption. While YFG is a newly formed company, the management has sound business expertise. The business opportunity targets the dynamic South African fashion market, providing a compelling value proposition to growing niche market segments. YFG's value proposition combines the brand promise of each unique and carefully selected international brand with a network of specialty mono brand stores located in major shopping malls to serve target markets that are relevant.

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STRATEGY BUILDING CRITICAL MASS THROUGH MANAGING PARTNERSHIPS YFG is structured as a parent company to operate and manage brand partnerships, the South African retail landscape and specialty mono brand stores effec vely. YFG represents and manages in South Africa each interna onal brand imported and introduced under the YFG partnership agreement, however, each unique brand retains its own corporate iden ty, value proposi on and builds its own customer base. YFG takes responsibility to maintain each brand's integrity in South Africa. Together, the YFG por olio of interna onal brands will develop cri cal mass through its combined brand equity in South Africa. YFG provides strategic direc on, strategy execu on and is responsible for the achievement of the company's business objec ves in South Africa.

LEVERAGES STRENGTHS AND CAPABILITIES OF CHOSEN PARTNER BRANDS   

Management skills and business exper se. Infrastructure and capabili es in terms of planning, sourcing and produc on efficiencies. Store opera on procedures, marke ng, merchandising and visual display strategies and techniques, customised to successfully address targeted South African market segments.

EFFECTIVE GO-TO-MARKET STRATEGY ADOPTS PHASED APPROACH Phase 1:  Secure first brand partner agreement  Market and promote the brand in targeted South African market segments  Open first store  Establish and perfect all opera ng processes from inventory procurement, shipping and importa on processes, store opera ons and management through to sales  Establish effec ve customer rela onship management system Phase 2: Open addi onal stores based on a prac cal store roll out plan, developing a na onal branch network  Partner with and introduce addi onal interna onal brands, focusing on premium and urban brand offerings  Replicate first store opera ons  Build strong customer rela onships and foster customer loyalty 

The national retail branch network targets store locations in all upmarket shopping malls including: Sandton City (Johannesburg) Hyde Park (Johannesburg) Melrose Arch (Johannesburg) Rosebank (Johannesburg) Woodlands Boulevard (Pretoria) Clearwater (Roodepoort) Gateway Theatre of Shopping and Pavilion (Durban) V&A Waterfront (Cape Town) Cavendish (Cape Town) Canal Walk (Cape Town) Tyger Valley (Cape Town) Hemingways (Port Elizabeth)

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YFG

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INITIAL BRAND PARTNERSHIP AND FRANCHISE AGREEMENT YFG has concluded its initial (first) international brand partnership with a leading Italian premium ladies fashion brand, Nadine Fashion Group, trading under the brand name NADINE. The basis of the partnership is a franchise agreement with exclusive rights to procure, distribute and retail NADINE merchandise through a branch network of NADINE stores across South Arica. NADINE is a trendy and reputable Italian fashion brand with 24 stores in Italy, its head office and flagship store is located in the famous Vittorio Emanuele II Street in Milan.

THE NADINE BRAND NADINE was established in Milan in 1990 by two young entrepreneurs, Alberto and Clemente Halfon. After initial business success in Milan, they expanded brand development in Italy and abroad. NADINE style appeals to the modern woman. The brand stands for sophistication, elegance and attention to new trends. NADINE is designed for the dynamic woman who takes special care of her femininity. NADINE'S young and seductive style was designed to meet all modern women's needs, as it stands for an ideal quality-price ratio and is an ideal alternative to famous fashion designer couture. NADINE's wide range of clothing, shoes, bags and accessories, constantly renewed collections and care for detail, make it possible for the brand to offer the perfect solution for each situation with glamorous and high quality products.

NADINE Franchise Agreement Benefits NADINE Fashion Group will assist with the development and management of the first YFG store in South Africa. Marketing and management support will be provided to help the franchisee to maximize financial performance, from planning and store concept developments to the opening of the first store. One of NADINE's competitive advantages is its focus on visual merchandising. The brand continuously attracts new customers while offering more to existing customers through a wide variety of styles and complete ranges of clothing with collections that match. NADINE also assists franchisees to avoid unsold stocks through a sell-out system and the ability to distribute merchandise on a weekly basis throughout a season. NADINE provides a unique in-store brand experience, fostering a tranquil atmosphere and enjoyable shopping. The stores are characterised by open spaces and minimal architecture. The real protagonists in stores are the exhibited clothing and through special displays in stores and shop windows frequently rotated and refreshed, customers discover new products on a weekly basis. NADINE collections are continuously updated and presented during the season (Autumn/Winter in September and Spring/Summer in February). The opposite will apply in South Africa due to the difference in seasons. With South Africa lagging Italy, this will be advantageous from a sourcing and procurement perspective (longer lead time) as well as early insight into popular trends and better merchandising and pricing benefits. NADINE works on a short delivery time to stores and thus guarantees a regular renewal of range selections. Turnaround can be as quick as on a weekly basis, with new ranges of products based on colours, lines and trends. Turnaround times for South Africa will be monitored to ensure proper balance between continuity of existing ranges and new introductions. Maintaining interest of existing customers is just as important for brand building as attracting new customers. Quantifying the variety in ranges, NADINE's collections include approximately 2000 items in total towards the end of a season.

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NADINE'S VALUE PROPOSITION FOR SOUTH AFRICAN MARKET SEGMENTS 

The compelling appeal of the NADINE brand offers uniqueness and youthfulness. The designs combine classical lines with trendy, sophisticated styles and a dash of fresh and seductive design elements.

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The NADINE merchandise appeals to the target market of fashion conscious and career driven women between (but not limited to) ages of 25 and 45 and LSM categories 8 to 10. These market segments are showing a growth trend that is foreseen to continue.

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The NADINE differentiator lies in the quality of fabrics, production standards and attention to detail and comes with a 'Made in Italy' label which carries a quality and style perception.

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Shop window visual merchandise displays are changed on a weekly basis, mix and match collections and new merchandise is distributed frequently throughout the season. The frequently rotated visual displays maintain interest and the variety of merchandise suitable for different occasions helps maximise sales.

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NADINE satisfies a strong South African affinity for European and in particular Italian fashion. NADINE will be one of few Italian fashion retail brands for the South African niche market segments. Currently, there are no premium Italian Ladies fashion brands with a mono brand branch network trading in South Africa. NADINE will be the first.

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NADINE provides a full range of ready-to-wear garments, shoes, handbags, and accessories that meet the fashion requirements of its target market.

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Since South Africa lags Europe in terms of fashion seasons, designs extremely popular in Europe will be known in advance which will helpYFG to ensure the procurement of the most popular designs.

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RETAIL OPERATIONS STORE OPERATIONS A feature of the Business Model is that existing NADINE retail operating processes and procedures will be imported and adopted as follows: 

The store concept design will be provided and a local designer will complete the visuals and complete the store plans.

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Store construction, fixtures and fittings, lighting and signage will all be procured locally subject to NADINE Fashion Group approval.

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The store layout plan, store décor, signage, branding, stationery and shopping bag designs will be identical to NADINE's stores in Italy.

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All merchandise design, garment manufacture and production as well as planning and merchandising will be done by the NADINE Fashion Group in Milan.

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NADINE Head Office will provide training on all store operating procedures. Staff will receive training in Milan or NADINE will send training resources to South Africa to assist in the initial training and support of new staff and store operations.

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The typical staffing structure will be a team consisting of a store manager and 2 permanent store assistants with 1 or 2 casual staff during peak trading hours. Given trading hours and the 7 day trading week as required by shopping malls, two teams will operate and rotate on a daily basis.

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JeanYon (Merchandise) and NicholasYon (Retail Operations) will be directly responsible for managing store operations.

MERCHANDISING NADINE's business expertise will be leveraged for all planning, production and merchandising activities. 

South Africa lags the European fashion seasons which allows YFG to plan carefully and optimise inventory procurement and gain cost advantages. NADINE sends visuals (electronically) of all merchandise released on a weekly basis of a particular season in Italy to all business partners. This allows YFG to identify, select, order and procure merchandise for South African NADINE stores well in advance. Merchandise selected will go into early production in Italy, ensuring sourcing in advance and in-time release in South Africa. This will assist marketing and promotional activities, for example fashion shows, fashion photography and advertising.

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Payment terms will apply when orders are shipped to South Africa on a basis of 50% upon leaving Italy and the balance when the merchandise is delivered at its destination in South Africa.

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Directors, Paul Yon and Jean Yon, will be responsible for procurement and as Managing Director, Paul Yon, will manage sourcing as well as logistics functions which includes import administration, delivery to local storage facilities and subsequent delivery to branch stores. Nicholas Yon (Retail Operations), will play a supportive role ensuring timeous execution of all logistics related functions.

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Buying and merchandising and maintaining optimum inventory levels at branches will be the overall responsibility of Jean Yon (Merchandise). This function will be shared with Nicholas Yon (Retail Operations), who will play a supportive role ensuring meticulous execution of all store merchandising related functions.

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SALES AND MARKETING NADINE's sales and marketing strategy will be used as a basis for customising an effective sales and marketing strategy for the targeted, high-end South African market segments. 

Prior to the opening of the first store, a carefully planned marketing promotional campaign, introducing the NADINE brand into the South African market will be launched.

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The first campaign will be followed by seasonal promotions which will be influenced and guided by NADINE Italy.

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The sales strategy will initially be driven by the merchandising strategy of new garment releases on a weekly basis and the refreshing of store windows and visual in-store displays. The rotation of merchandise in-store and weekly releases of new designs and garments will be the primary tactic to generate sales.

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The initial marketing strategy will focus on below the line activities including in-store promotions and the development of customer relationships with frequent shoppers. However as the branch network grows a comprehensive above the line marketing strategy will be developed and implemented, funded by growing revenue. Advertising channels such as Grazia and other local fashion magazines will be central in above the line activities. Brochures and fliers will be developed and distributed together with Shopping Mall publications where opportunities arise. Once the brand has a national footprint, billboard advertising could be evaluated for brand building to reaffirm brand awareness and 'top of mind' status.

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The sales and marketing portfolio will be managed by the Managing Director, PaulYon. He will be assisted by MarcYon who will also manage the Business Development Portfolio.

FINANCE AND BUSINESS DEVELOPMENT The responsibility of ensuring that YFG achieves its financial goals and objectives and delivers projected year-on-year earnings growth will be that of the Finance Head, Marc Yon. This portfolio also includes general financial management, tax and treasury requirements and functions. Marc, a qualified Chartered Accountant will also manage all company secretarial, compliance, governance deliverables and support the business development portfolio in so far as identifying new business partners and negotiating new franchise, distributor or joint venture agreements. The Business Development Portfolio also includes the identification of new suitable store locations, lease agreement negotiations as well as the management of store roll out plans. YFG will track its financial performance against its 5 year business plan. The business plan adopts a conservative approach and includes only five stores in the first five years however YFG foresees the possibility to open between 8 and 10 stores within the first five years. However the goal will need to be managed carefully in terms of cash flow management, funding, capital expenditure, and expense control as well as turnover growth.

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INDUSTRY ANALYSIS SOUTH AFRICAN MACRO-ECONOMIC ENVIRONMENT INDICATORS CPI: GDP: Prime Interest Rate: Unemployment:

5.5% (June 2012) – up 0.5% compared to 2011 2.7% in Q1 2012 8.5% (lowest in 42 years) 24.9%

RETAIL ENVIRONMENT INDICATORS Business Confidence increased to 46 points in Q3 2012 (up 7 index points) 1 Overall retail sales growth: 5.9% year-on-year growth in Q1 2012 2 5.4% year-on-year growth in Q2 2012 2 Semi-durable retail goods: 5.6% year-on-year growth in Q1 2012 2 10.0% year-on-year growth in Q2 2012 2 The targeted market segment of LSM 8 to LSM 10 consumers comprises approximately 8 million people, representing about 35 % of economically active consumers in South Africa. This market segment is growing with an increasing number of middle class consumers moving up into higher LSM consumer categories. August 2012 retail sales figures released by Statistics SA beat market expectations where year-on-year figures August 2012 increased by 6.4%, up by 2.9% from July 2012 (better than market forecast of 4.6%). The major driver of this growth came from the clothing, footwear and leatherwear sectors which were up by 17.6% 3. 1 - Bureau for Economic Research (BER) Retail Survey Report 2 - Statistics SA 3 - Business Day 18 October 2012

MAJOR RETAILERS IN THE CLOTHING INDUSTRY The South African clothing industry is advanced and sophisticated and is dominated by a number of large fashion retail companies, namely Edgars, Jet, Woolworths, Truworths, Foschini, Mr Price and Ackermans. These companies target consumers across the spectrum of LSM groups and focus predominantly on the middle income groups (mid-market segments). A critical success factor for sustainability is the extension of credit by issuing a private label store card which is used to drive credit sales. For most chain stores the credit sales contribution to total sales ranges from 55% to 70%. The only exception is Mr Price who has a credit sales contribution of only 20%, following a strategy with a focus on cash sales. High Level Market Segmentation of Major Retail Companies within the South African Clothing Industry LSM 9 – 10 Woolworths Daniel Hechter Truworths Brands Queenspark Trennery Trend Stu afords (World of Brands)

LSM 6 – 8 (mid-market) Edgars Truworths Foschini Markham Milady's Mr Price (trendy, cost effec ve op ons)

LSM 4 – 5 (value market) Jet Stores Ackermans Mr Price Legit Identity

LSM 1 – 3 (low income) Pep Stores Jay Jay's The Hub Dunn's

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MAJOR RETAILERS FINANCIAL PERFORMANCE South African retail industry has shown excellent financial performance, demonstrating continued year-on-year growth for a number of successive years. Clothing retailers in particular have shown solid, consistent performance. Outstanding results of the past year include: 

Market expectations have been beaten with improved margins and performances through supply chain efficiencies.

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Woolworths' share price has outperformed that of its direct competition, i.e. Truworths and the Foschini Group. The upmarket retailer has benefitted from steady spending by its target market.

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The Foschini Group, with a number of specialist chains such as Foschini, Markham, @ home, Total Sports, American Swiss and Exact grew its turnover by 17% to R11.6 bn.

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Mr Price announced growth in turnover of 14.1% and operating profit of 21%.

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Truworths reported turnover growth of 12% to R8.8bn, trading profit growth of 11% and operating profit increase by 12% to R3.2 bn (June 2012).

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Edcon reported 9% increase in revenue to R27.3 bn (March 2012).

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The Top 100 Companies (November 2012) are dominated by the retail sector which has outperformed the all share index, banks, resources and industrials. Foreign investors own about half of the retail sector on the JSE, up from 24% in 2007.

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Since 2000, profits in the retail industry have increased more than 15 fold and continued to grow through the financial crisis. Domestic factors have also helped retailers' performance. Shoppers spent more than expected due to a better than inflation real wage growth. Lower interest rates have also helped richer shoppers.

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MARKET ANALYSIS INTERNATIONAL BRANDS STRATEGY YFG's business model is to partner with selected and diverse international brands and to distribute and retail through a network of specialty mono brand stores across South Africa in line with two categories, namely premium brands and urban brands. Currently there are only two companies in the retail market sector, House of Busby (HOB) and the Surtee Group, following a similar business model and strategy. While both companies are pursuing an International Brands strategy, they do not compete directly with each other as one focuses more on urban and premium brands and the other focuses on high-end luxury brands. Both groups have sizeable businesses which have evolved over a number of years with stores located in upmarket shopping malls. Their growth in partner brands and number of stores is indicative of a successful and sustainable business model. Both HOB and The Surtee Group are experienced retailers and built their companies into successful retail businesses. HOUSE OF BUSBY

THE SURTEE GROUP

The initial business focus was the manufacture and supply of leather goods which grew into the retailing of certain products. HOB has developed its fashion retail business during the past decade through the introduction of a number of international brands to South African market segments through distributor and franchise type partner agreements. In 2008, HOB delisted and was acquired by Ethos Private Equity. Some of the brands retailed under the H O B brand management include:

With a focus on luxury brands, the Surtee Group's international brand strategy has a successful and proven track record of more than twenty years. The business is owned and managed by the Surtee family. The initial business has split into two separate independent entities, namely the Surtee Group South Africa and the Power of Trading (Pty) Ltd. Surtee Group South Africa includes brands such as: 

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Aldo Nine West GUESS Mango Forever New Marion and Lindie

HOB has built a successful business with each of its brands comprising a network of stores located in shopping malls throughout South Africa, boasting a national footprint. The Group's total store network comprises approximately 140 stores. The group also distributes some of its merchandise such as Guess and Nine West handbags through some of the major chain stores such as Foschini and Edgars. HOB has developed a strong business relationship with Edcon distributing many of its branded merchandise through the Edgars chain. In addition, HOB has leveraged the opportunity to set up shop-in-shop concept stores in certain Edgars stores through occupying floor space within Edgars stores. This has proven to be a highly successful strategy. As a result, HOB and Edcon set up a joint venture to secure franchise agreements with the European Arcadia Group for the Top Shop and Top Man brands to roll out stores across South Africa. The roll out of these mono brand chains will be Top Shop and Top Man mono brand stores as well as shop-in-shop stores located within certain Edgars stores

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Hugo Boss Alfred Dunhill Mamas & Papas Grays (with a multi-brand strategy)

Surtee Group Power of Trading (Pty) Ltd includes brands such as:      

BOSS Armani Burberry Levisons Lacoste Paul & Shark

Branded stores under the Surtee Group are located in the major shopping malls. Burberry is a recent inclusion in the stable with branches in V & A Waterfront and Hyde Park Corner. Paul & Shark is also a recent acquisition with only one store located in Sandton City. This is an Italian brand retailing casual and semi-formal menswear with a nau cal theme.

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COMPETITOR ANALYSIS YFG faces competition at various levels including Company, Brand and from foreign brands entering or being introduced to the South African market.

COMPANY LEVEL YFG's primary competitor is House of Busby, however, only with certain brands. HOB has quite a diverse portfolio of brands which will not all be in direct competition with YFG's brands. Both companies however follow the same business model by partnering with International Brands. The Surtee Group of companies does not pose direct competition as their portfolio of brands serve only the top end of the market. It is foreseen that the Surtee Group will stay focused on the more affluent market segments with very niche upper end brands. Both market players have a competitive advantage in their strong relationships with all the major shopping malls in terms of procurement of trading space.

BRAND LEVEL Competitor brands that stand in direct opposition to the NADINE brand and target the same market segments are: ZARA (LADIES)

JO BORKETT

A Spanish brand, active in South Africa since November 2011 with its first store in Sandton City, and two other stores in Gateway Durban and V&A Waterfront respectively. Zara's merchandise is trendy, international urban with price points higher than the major chain stores. Variety of styles and garments are somewhat limited. Given their international brand awareness the introduction of Zara gained immense interest however the euphoria seems to have settled and the brand no longer evoke the same level of interest. The perception with consumers is that South African quality is not comparable to that of European stores and that outdated merchandise that no longer sells in Europe is retailed locally. This is causing a negative sentiment around the Zara brand in South Africa.

A local designer brand with European design styles and price points higher than the major chain stores. This brand was very popular for a number of years with corporate styles as well as trendy casual wear and luxurious handbags. However it seems as if the brand has lost its lustre. Jo Borkett has only four branch branded stores and are not expanding the business with additional stores and does not seem to pose serious competition for the NADINE brand.

FOREVER NEW

MANGO

The Forever New brand was initially started in Australia and brought to South African by the House of Busby. Forever New was launched in December 2010 and within only two years the brand has opened about twenty stores in South Africa. They were aggressive in rolling out new stores since the first opening and their stores are also located in all the major shopping malls nationally as well as regionally. The successful roll-out of stores is funded by Tom Singh, the founder of New Look, which is the UK's third largest women's fashion chain.

Another Spanish brand retailing under the House of Busby business brand. Mango's merchandise is also categorised under urban fashion and is a well-known European brand. There are currently about eight Mango branded stores in South Africa located in major shopping malls. Mango's price points are the lowest of all the primary competitors to the NADINE brand and prices compete favourably with Edgars, Woolworths, Foschini and Truworths' clothing. The brand appeals to a niche segment and is not perceived to be a strong competitor to the NADINE brand.

Forever New carries a fresh range of design styles, categorised as high fashion apparel and accessories with a signature feminine look. Their range includes clothing, footwear and accessories ranging from smart casual to couture. Their signature look is pastel shades and frilly dresses which evokes interest in the young professional female. The predominant target market within the LSM 8 to 10 bands is the younger female. Their price range is the highest of all the primary competitors and relatively higher than the major chain stores. Forever New is undoubtedly the best performer of all the primary competitor brands and is currently one of the most appealing and exciting ladies fashion brands in South Africa. Of the four primary brand competitors NADINE is the closest to Forever New in terms of product, designs, range, price points and target market. As such, Forever New will be NADINE's biggest competitor.

PAGE 15

COMPETITOR ANALYSIS (continued) COMPETITION FROM FOREIGN COMPANIES In November 2011 the first Zara store was opened in Sandton City by its Spanish owners, the Inditex Group with the purpose to enter the South African market to progress their global strategy. This event took place with extensive public relations and media coverage as it coincided with the opening of the new wing in Sandton City. This evoked significant interest in the South African fashion conscious consumer given the popularity of the brand in Europe. Zara has since opened an additional two stores in major shopping malls in South Africa. At the same time (November 2011), an Australian owned company opened its first store, Cotton On, in Sandton City. This was low key since Cotton On was not a well-known brand in South Africa. Cotton On is a value fashion retailer competing with the brands such as Mr Price, Jet, Identity and Ackermans. This brand has done extremely well and in less than 18 months has opened about twenty stores and plan to reach thirty stores by the end of 2013. Their aggressive store roll out plan is indicative of the demand for their value proposition which is trendy and fashionable merchandise at value based prices. Their retail format and target market supports an aggressive store expansion plan allowing them to be located not in just the high end shopping malls but also regional malls and value centres. Towards the end of 2012, well known UK based retailer, the Arcadia Group, introduced their well-known brand Top Shop and Top Man to South Africa. This brand was brought to South Africa by way of a joint venture between Edcon and the House of Busby Group. Top Shop opened its first store in Sandton City around October 2012, also with immense interest from the fashion conscious public in Johannesburg. Other foreign brands of significance have been included in the discussion under House of Busby brands.

COMPANY ASSESSMENT ADVANTAGES        

OPPORTUNITIES

NADINE brand expertise and management experience Available training within the NADINE brand Quality, design and appeal of merchandise NADINE authentic label 'Made in Italy No upfront franchise fee applicable Import duty of 20% as opposed to 45% Strong demand for ladies fashion Target market more affluent and not reliant on store card credit

    

CHALLENGES      

Low interest rates Growing middle to higher income group – LSM 8 – LSM 10 Space in the market for additional specialty mono brand chain stores with unique value proposition YFG selected brands provides promise of success within proposed business model Only one serious competitor in market segments that is showing growth

RISKS

Logistics relative to European partner collaboration Ensuring effective sourcing and buying processes Ensuring smooth and effective administration of inventory orders and import bureaucracy Maintaining optimum lead times Access to flexible funding options to support business growth Securing retail space in appropriate shopping malls as a new entrant

   

PAGE 16

Uncertainty in external economic condi ons Cyclical nature of business Vola lity in fuel price could affect importa on cost nega vely Vola lity in exchange rate

YON FASHION GROUP MANAGEMENT YFG is established as a family business. The management team from Left to Right is Marc Yon; Nicholas Yon; Paul Yon and Jean Yon, is responsible for managing theYFG and NADINE store operations.

PAUL YON : MANAGING DIRECTOR - CIS; MBA Paul has extensive retail experience having held executive positions in listed retailers and the banking industry. His expertise covers consumer finance and customer value management and he currently works for a global company heading up the Retail Financial Services Unit, providing data and business intelligence solutions to drive customer account management strategies.

JEAN YON : MERCHANDISE BUYER Jean qualified as a school teacher and has over 30 years' experience in Education. The discipline required in her role will ensure the necessary structure and discipline is enforced in managing store operations. Jean is a keen follower of fashion and her insights into emerging trends will ensure the merchandise portfolio is successfully managed.

MARC YON: CFO – B Com Hons CA(SA) Marc is a newly qualified Chartered Accountant having completed articles with Deloitte. Marc currently works for a division of Imperial Holdings and holds the position of Group Accountant for a portfolio of companies within the division.

NICHOLAS YON : RETAIL OPERATIONS – B Com Hons (ACCOUNTING) Nicholas completed articles with Moore Stephens in 2007. He spent 2 years working for Central Energy Fund (CEF) as a Financial Accountant. Nicholas currently holds the position of Financial Manager in one of the Group Finance division's within Standard Bank.

PAGE 17

FINANCIALS

PAGE PAGE 18 19

CONSOLIDATED BALANCE SHEET Year 1

Year 2

Year 3

Year 4

Year 5

40 000

80 000

120 000

160 000

200 000

-8 000

-24 000

-48 000

-80 000

-108 000

500 000

1 000 000

1 500 000

2 000 000

ASSETS Non-current Assets Store Equipment Accumulated Depreciation Leasehold Improvements C omputer Equipment

2 500 000

60 000

120 000

180 000

240 000

300 000

-12 000

-36 000

-72 000

-120 000

-174 000

1 108 338

2 116 648

3 992 071

5 978 161

5 603 543

100 000

160 000

220 000

320 000

380 000

Cash

2 240 149

4 193 464

7 723 866

13 212 428

22 602 187

Total Assets

4 028 487

7 610 112

13 615 937

21 710 588

31 303 730

100

100

100

100

1 365 758

4 890 314

10 380 229

17 909 558

27 887 353

-

-493 003

-1 511 571

-2 528 480

Accumulated Depreciation Current Assets Inventory Deposit

EQUITY AND LIABILITIES Equity Share Capital Retained Income Dividend Declared

-

100

Non-current Liabilities Interest Bearing Borrowing Shareholders Loan

1 594 638

1 189 277

783 915

378 553

-

700 000

700 000

700 000

700 000

700 000

367 991

Current Liabilities Accruals

160 638

569 669

1 452 600

Provision for Leave Pay

-

115 492

246 367

548 964

1 605 055 494 062

Current Tax Liability

-

554 291

1 428 660

2 232 383

3 145 640

4 028 487

7 610 112

13 615 937

21 710 588

31 303 730

Total Equity and Liabilities

PAGE 19

COMPREHENSIVE INCOME STATEMENT Year 1

Year 2

Year 3

Year 4

Year 5

Sales

7 750 300

15 888 115

24 432 821

33 404 762

42 825 300

Cost of Sales

3 369 696

6 907 876

10 622 966

14 523 809

18 619 696

Gross Profit

4 380 604

8 980 239

13 809 855

18 880 953

24 205 604

511 080

777 134

1 283 621

1 855 023

2 198 460

20 000

36 000

52 000

68 000

84 000

516 000

903 600

1 492 932

1 945 317

2 389 481

1 200 000

1 980 000

2 799 000

3 658 950

4 597 898

126 000

277 650

446 783

785 622

967 078

2 007 524

5005 855

7 735 520

10 568 041

13 968 687

Interest Expense

110 638

110 638

110 638

110 638

110 638

Interest Income

-

-

-

-

-

1 896 886

4 895 217

7 624 882

10 457 402

13 858 048

531 128

1 370 661

2 134 967

2 928 073

3 880 254

1 365 758

3 524 556

5 489 915

7 529 330

9 977 795

Admin Expenses Depreciation Salaries and Wages Rent Expense Operating Expenses

Profit from Operations

Profit Before Tax Tax Expense

Net Profit After Tax

PAGE 20

COMPREHENSIVE CASH FLOW STATEMENT Year 1

Year 2

Year 3

Year 4

Year 5

Sales

7 750 300

15 888 115

24 432 821

33 404 762

42 825 300

Financing Inflows

2 700 000

0

0

0

0

10 450 300

15 888 115

24 432 821

33 404 762

42 825 300

Operating Expenses

219 580

405 784

628 328

870 441

1 100 720

Marketing \ Travel

545 000

776 500

1 229 575

1 862 704

2 212 319

1 816 000

2 943 600

4 351 932

5 704 267

7 047 379

600 000

620 000

625 000

600 000

600 000

4 513 571

8 141 788

12 735 214

17 520 945

20 341 389

516 000

516 000

516 000

516 000

516 000

0

531 128

816 369

841 844

1 617 734

Total Outflows

8 210 151

13 934 800

20 902 419

27 916 200

33 435 540

Net Cash

2 240 149

1 953 315

3 530 402

5 488 562

9 389 759

Opening Cash

0

2 240 149

4 193 464

7 723 866

13 212 428

Closing Cash

2 240 149

4 193 464

7 723 866

13 212 428

22 602 187

Total Inflows

Occupancy and Payroll Store Development Costs Inventory Procurement Financing Outflows Tax Paid

PAGE 21

FIRST YEAR BALANCE SHEET MONTHLY M1

M2

M3

M4

M5

M6

M7

M8

M9

M 10

M 11

M 12

TOTAL

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

40 000

-667

-1 333

-2 000

-2 667

-3 333

-4 000

-4 667

-5 333

-6 000

-6 667

-7 333

-8 000

-8 000

Leasehold Improve.

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

500 000

Computer Equip.

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

60 000

-1 000

-2 000

-3 000

-4 000

-5 000

-6 000

-7 000

-8 000

-9 000

-10 000

-11 000

-12 000

-12 000

Inventory

939 442

706 090

1 068 166

841 281

494 334

908 045

608 431

338 119

1 770 012

1 353 162

1 353 160

1 108 338

1 108 338

Deposit

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

Cash

1 006 217

1 271 527

1 017 241

1 437 251

1 957 261

1 657 976

1 998 086

2 278 396

902 617

1 322 627

1 575 339

2 240 149

2 240 149

Total Assets

2 643 992

2 780 407

2 971 865

3 143 262

3 256 021

3 294 850

3 303 181

3 357 629

3 359 122

3 610 165

4 028 487

4 028 487

ASSETS Non-Current Assets Store Equipment Acc. Depreciation

Acc. Depreciation Current Assets

2674 283

EQUITY AND LIABILITIES Equity Share Capital Retained Income

100

100

100

100

100

100

100

100

100

100

100

-22 328

41 744

181 647

282 067

454 486

572 789

640 693

715 565

822 952

923 372

1 128 307

1 365 758

100

1 365 758

100

1 932 440

1 898 660

1 864 879

1 831 099

1 797 319

1 763 539

1 729 759

1 695 979

1 662 199

1 628 418

1 594 638

1 594 638

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

700 000

-

-

-

124 819

157 577

185 812

190 518

157 757

138 598

73 452

153 340

367 991

367 991

-

-

-

-

-

-

-

-

-

-

-

-

2 643 992

2 674 283

2 780 407

2 971 865

3 143 262

3 294 850

3 303 181

3 357 629

4 028 487

4 028 487

Liabilities Non-Current Liabilities Interest Bearing 1 966 220 Borrowing Shareholders Loan 700 000 Current Liabilities Accruals Provision for Leave Pay Total Equity and Liabilities

3 256 021

3 359 122

-

3 610 165

FIRST YEAR INCOME STATEMENT MONTHLY M1

M2

M3

M4

M5

M6

M7

M8

M9

M 10

M 11

M 12

TOTAL

Sales

479 400

479 400

639 200

719 100

719 100

639 200

639 200

479 400

559 300

719 100

799 000

878 900

7 750 300

Cost of Sales

208 435

208 435

277 913

312 652

312 652

277 913

277 913

208 435

243 174

312 652

347 391

382 130

3 369 696

Gross Profit

270 965

270 965

361 287

406 448

406 448

361 287

361 287

270 965

316 126

406 448

451 609

496 770

4 380 604

Admin Expenses

511 080

140 090

20 090

5 090

105 090

5 090

5 090

105 090

5 090

5 090

105 090

5 090

5 090

Depreciation

1 667

1 667

1 667

1 667

1 667

1 667

1 667

1 667

1 667

1 667

1 667

1 667

20 000

Salaries and Wages

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

516 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

100 000

1 200 000

8 000

8 000

8 000

8 000

8 000

38 000

8 000

8 000

8 000

8 000

8 000

8 000

126 000

(21 791)

98 209

203 530

148 691

248 691

173 530

103 530

113 209

158 369

148 691

293 852

339 013

2 007 524

9 220

9 220

9 220

9 220

9 220

9 220

9 220

9 220

9 220

9 220

9 220

9 220

110 638

Rent Expense Operating Expenses

Profit from Operations

Interest Expense Interest Income

0

0

0

0

0

0

0

0

0

0

0

0

0

Profit Before Tax

(31 011)

88 989

194 310

139 471

239 471

164 310

94 310

103 989

149 150

139 471

284 632

329 793

1 896 886

Tax Expense

(8 683)

24 917

54 407

39 052

67 052

46 007

26 407

29 117

41 762

39 052

79 697

92 342

531 128

Net Profit After Tax

(22 328)

64 072

139 904

100 419

172 419

118 304

67 904

74 872

107 388

100 419

204 935

237 451

1 365 758

PAGE 22

FIRST YEAR CASH FLOW STATEMENT MONTHLY Sales

Pre -Start

M1

M2

M3

M4

M5

M6

M7

M8

M9

M 10

M 11

M 12

TOTAL

-

479 400

479 400

639 200

719 100

719 100

639 200

639 200

479 400

559 300

719 100

799 000

878 900

7 750 300

Financing Inflows

2 700 000

-

-

-

-

-

-

-

-

-

-

-

-

2 700 000

Total Inflows

2 700 000

479 400

479 400

639 200

719 100

719 100

639 200

639 200

479 400

559 300

719 100

799 000

878 900

10 450 300

Operating Expenses

2 500

28 090

28 090

13 090

13 090

13 090

28 090

13 090

13 090

13 090

1 3 090

13 090

28 090

219 580

Marketing \ Travel

115 000

100 000

-

-

100 000

-

30 000

100 000

-

-

100 000

-

-

545 000

Occupancy and Payroll

100 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

143 000

1 816 000

Store Development

270 000

330 000

-

-

-

-

-

-

-

-

-

-

-

600 000

Inventory Procurement

1 041 593

-

-

694 396

-

-

694 396

-

-

1 735 989

-

347 198

-

4 513 571

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

43 000

516 000

Financing Outflows

-

Total Outflows

1 529 093

644 090

214 090

893 486

299 090

199 090

938 486

299 090

199 090

1 935 079

299 090

546 288

214 090

8 210 151

Net Cash

1 170 907

-164 690

265 310

-254 286

420 010

520 010

-299 286

340 110

280 310

-1 375 779

420 010

252 712

664 810

2 240 149

1 170 907

1 006 217

1 271 527

1 017 241

1 437 251

1 957 261

1 657 976

1 998 086

2 278 396

902 617

1 322 627

1 575 339

-

1 006 217

1 271 527

1 017 241

1 437 251

1 957 261

1 657 976

1 998 086

2 278 396

902 617

1 322 627

1 575 339

2 240 149

2 240 149

Opening C ash Closing Cash

-

1 170 907

PAGE 23

NADINE

PAGE 24

YFG