Esprit Holdings Limited — M&A Activity 2001

Nov 6, 2001

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

THE GRANDE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

ACQUISITION OF 30.97% INTEREST IN

LAFE TECHNOLOGY LIMITED (CONNECTED TRANSACTION)

The Board announces that on 5 November 2001, the Purchaser, the Vendor and the Guarantor entered into the Agreement whereby the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Shares, representing approximately 31% of the issued share capital of LTL, at an aggregate consideration of US$25,118,000 payable in cash upon Completion. The Guarantor, which indirectly owns 100% of the entire issued share capital of the Vendor, has agreed to guarantee in favour of the Purchaser the performance of the obligations of the Vendor under the Agreement.

As at the date of the Agreement, LIHL is a subsidiary of the Company. LIHL is owned approximately 50% by the Company and its nominees and approximately 50% by the Vendor, which in turn owns approximately 62% of the issued share capital of LTL. Since LIHL is a subsidiary of the Company and the Vendor is a substantial shareholder of LIHL, the Vendor is a connected person of the Company under the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction for the Company under Chapter 14 of the Listing Rules.

Mr. Ho, through Barrican Investments Corporation, is the controlling shareholder of the Company. An application will be made to the Stock Exchange for a waiver from strict compliance with Rule 14.26 of the Listing Rules, exempting the Company from convening a shareholders' meeting to approve the Acquisition.

A circular containing, among other things, details of the Acquisition, a letter from the independent financial adviser of the Company containing its advice to the independent board committee of the Company in respect of the Acquisition and the recommendation of the independent board committee of the Company in respect of the Acquisition, will be despatched to the shareholders of the Company as soon as practicable.

CONNECTED TRANSACTION

THE AGREEMENT

Date of the Agreement

2 November, 2001

Parties

Vendor: Nakamichi Electronics Inc. A 45% indirectly owned associated company of the Company.

Purchaser: Sheer Profit Corporation. A wholly owned subsidiary of the Company incorporated in British Virgin Islands.

Guarantor: Nakamichi Corporation. A 45% owned associated company of the Company and which indirectly owns 100% of the entire issued share capital of the Vendor.

Transaction contemplated under the Agreement

Pursuant to the Agreement, the Vendor has conditionally agreed to sell and the Purchaser has conditionally agreed to purchase the Sale Shares, representing approximately 31% of the issued share capital of LTL, at an aggregate consideration of US$25,118,000 payable in cash upon Completion. The Guarantor has agreed to guarantee in favour of the Purchaser the performance of the obligations of the Vendor under the Agreement.

As at the date of the Agreement, LIHL is a subsidiary of the Company. LIHL is owned approximately 50% by the Company and its nominees and approximately 50% by the Vendor, LIHL in turn owns approximately 62% of the issued share capital of LTL. As one of the conditions to Completion, LIHL will distribute, by way of a dividend in specie, its entire shareholdings in LTL to the Purchaser or their respective nominee and the Vendor in proportion to their respective shareholding interests in LIHL. After the distribution but before Completion, each of the Purchaser or their respective nominee and the Vendor will directly hold approximately 31% of the issued share capital of LTL.

By way of background, we set out below a simplified shareholding structure of the various companies before the Purchase:

The proposed simplified shareholding structure regarding the various companies after completion of the Purchase is as follows:

Consideration

US$25,118,000 at Singapore dollar 0.148 per LTL Share based on the average trading prices of LTL Shares on the Singapore Exchange for the month of October 2001, payable in US$ by the Purchaser on Completion at the exchange rate of US$=S$1.825.

Conditions

Completion is conditional upon the fulfilment or waiver of the following conditions:

(a) the distribution, by way of a dividend in specie, of 619,461,261 LTL Shares by LIHL to the Vendor and the Purchaser or their respective nominee in proportion to their respective shareholding interests in LIHL having been declared, issued and completed;

(b) the passing of all necessary resolutions by the shareholders of the Company (other than persons who are prohibited from voting at such meeting under the Listing Rules) in a special general meeting or, in the case where an appropriate waiver from such requirement is obtained from the Stock Exchange, the obtaining of a written approval certificate signed by Barrican Investments Corporation, to approve the transactions contemplated under the Agreement;

(c) (if required) written confirmation having been obtained from the Singapore Exchange Trading Securities Ltd confirming that Completion will not give rise to any obligation on the part of the Company or the Purchaser to make a general offer for all the Shares (other than Shares not already owned by the Company or the Purchaser) under the Singapore Code on Takeovers and Mergers;

(d) (if required) approvals or consents in relation to the transactions contemplated under the Agreement having been granted by the Tokyo Stock Exchange, other governmental or regulatory authorities and, by the shareholders of the Guarantor and any other third party; and

(e) the warranties given by the Vendor remaining true and accurate and not misleading at all times between the date of the Agreement and Completion.

If the above conditions are not fulfilled or waived by the Company on or before 31 December 2001 (or such other date as the parties to the Agreement may agree in writing), the Agreement will become null and void and of no further force and effect.

Completion

Completion is to take place within 3 business days after all the above conditions are satisfied or waived (or such other date as the parties to the Agreement may agree in writing), which is expected to be around the end of November 2001. Upon Completion, the Purchaser will hold 619,461,261 Shares directly, representing approximately 62% of the issued share capital of LTL.

REASONS FOR THE ACQUISITION

The Company is an investment holding company. The principal activities of the Group consist of the design, development, manufacture and sale of consumer electronic products and computer peripherals, and the distribution of branded products.

LTL and its subsidiaries are primarily involved in the design and manufacture of computer magnetic heads for use in hard disk drives and tape drives for some of the world's leading disk drive and tape drive makers. For the two years ended 31 December 1999 and 2000, the audited consolidated net profits of LTL were approximately US$35 million and US$32 million, respectively. As at 31 December 2000, the audited consolidated net asset value of LTL was approximately US$89 million.

Upon Completion, the Company's shareholding interests in LTL will increase to approximately 62% of the issued share capital of LTL. The Acquisition will enable the Company to enhance its control and management of, and to influence the strategic and financial position regarding, LTL.

RELATIONSHIP BETWEEN THE PURCHASER AND THE VENDOR

As at the date of the Agreement, LIHL is a subsidiary of the Company. LIHL is owned approximately 50% by the Company and its nominees and approximately 50% by the Vendor, LIHL in turn owns approximately 62% of the issued share capital of LTL. Since LIHL is a subsidiary of the Company and the Vendor is a substantial shareholder of LIHL, the Vendor is a connected person of the Company under the Listing Rules. Accordingly, the Acquisition constitutes a connected transaction for the Company under Chapter 14 of the Listing Rules.

Under Rule 14.26 of the Listing Rules, the Acquisition must be approved by the shareholders of the Company at a special general meeting.

Mr. Ho, through Barrican Investments Corporation, holds approximately 73.7% of the entire issued share capital of the Company as at the date of this announcement. There is no conflict of interests between Mr. Ho and Barrican Investments Corporation, on the one hand, and the other shareholders of the Company, on the other hand, with regard to the Acquisition and therefore Barrican Investments Corporation is not required to abstain from voting on any shareholders' resolution required to approve the Acquisition. The Directors including non-executive directors consider that the Acquisition is negotiated on arm's length basis and is fair and reasonable so far as the shareholders of the Company are concerned. An application will be made to the Stock Exchange for a waiver from strict compliance with Rule 14.26 of the Listing Rules, exempting the Company from convening a shareholders' meeting to approve the Acquisition

GENERAL

A circular containing, among other things further information regarding the Acquisition, a letter from the independent financial adviser of the Company containing its advice to the independent board committee of the Company in respect of the Acquisition and the recommendation of the independent board committee of the Company in respect of the Acquisition will be despatched to the shareholders of the Company as soon as practicable.

DEFINITIONS

In this Announcement, unless the context requires otherwise, the following expressions have the following meanings:

"Acquisition" the proposed acquisition by the Company of the Sale Shares from the Vendor pursuant to the terms and conditions as set out in the Agreement

"Agreement" the conditional sale and purchase agreement dated 2 November 2001 entered into between the Vendor, the Purchaser and the Guarantor in relation to the acquisition of the Sale Shares

"Board" board of Directors

"Company" The Grande Holdings Limited, a company incorporated in Bermuda with limited liability and whose securities are listed on the Stock Exchange

"Completion" completion of the sale and purchase of the Sale Shares

"Directors" the directors of the Company

"Group" the Company and its subsidiaries

"Guarantor" Nakamichi Corporation, a limited liability company incorporated in Japan and whose securities are listed on the Tokyo Stock Exchange

"Hong Kong" the Hong Kong Special Administrative Region of the People's Republic of China

"LIHL" Lafe International Holdings Limited, a limited liability company incorporated in the Cayman Islands, and a non-wholly-owned subsidiary of the Company

"Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange

"LTL" Lafe Technology Limited, a limited liability company incorporated in Bermuda and whose securities are listed on the Singapore Exchange

"Purchaser" Sheer Profit Corporation, a wholly owned subsidiary of the Company, a limited liability company incorporated in Bermuda

"Shares" ordinary shares of US$0.04 each in the issued share capital of LTL

"Mr. Ho" Mr. Christopher W Ho, the controlling shareholder of the Company, holding beneficial interests in an aggregate of approximately 73.7% of the total issued share capital of the Company through Barrican Investments Corporation as at the date of this announcement

"Sale Shares" the 309,730,630 Shares, representing approximately 31% of the issued share capital of LTL

"Singapore Exchange" Singapore Exchange Securities Trading Limited

"Stock Exchange" The Stock Exchange of Hong Kong Limited

"Vendor" Nakamichi Electronics Inc., a limited liability company incorporated in the British Virgin Islands

"US$" United States dollars, the lawful currency of United States of America

By order of the Board

The Grande Holdings Limited

Mr Christopher W Ho

President and Group Chief Executive

Hong Kong, 5 November 2001

Please also refer to the published version of this announcement in the Hong Kong iMail.