Graham Kirkham

Increased and final offer

Graham Kirkham
02 September 2004



Not for release, publication or distribution, in whole or in part, in, into or
from Canada, Australia or Japan

                                                                2 September 2004

 RECOMMENDED INCREASED AND FINAL TERMS OF ACQUISITION OF DFS FURNITURE COMPANY
                                 PLC ('DFS') BY
                   FULL CIRCLE FUTURE LIMITED ('FULL CIRCLE')

                      ADJOURNMENT OF SHAREHOLDER MEETINGS

  1.  Recommended Increased and Final Offer

Graham Kirkham, Chairman of Full Circle, announces that, following further
discussions with the Independent Directors, Full Circle has increased the cash
element of its bid for DFS by 10 pence per share to 455 pence per share. The
other terms and conditions of the Increased and Final Offer will remain as set
out in the document posted to DFS Shareholders on 14 August 2004 (the 'Scheme
Document'). Full Circle also announces that these increased terms are final and
in no circumstances will they be increased further.

The Proposals will be revised such that, if the Scheme becomes effective, DFS
Scheme Independent Shareholders will now receive from Full Circle:

For each DFS Share                      455 pence in cash
                                        and
                                        one Primback Entitlement Unit

The cash element of the Increased and Final Offer values the issued and to be
issued share capital of DFS at approximately £507 million, without attributing
any value to the Primback Entitlement.

Graham Kirkham commented: 'This offer has been carefully considered over a long
period of time and is the third improvement Full Circle has made to its
proposals, following exhaustive discussions with the Independent Directors and
their advisers, Citigroup. In addition to the certainty of 455 pence cash now,
shareholders will receive a right to a share of any net proceeds from the
continuing Primback Disputes, involving a total of some £57.5 million.

It remains my view that the original terms of the offer were fair to
shareholders and there has been no change in either market conditions or the
circumstances of DFS that would justify Full Circle making any further increase
in its offer. Indeed, when the original offer price was determined, we did not
anticipate the retention of approximately £7 million by H. M. Customs & Excise
from the most recent Court award of £14.6 million relating to the Primback
Disputes. However, after considerable debate with the Independent Directors, I
have been persuaded to increase the offer for the final time by an additional
10 pence per share.

To avoid any doubt, I wish to make it clear that this offer is final and will
not be increased in any circumstances. This offer has been recommended by the
Independent Directors as being fair and reasonable and in the best interests of
DFS and its shareholders.

I urge all shareholders to vote in favour.'

  2.  The Recommendation of the Independent Directors

The Independent Directors of DFS, who have been so advised by Citigroup,
consider the terms of the Increased and Final Offer to be fair and reasonable.
In providing advice to the Independent Directors, Citigroup has taken into
account the commercial assessments of the Independent Directors.

The Independent Directors consider that the resolutions to be proposed at the
Court Meeting and the EGM are in the best interests of DFS and DFS
Shareholders. Accordingly, the Independent Directors unanimously recommend
shareholders to vote in favour of the resolutions to be proposed at the Court
Meeting and the EGM as they intend to do in respect of their entire beneficial
holdings of DFS Shares.

The factors taken into account by the Independent Directors in reaching their
recommendation are set out in the Scheme Document.

  3.  The Primback Entitlement

As explained in the Scheme Document, the Primback Entitlement Units will give
DFS Scheme Independent Shareholders a contingent entitlement to payment of
additional consideration from time to time out of the proceeds (net of any
relevant tax and costs) of any further amounts paid by H. M. Customs & Excise
to the DFS Group in the period up to the seventh anniversary of the Effective
Date following a final, non-appealable and binding determination, or a binding
agreement, in relation to each of the Primback Disputes, together with any
interest. Any additional consideration will be determined and paid in
accordance with the terms of the Deed Poll. As stated in the Scheme Document,
there can be no certainty on the outcome of these disputes, and therefore that
any such payments will be made. Further information in relation to the Primback
Entitlement is set out in Parts 1, 2 and 7 of the Scheme Document.

  4.  Circular

A circular containing further details, including in relation to the financing
of the Increased and Final Offer, of the revision to the Proposals (the
'Circular') will be sent to DFS Shareholders and (for information only) to
participants in the DFS Share Option Schemes as soon as is practicable.

  5.  Court Meeting and Extraordinary General Meeting of DFS

It is intended (subject to confirmation by the Court) that the Court Meeting
and Extraordinary General Meeting of DFS due to be held on 7 September 2004
will be adjourned to Thursday, 23 September 2004 to give DFS Shareholders time
to consider the Increased and Final Offer. Confirmation of the date for, and
details of, the adjourned Meetings will be given in the Circular.

New Forms of Proxy will be enclosed with the Circular and, if the Meetings are
held on 23 September 2004 as intended, such Forms of Proxy would need to be
returned to the Company's registrars not later than 11.00 a.m. and 11.15 a.m.
on Tuesday, 21 September. If a DFS Shareholder submits new Form(s) of Proxy,
any previous Forms of Proxy submitted by them will be treated as revoked. If a
DFS Shareholder does not submit new Form(s) of Proxy, any previous Forms of
Proxy submitted by them will remain valid for the adjourned Meetings.
Similarly, Forms of Election submitted in respect of the Primback Cash
Alternative will remain valid and no new Forms of Election will be issued to
DFS Shareholders.

The approval required at the Court Meeting for the scheme of arrangement to
proceed is a majority in number of DFS Independent Shareholders present and
voting, either in person or by proxy, representing not less than three fourths
in value of the DFS Independent Shares held by such DFS Independent
Shareholders.

Further detail on the action to be taken by DFS Shareholders and the revised
timetable will be set out in the Circular.

Enquiries:

Full Circle                                               Tel: 01302 330 365
Graham Kirkham
Jon Massey

Hawkpoint (Joint financial adviser to Full Circle)        Tel: 020 7665 4500
Paul Baines
Ben Mingay

Nomura (Joint financial adviser to Full Circle)           Tel: 020 7521 2000
Gary Wilder
Jagdeep Kapoor

Teather & Greenwood (Broker to Full Circle)               Tel: 020 7426 9000
Christopher Hardie
Adam Pollock (sales)

Tulchan Communications (PR adviser to Full Circle)        Tel: 020 7353 4200
Andrew Grant
Kirstie Hamilton

Jacobs Capital (Adviser to Full Circle)                   Tel: 07770 496209
Alan Jacobs

Citigroup (Financial Adviser to DFS)                      Tel: 020 7986 4000
William Barter
Mark Todd

Deutsche Bank (Broker to DFS)                             Tel: 020 7545 8000
Charles Wilkinson
Rupert Green

Hudson Sandler (PR adviser to DFS)                        Tel: 020 7796 4133
Alistair Mackinnon-Musson
Philip Dennis

keithhann.com (PR adviser to DFS)                         Tel: 07831 521870
Keith Hann

Terms used in this announcement and not otherwise defined shall have the meaning
given to them in the Scheme Document.

This announcement is not an offer to sell or an invitation to purchase or
subscribe for any securities pursuant to the Increased and Final Offer or
otherwise or the solicitation of any vote or approval in any jurisdiction. DFS
Shareholders are advised to read carefully the formal documentation in relation
to the Increased and Final Offer once it has been despatched.

The distribution of this announcement in jurisdictions other than the UK may be
restricted by law and therefore any persons who are subject to the laws of any
jurisdiction other than the UK should inform themselves about, and observe, any
applicable legal and regulatory requirements. Further details in relation to
overseas shareholders are contained in the Scheme Document. This announcement
has been prepared for the purposes of complying with English Law and the City
Code and the information disclosed may not be the same as that which would have
been disclosed if this announcement had been prepared in accordance with the
laws of jurisdictions outside the UK.

The Increased and Final Offer in the United States is made solely by Full
Circle. Neither Hawkpoint, Nomura nor any of their respective affiliates is
making the Increased and Final Offer in the United States.

Hawkpoint, Nomura and Teather & Greenwood, each of which is authorised and
regulated in the United Kingdom by the Financial Services Authority, are acting
exclusively for Full Circle and no one else in connection with the Increased and
Final Offer and will not be responsible to anyone other than Full Circle for
providing the protections afforded to their respective clients or for providing
advice in relation to the Increased and Final Offer or in relation to the
contents of this announcement or any transaction or arrangement referred to
herein.

Citigroup and Deutsche Bank, each of which is authorised and regulated in the
United Kingdom by the Financial Services Authority, are acting exclusively for
DFS and no one else in connection with the Increased and Final Offer and will
not be responsible to anyone other than DFS for providing the protections
afforded to their respective clients or for providing advice in relation to the
Increased and Final Offer or in relation to the contents of this announcement or
any transaction or arrangement referred to herein.

APPENDIX 1

SOURCES AND BASES

In this announcement, the value of DFS's issued and to be issued share capital,
without attributing any value to the Primback Entitlement, of approximately £507
million is based on cash consideration of 455 pence for each DFS Share due under
the Scheme and 107,595,067 DFS Shares in issue as at 1 September 2004 (the
latest practicable date prior to the publication of this announcement), as it
would be diluted by the exercise of all outstanding Options (other than those of
Graham Kirkham) which it is estimated will be exercisable at an exercise price
of less than 455 pence for each Option following notification to holders of
Options that the Court has sanctioned the Scheme.

APPENDIX 2

DEFINITIONS

The definitions set out in the Scheme Document, together with those set out
below, shall apply to this announcement:

Circular   the formal supplementary scheme circular to be sent to DFS
           Shareholders and (for information only) to participants in the DFS
           Share Schemes as soon as is practicable in connection with the
           Increased and Final Offer; and

Increased  the recommended increased cash offer (including the Primback
and Final  Entitlement) to acquire the entire issued and to be issued ordinary
Offer      share capital of DFS not otherwise acquired or contracted to be
           acquired by Full Circle on the terms and subject to the conditions
           set out in the Scheme Document (as revised by the terms and
           conditions set out in the Circular) including, where the context
           permits or requires, any subsequent revision, variation, extension or
           renewal thereof.




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