Michael Hill International - Report of the Directors

REPORT OF THE DIRECTORS

The Directors have pleasure in submitting to shareholders the 15th Annual Report and audited accounts of the Company for the year ended 30 June 2002.

BUSINESS ACTIVITIES
The groups sole business activities during the 2001/02 financial year continued to be jewellery retailing and manufacturing.

CONSOLIDATED FINANCIAL RESULTS
The Group has recorded a tax paid surplus of $12,706,000 for the year ended 30 June 2002 (2001 - $10,039,000). This surplus was achieved on a turnover of $214,105,000 (2001 - $189,168,000).

The accounts for the year ended 30 June 2002 have been presented in accordance with the accounting principles and policies detailed on pages 36 and 37 of this report.

	2002	2001
	$000	$000
Group Turnover	214,105	189,168
Surplus before tax	18,698	15,130
Taxation	(5,992)	(5,091)
Surplus after tax	12,706	10,039
Dividends paid and proposed	(5,978)*	(2,518)
Net surplus retained	6,728	7,521

*Note the final dividend of 10 cents per share has not been included.

SHAREHOLDERS FUNDS/RESERVES
Total Shareholders Funds of the Group now stand at $53,328,000 an increase of $3,756,000 over the previous year.

The Groups reserves at 30 June 2002 totalled $45,616,000.

	$000
The Groups reserves at 30 June 2001 were	41,860

To which was added:
Operating surplus after tax for the year	12,706
From which was deducted:
Foreign currency translation reserve movement	(1975)
Investment property reserve movement	(561)
Net Treasury stock movement	(436)
Ordinary Dividends paid	(5978)
Leaving Reserves at 30 June 2002 at	$45,616

These comprise:
Retained earnings	44,548
Other reserves	1,068
	$45,616

ACCOUNTING POLICIES
There have been no changes in accounting policies during the year.

DIVIDENDS
Your Directors paid an interim dividend of 7 cents per share, with full imputation credits attached on the 25th March 2002. Overseas shareholders were also paid a supplementary dividend. On the 22nd August 2002, your Directors declared a final dividend of 10 cents per share payable on the 14th October 2002. The share register will close at 5:00pm on the 4th October 2002 for the purpose of determining entitlement to the final dividend. Overseas shareholders will also be entitled to a supplementary payment on the final dividend.

The total ordinary dividend for the year was 17 cents (fully imputed), a 13% increase over last year. The Company is also paying a special dividend of 20¢ per share (fully imputed) on the 14th October 2002, following the sale of our Australian Head Office building.

DIRECTORS
Messrs R.M. Hill, G.J. Gwynne and M.R. Doyle retire by rotation and being eligible offer themselves for re-election.

DIRECTORS REMUNERATION
Directors remuneration and all other benefits received, or due and receivable during the year was as follows:-

	2002	2001
	$000	$000
Parent Company
R.M. Hill *	$153	153
M.R. Parsell *	A$483	A$400
J.W.D. Ryder		13
G.J. Gwynne	$50	35
L.W. Peters	A$50	A$35
M.R. Doyle	$50	$35
A.C. Hill	$50	$21

*Note Executive Directors do not receive Directors fees. Executive remuneration includes salary, superannuation, bonus payments, retirement allowances and provision of a vehicle received in their capacity as employees.

REMUNERATION OF EMPLOYEES
The number of employees (not including Directors) whose remuneration exceeded $100,000 is as follows:-

$000	2002	2001
100-110	7	5
110-120	12	5
120-130	4	2
130-140	3	4
140-150	2	6
150-160	3	-
160-170	4	1
170-180		1
180-190	2	1
190-200		-
200-210		-
210-220	1	-
220-230	1	-
230-240		1
240-250
250-260		1
270-280	1
280-290	1
320-330	1	-

Australian remuneration has been converted into New Zealand dollars at the exchange rate used for translating the Australian profits into New Zealand dollars, 0.82 (2001 0.79).

INFORMATION ON DIRECTORS
The qualifications and experience of the Directors are shown on page 27.

The Directors are responsible for the preparation of the financial statements and other information included in this Annual Report. The financial statements have been prepared in conformity with generally accepted accounting principles to give a true and fair view of the financial position of the Company and Group and the results of their operations and cash flows.

The Company appoints independent chartered accountants to audit the Financial Statements prepared by the Directors and to express an opinion on these Financial Statements. The independent auditors report, which sets out their opinion and the basis of that opinion is set out on page 30 of this report.

DIRECTORS INTERESTS IN CONTRACTS
Since the date of the last report, the Directors have declared, pursuant to Section 140 (2) of the Companies Act 1993, that they are to be regarded as having an interest in any contract that may be made with the entities listed by virtue of their directorship or membership of those entities. Changes recorded in the interests register during the year were:

M.R. Doyle- Blis Technologies Ltd Dublin Nominees Ltd Adam Art Gallery

L.W. Peters - No longer associated with Freedom Group Ltd

DONATIONS
The total of donations made during the year amounted to $10,800.

ANNUAL REPORT AWARDS
The Company was delighted to receive a number of awards for its 2001 Annual Report.

In the Annual Report Awards competition conducted by the Institute of Chartered Accountants of New Zealand, the Company was awarded a commendation in the Other Companies section, and for the second consecutive year, was awarded the special award for best Corporate Governance Reporting for all New Zealand companies.

In addition, the Company was also awarded a Bronze medal in the prestigious Australasian Reporting Awards, which covers all companies in both Australia and New Zealand.

The Board again extends its congratulations to the dedicated team who compiled and designed last years report.

On behalf of the Directors,

R.M. Hill
Chairman

M.R. Parsell
Chief Executive Officer