Dear Fellow Shareholders, Michael Hill International has achieved a fifth consecutive record profit for the year ended 30 June 2002 (before abnormals) of $12.298 million which has substantially increased value for our shareholders. This profit was achieved on a 13.2% increase in revenue of $214.105 million. Our main goals at the beginning of the year were to achieve group revenue of $210 million, and an after tax operating profit of $11.8 million. It was gratifying to exceed these goals and I thank our dedicated team for delivering an outstanding 23.9% return on shareholders funds. Over the past five years our return on shareholders funds has averaged 24%, a return we can justifiably be very proud of. The value of the company has again been reflected in the change in the share price which has increased 31.5% to $5.00 in the 12 months ended 30 June 2002. Our ordinary dividend payout of 17 cents per share for the year was up 13.3%, and a special dividend of 20 cents per share was declared on

I would like to thank my fellow Board members for their contribution over the last year. We work very well as a team and everyone has concentrated on the big picture for the future of the company. Our focus over the past 12 months has been on ensuring that we have a solid group structure in place to enable us to expand globally. It is a credit to Mike Parsell, our Group CEO, that the restructuring has been accomplished in rapid time.

In our half year report, we signalled that a full feasibility study was to be undertaken into the possibility of expansion into Canada. I am pleased to report that a full study and business plan has been completed and the Board has decided to proceed. We intend to open four new stores and set up a Head Office in or around Vancouver in the next financial year. Three of these stores will be operational by November 2002 and leases for these stores have been finalised. An experienced team of managers from Australia and New Zealand will lead this venture into Canada, and I am very proud to report that Emma Hill has been appointed General Manager for Canada reporting to Mike Parsell.

Our plan is to open four new stores each year for the next four years, with an initial funding of NZ$3.3 million for the first year and a total of $NZ 6.63 million over the first four years. The growth potential for stores in Canada is enormous with 120 stores being a possibility over the next ten to fifteen years.

We see the Canadian expansion as the commencement of our expansion to other countries in coming years and this global expansion will create great opportunities to increase shareholder value over time.

Underlying all our growth strategies however will be our fundamental philosophy of controlled profitable growth.

The Groups balance sheet is in fine shape with an equity ratio of 55% as at 30 June 2002, providing a solid platform from which to launch our global expansion.

Needless to say, we also have substantial growth opportunities available to us in both Australia and New Zealand with a further 50 new stores possible in Australia over the next six to eight years and still further possible locations in NZ.

In summary, it has been a very exciting year for the company. Profits up 22.5% (before abnormals), a 23.9% return on shareholders funds, ordinary dividend up 13.3%, a special dividend of 20 cents for shareholders and our decision to open up in Canada.

All this progress could not have happened without our Number one asset our people. In this years report we have listed all 1500 people who work for our company on the back cover. We have a magnificent team of dedicated and passionate individuals at all levels , a great many of whom have been with us for many years, and their expertise and enthusiasm is a major reason for our continuing success. They foster and preserve a company culture that is unique. I personally thank everyone of them for their magnificent contribution to our results. This year we introduced a share incentive scheme for executives and managers thereby giving our top performers a share in the business and an even greater commitment to the future of our company.

Our annual meeting will be held this year at the Hilton Hotel on Princes Wharf in Auckland on the 28th of November. I look forward to seeing you there.

 Michael Hill
 Chairman