The Directors have pleasure in submitting to shareholders the 16th Annual Report and audited accounts of the Company for the year ended 30 June 2003.

Business Activities
The groups sole business activities during the 2002/03 financial year continued to be jewellery retailing and manufacturing.

Consolidated Financial Results
The Group has recorded a tax paid surplus of $11,570,000 for the year ended 30 June 2003 (2002 - $12,706,000). This surplus was achieved on a turnover of $224,802,000 (2002 - $214,105,000).
The accounts for the year ended 30 June 2003 have been presented in accordance with the accounting principles and policies detailed on pages 38 and 39 of this report.

ShareholdersFunds/Reserves
Total Shareholders Funds of the Group now stand at $50,048,000 a decrease of $3,280,000 over the previous year.

The Groups reserves at 30 June 2003 totalled $42,336,000.

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 31st March 2003. Overseas shareholders were also paid a supplementary dividend. On the 15th August 2002,your Directors declared a final dividend of 10 cents per share payable on the 20th October 2003. The share register will close at 5:00pm on the 10th October 2003 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), which equalled last years ordinary dividend. The Company also paid a special dividend of 20¢ per share (fully imputed) on the 14th October 2002,following the sale of our Australian Head Office building.

Directors
A.C.Hill,M.R.Parsell and L.W.Peters 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:-

*Note Executive Directors do not receive Directors fees. Executive remuneration includes salary,superannuation,bonus payments,retirement allowances,options 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:-

Australian remuneration has been converted into New Zealand dollars at the exchange rate used for translating the Australian profits into New Zealand dollars, 0.89 (2001 0.82). Canadian remuneration on the same basis at 0.80.

Information on Directors

The qualifications and experience of the Directors are shown on page 29.

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 32 of this report.

Directors Interests in Contracts

There were no changes recorded in the interests register during the year.

Donations

The total of donations made during the year amounted to $34,191.

Waivers Granted by N.Z.Exchange Ltd.

Michael Hill International limited were granted the following waivers from N.Z.Exchange Ltd during the past 12 months.

5 August 2002 - NZX granted an exemption from Listing Rule 9.2.1 as provided by Listing Rule 9.2.4(c) relating to the requirement for the passing of an ordinary resolution for the annual salary package for the year ended 30 June 2003 of Mike Parsell,the Chief Executive Officer of the Company who is also a Director of Michael Hill International. The Market Surveillance Panel granted the exemption on the basis that Mr Parsells remuneration package was set on an arms length basis.

30 July 2003 - NZX approved the text of resolution 4 to be considered at the Annual Meeting on 7 November 2003 (see page 52),and granted a waiver from the requirement to obtain an independent solicitors opinion on the proposed amendment to the Companys Constitution.

27 August 2003 - NZX granted an exemption from Listing Rule 9.2.1 as provided by Listing Rule 9.2.4(c) relating to the requirement for the passing of an ordinary resolution for the annual salary package for the year ended 30 June 2004,of Mike Parsell,the Chief Executive Officer of the Company who is also a Director of Michael Hill International. The salary package which includes performance bonuses is estimated at A$490,563. The Market Surveillance Panel granted the exemption on the basis that Mr Parsells remuneration package was set on an arms length basis commercial basis.

Annual Report Awards

The Company was delighted to again receive a number of awards for its 2002 Annual Report.

In the Annual Report Awards competition conducted by the Institute of Chartered Accountants of New Zealand, the Company won the top award in the Other Companiessection. MHI has won this division for four out of the last five years, with a commendation received last year. The Company also received the special award for Human Resource Reporting for all New Zealand companies.

In addition,the Company was also awarded a silver 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