Laurence Cooklin resigned from the Board as Chief Executive Officer of the UK jewellery division.

Announcement of resumption of dividends with a final dividend of 1.0p recommended in respect of the year ended 1998/99 for payment on 1 July 1999.

Announcement of move to Quarterly Reporting with effect from the first quarter of the year 1999/00.

The consideration was £135m plus the repayment of £15.75m of intercompany debt due to Next.

The acquisition was funded by the rights issue, £30m cash and the issue to Next of £25m nominal 10.5% cumulative redeemable preference shares at par. The issue of 48,016,438 new shares at 175p per share raised approximately £80m.

Information on Zales and Salisburys and background to acquisitions. Zales, the additional shops and Salisburys had been acquired by Next from CES in June 1987.

Zales was a retail jewellery chain with over 130 branches throughout Great Britain in prime retail sites. These shops, operating principally under the name 'Zales', were aimed at the middle level of the jewellery market. The 73 additional shops traded under the names 'Collingwood' and 'Weir'.

Salisburys was the principal multiple retailer of fashion accessories in the High Street. Its merchandise sold through 235 outlets and covered a wide spectrum from fashionable costume jewellery to handbags and other fashion accessories to executive briefcases and branded luggage.

The Zales and additional shops were shopfitted to a high standard with trained staff, in first class locations, many in shopping centres where the availability of new outlets was limited. The Board believed that it would have been impracticable to assemble such a valuable and quality portfolio on a piecemeal basis.

It was planned that Zales would operate alongside Ernest Jones serving the middle level of the market where there was a greater emphasis on diamond jewellery and higher average per item expenditure. It was planned that Zales would benefit from the proven diamond buying expertise of the US.

The remaining 73 shops were merged with and operated as part of the H. Samuel and Ratners' chains. The addition of those shops satisfied the Group's expansion at that level of the market.

Salisburys represented a strategic acquisition in the related business of fashion accessories.

Westhall was a speciality retail jewellery company also based in Akron, Ohio. Its acquisition gave the Group wider geographic coverage, together with further prominent positions in shopping malls and well respected trading names.

On the same day as the Company announced its offer for Ernest Jones (Jewellers) p.l.c.it announced the proposed acquisition of Sterling Inc., USA ("Sterling"), a proposed 3 for 10 rights issue, and an amendment to the terms of the then current rights issue first proposed in May 1987.

Sterling was the fourth largest speciality jewellery store chain in the US with 117 stores in 15 states operating under the names of "Shaw's Jewelers", "Le Roy's Jewelers", "Sterling Jewelers", "Hudson-Goodman Jewelers", and "Friendlander Fine Jewelers". The stores were located primarily in the Midwest and also in the Mid-Atlantic and West Coast regions. Sterling was founded by the Shaw family in Ohio in 1912. In June 1985 it was acquired by an investor group, including members of senior management. In May 1986 Sterling made an initial public offering and raised further capital in an offering in April 1987. Its common stock was traded on NASDAQ.

Its stores were located predominantly in enclosed regional shopping malls. Each store offered jewellery in a variety of styles and prices with primary emphasis on quality diamond and gemstone products. Approximately 60% of sales were made on credit.

Sterling had grown by increasing sales in its existing stores, by opening new stores in its existing markets and by acquiring regional chains located in new markets. Sterling's strategy was to cluster its stores using established store names in regional and local markets in order to concentrate its marketing and advertising programmes.

Given the size of the US jewellery market, then estimated to be in excess of US$20 billion sales per annum, the Board believed that the acquisition of Sterling, which operated in a sector familiar to the Group, would give it a significant position in a fragmented market which had enormous potential.

The acquisition made the Group the second largest retail jeweller in the world.

Rights Issue

In order to fund the acquisition of Sterling the Board raised approximately £122m by the issue of 40,928,368 new ordinary shares at 310p per share.