.Corporate review

corporate review

.Corporate Profile & Financial Highlights

.Chairman's Statement

.The Group at a Glance

.Chief Executive's Review

.Associated Newspapers

.Northcliffe Newspapers

.Euromoney Institutional Investor

.DMG Broadcasting: Television

.DMG Broadcasting: Radio

.dmg world media

.DMG Information

.Corporate Social Responsibility

.Financial and Treasury Review

.Board of Directors

financial review

.Directors' Report

.Corporate Governance

.Remuneration Report

.Auditors' Report

.Group Profit and Loss Account

.Group Cash Flow Statement

.Group Balance Sheet

.Group Total Recognised Gains and Losses

.Company Balance Sheet

.Accounting Policies

.Notes to the Profit and Loss Account

.Notes to the Cash Flow Statement

.Notes to the Balance Sheet

.Principal Subsidiaries

.Five Year Financial Summary

.Shareholder Information

.Websites and Products

.Financial review

This report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002 which introduced new statutory requirements for the disclosure of directors’ remuneration in respect of periods ending on or after 31st December, 2002. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority. As required by the Regulations, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the approval will be sought for the adoption of the accounts. The Company adopted the same practice voluntarily last year.

The Remuneration Committee
The Remuneration and Nominations Committee of DMGT was renamed the Remuneration Committee in May when a separate Nominations Committee was set up. The Remuneration Committee is responsible inter alia for overall Group remuneration policy and for setting the remuneration, benefits and terms and conditions of employment of the Company’s executive Directors.

The members of the Committee throughout the year were the Viscount Rothermere, its chairman, Mr Gray, Mr Hakkarainen and Mr Hemingway. On 26th November, Messrs Hakkarainen and Hemingway stood down from the Committee and were replaced by Mr Park. The Combined Code recommends that a remuneration committee should be composed entirely of independent non-executive directors. The Board considers it wholly appropriate that the Viscount Rothermere, as Chairman of the Board and as the Company’s largest shareholder, is a member of the Committee. He does not participate in discussions regarding his own remuneration. While Mr Gray and Mr Park are not considered by the Board to be independent as defined, the Board does consider them to act independently as regards remuneration issues.

Remuneration Policy
The Committee seeks to structure remuneration packages on an individual basis appropriate to the level of responsibility, but generally designed to retain and motivate the individual. In carrying out this function, the Committee makes reference, where appropriate, to external evidence of remuneration levels in other companies, particularly in the media field, and to advice sought from leading compensation consultancies. External consultants are appointed directly by the Committee. It also seeks the recommendations of the Chief Executive, who usually attends meetings of the Committee other than when his own remuneration is being discussed, as regards the remuneration of the other executive Directors and of the divisional managing directors.

The main components of the remuneration package for executive Directors are:

• (i) basic salary, reviewed annually;
• (ii) where appropriate, annual performance related bonus. For the Chairman, Chief Executive and Finance Director, this is related to the performance of the Group as a whole and paid in DMGT ‘A’ Ordinary shares through the Executive Bonus Scheme, details of which are given below. For the year to 28th September, 2003, no bonus was earned under this scheme. For other executive Directors, bonuses are paid at the discretion of the Remuneration Committee to reward individual performance;
• (iii) share options, since 1997 only exercisable on achievement of demanding performance criteria as set out on page 42, to provide a long term incentive which aligns their interests to those of shareholders. Options granted until December 1994 under the 1989 Scheme were not subject to performance criteria as this was not standard practice when the scheme was adopted in 1989. Options are granted in phased blocks over a number of years; and
• (iv) where appropriate, a long-term incentive plan. Under this scheme, established in 2001, executives are invited to commit shares in the Company at a market price equal to a maximum of twice the value of their basic annual salary. If they hold those shares for five years, they will be eligible to receive matching shares on a sliding scale up to 200% of the value of the shares held, dependent on the total shareholder return of the Company compared with a peer group. The peer group which operates was chosen to reflect a range of listed companies in the businesses and locations principally occupied by DMGT. No award will be made if performance is below median level. Further details are given below.

In the case of Mr Fallon, the Committee considers that his remuneration as Executive Chairman of Euromoney Institutional Investor plc, a separately listed company, should be set by the remuneration committee of that company. The report on this is set out in Euromoney’s Annual Report.

The Committee also sets the remuneration packages for the managing directors of the Company’s operating divisions and oversees the bonus arrangements established in each division. These are individually designed to reflect the targets and objectives of each division. The Committee does not expect to change the overall remuneration policy in the current or subsequent years.

Pensions
The Group operates a two-tier, non-contributory defined benefit pension scheme for senior employees (including most of the Company’s executive Directors), details of which are given here. One of the Company’s executive Directors is subject to the Inland Revenue pensionable earnings’ cap and a funded unapproved retirement benefits scheme has been put in place for him on the same terms as for other capped senior executives. The assets of this Scheme are held independently from the Group’s finances and are administered by Trustees. It is the Company’s policy that annual bonuses, payments under the Executive Bonus Scheme and benefits in kind are not pensionable.

Non-Executive Directorships
The Company allows its executive Directors to take a very limited number of outside directorships. Individuals retain the payments received from such services since these appointments are not expected to impinge on their principal employment. This does not apply where a Group executive serves as a non-executive director of a company because the Group has a significant interest, as in the case of GWR Group plc. In this case, all fees are paid to the Company.

The revised Combined Code recommends that executives should normally hold only one non-executive directorship. Mr Sinclair currently holds two, but will be standing down as a director of Schroders plc after their next Annual General Meeting in April 2004.

Service Contracts
Contracts of service are negotiated on an individual basis as part of the overall remuneration package and their length is inevitably conditioned by external competitive pressures. For this reason, the contracts of some of the executive directors exceed the one year recommended in the Combined Code. The Chairman and Mr Dutton have contracts of up to one year in duration. Mr Sinclair and Mr Williams have offered to reduce their contract length from two years to one year over a four-year period. Mr Dacre and Mr Fallon have rolling two-year contracts, which the Committee considers wholly appropriate for their particular responsibilities. Details of these service contracts are set out below:

In the event of earlier termination of their contracts, each Director is entitled to compensation equal to their basic salary, benefits, pension entitlement and, as appropriate, bonus or profit share for their notice period. In the case of Mr Sinclair, the pension entitlement is for a two year period, regardless of his notice period.

The contracts of Mr Sinclair and Mr Williams include mitigation arrangements in the event of the Director obtaining alternative employment during the notice period. This mitigation does not apply to their pension benefit, given their uncapped status that cannot be replicated elsewhere. Share options would be treated as for any member of the scheme, depending on the reason for termination of the contract. Mr Sinclair is entitled, on a change of control of the Company, to give notice under his contract within 60 days of the change of control, and to receive compensation for basic salary and benefits for a two-year period.

Mr Fallon has a second service contract with Euromoney Publications (Jersey) Limited (‘EPJ’), a subsidiary of Euromoney Institutional Investor plc dated 4th May, 1993. This contract has the same terms as his first contract, except that termination does not include a car allowance as Mr Fallon does not receive this benefit from EPJ. If Mr Fallon were adjudicated bankrupt, he would be entitled to seven days’ salary and profit share from EPJ.

Non-executive Directors are appointed for specified terms and are subject to re-election by the shareholders at the Annual General Meeting following appointment, and thereafter every three years. Each appointment can be terminated before the end of the three year period, with no notice or fees due. The dates of the appointment or subsequent re-appointment of the non-executive Directors are set out below:

Directors retiring by rotation and standing for re-election at the forthcoming Annual General Meeting are shown in the Directors’ Report on page 29. Sir Patrick Sergeant and Mr Hakkarainen will stand down at the conclusion of the Annual General Meeting in February 2004.

Non-Executive Directors’ Remuneration
Fees payable to non-executive Directors are reviewed annually, including a comparison with the level of fees paid by other companies of similar size and complexity; these fees are shown in the table below. A recommendation to the Board on this subject is then made. The basic fee as a Director was raised to £24,000 p.a. with effect from 1st January, 2003 and no increase is being made for the year to 3rd October, 2004.

In addition, fees are paid for membership of Board committees. These have been reviewed and changes are being introduced with effect from 1st January, 2004 to reflect the differing workloads and responsibilities of the committees. Committee fees will range from £4,000 p.a. to £12,500 p.a.

Audited information
Directors’ Remuneration
a) The total amounts of the remuneration and other benefits of the Directors of the Company for the years ended 28th September, 2003 and 29th September, 2002 are shown below for Directors:

b) View the Directors’ emoluments table.
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The LTIP is supervised by the Committee and is operated in conjunction with an employee discretionary trust (the ‘Trust’). The Trust will acquire ‘A’ Ordinary Non-Voting Shares in the Company (‘shares’) to satisfy awards under the LTIP. The Committee intends to operate the LTIP annually.

Prospective participants are invited by the Committee to agree to commit shares to the LTIP. Usually invitations are made in tranches over a period of two to four years, and individuals are given six months to make commitments in order to allow for them to make purchases of shares, where appropriate. Once an individual has agreed to commit shares which are owned by him or by his close family, the Trustee of the Trust (“the Trustee”) decides whether to make an award of an equal number of shares to those committed.

Awards under the LTIP have been made to four executive Directors. In 2001, Messrs Sinclair, Williams and Dacre were invited to commit shares in two equal annual tranches in the case of Messrs Sinclair and Dacre, and in three equal annual tranches in the case of Mr Williams. In June 2002, Mr Dutton was invited to commit shares in three tranches and in July 2002, the Viscount Rothermere was invited to commit shares in four tranches. Having received agreements to commit shares, the Trustee made the awards set out in the Long Term Incentive Plan table.

Daily Mail and General Trust Long Term Incentive Plan
View the DMGT Long Term Incentive Plan table.
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Unaudited Information
Awards under the LTIP are subject to stringent performance conditions, which will determine whether, and to what extent, shares under awards will vest. The performance conditions relate to the total shareholder return (‘TSR’) of the Company initially over a five-year period against a peer group of UK and overseas companies determined by the Committee. TSR is the aggregate of share price growth and dividends paid (assuming that such dividends are reinvested in shares during the five year period), and is commonly adopted as a measure of comparative performance.

Awards will be realisable after the performance period to the extent of the percentage in the right-hand column below according to the Company’s place in the list of comparator companies as indicated in the left-hand column below:

At the end of the five year performance period, participants may elect either to realise their awards at that time or to extend the performance period to seven years. If they elect to extend the performance period, the level of committed shares must be maintained throughout the extended period. At the end of the seven year performance period, the Company’s TSR performance will be measured. The awards will be realisable after the performance period to the extent of the percentage in the right-hand column below according to the Company’s place in the list of comparator companies as indicated in the left-hand column below:

In the period from 1st January, 2001, the date on which the performance comparison begins for awards made during 2001, to 28th September, 2003 DMGT ranked tenth within the comparator group. In the period from 1st January, 2002, the date on which the performance comparison begins for awards made during 2002, to 28th September, 2003 DMGT ranked eleventh within the comparator group. In the period from 1st January, 2003, the date on which the performance comparison begins for awards made during 2003, to 28th September, 2003, DMGT ranked eleventh.

Thus if these rankings remain unchanged at the end of the award period, no awards will vest.

Graphs of DMGT’s performance against each of its comparators for the periods from 1st January, 2001, 1st January, 2002 and 1st January, 2003 to 28th September, 2003 are set out in the graphs below.

The graphs on page 1 to 4 compare the DMGT total shareholder return with that of the FTSE 100 index and of the media index over a period of five years. As a constituent of both indices, the Directors regard them as the most appropriate indices for purposes of comparison of the Group’s performance. The graphs 5 to 7 illustrate performance over a ten year period.

Graphs
The graphs below are unaudited.
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Audited Information

Accrued entitlements under the DMGT Senior Executives Pension Fund (audited)
View the table for the accrued entitlements under the DMGT Senior Executives Pension Fund.
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Accrued benefits under the Mail Newspapers Pension Scheme
View the table for the accrued benefits under the Mail Newspapers Pension Scheme.
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Notes to Directors’ Pension Entitlements
(i) The DMGT Senior Executives’ Pension Fund, of which four executive Directors are members, is non-contributory for members. The normal retirement age under the Fund for this group is 60. For each Director, the accrued entitlement at 28th September, 2003 represents the annual pension that is expected to be payable on eventual retirement, given the length of service and salary of each director at this date. A spouse’s/dependant’s pension equal to two thirds of the Director’s pension is incorporated and the Director can elect to receive the pension from age 50, subject to a discount if retirement takes place before 60. The pension, when in payment, will receive annual increases in line with inflation, which may be limited when inflation exceeds 5% p.a.

(ii) All transfer values have been calculated on the basis of actuarial advice in accordance with “Retirement Benefit Schemes – Transfer Values (GN11)” published by the Institute of Actuaries and the Faculty of Actuaries. The transfer values of the accrued entitlement represent the value of assets that the pension scheme would need to transfer to another pension provider on transferring the scheme’s liability in respect of the directors’ pension benefits. They do not represent a sum paid or payable to individual directors and therefore cannot be added meaningfully to annual remuneration.

(iii) The Viscount Rothermere is subject to the Inland Revenue pensionable earnings cap. To mitigate the impact of this pension restriction, the Company has formulated a policy under which assets are being held under trust and invested in a funded unapproved retirement benefits scheme. During the year, £84,700 (2002 £69,225) was paid into this trust on his behalf.

(iv) Mr Fallon waived profit share in respect of the current year and of future years of £138,800 (2002 £138,800). This waived profit share was paid into a pension scheme on Mr Fallon’s behalf. His pension benefit in the above table relates to a deferred pension in the Mail Newspapers Pension Scheme for pensionable service between 1st April, 1978 and 1st April, 1986. Neither the Group nor Mr Fallon continue to make any contributions to this scheme.

(v) The Company does not make any pension contributions on behalf of Mr Dutton.

Directors’ Interests (audited information)
The number of shares of the Company and of securities of other Group companies in which Directors or their families had an interest at the dates shown are stated below.

View the Directors’ Interests table.
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View the options granted table.
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(i) The above table sets out the options granted: under the DMGT 1989 Executive Share Option Scheme from January 1993 to December 1994; and under the DMGT 1997 Executive Share Option Scheme from June 1997. All options under both schemes were granted at market value at the date of grant and none required any payment. They are not normally exercisable before the third anniversary of the date of grant and in all circumstances will lapse if not exercised within ten years.

(ii) No Directors’ options lapsed or had their terms and conditions varied during the year.

(iii) The mid-market price of the ‘A’ Ordinary Non-Voting shares was £5.5425 at 28th September, 2003 and £5.015 at 29th September, 2002. It ranged from £3.98 to £6.58 during the year.

(iv) Options under the 1989 Scheme were granted from January 1993 to December 1994 at prices ranging from £1.9625 to £3.1125 per share. These options have all vested and were exercisable before December 2004. Options granted under this scheme were not subject to performance criteria as this was not standard practice when the scheme was adopted in 1989.

(v) Since June 1997, all grants have been made under the DMGT 1997 Executive Share Option Scheme at prices ranging from £4.070625 to £10.295. These options are normally exercisable only when two demanding performance conditions have been met. The first condition is that, in respect of four out of six consecutive monthly calculation dates (which start in the thirtieth month following the date of grant of a particular option), the total shareholder return (‘TSR’) of the Company must exceed that of the FTSE 100 index. Secondly, there must be real growth in earnings per share over a period of three consecutive financial years.

(vi) Options granted in June 1997 at £4.070625 per share are exercisable as both performance criteria were met by June 2000. Options granted in December 1998 at £6.475 per share vested on 26th November, 2003 when the earnings per share condition was met; the TSR condition was met in October 2001.

(vii) The earnings per share condition was also met in the year in respect of the options granted in December 1999 at £10.295 per share, in December 2000 at £8.34 per share and in July 2001 at £7.25 per share since real growth in adjusted earnings per share was achieved in the year, compared to that of three years previously. The TSR condition has not been met so far in respect of these options. As a consequence, none of these options has vested yet.

(viii) On 29th November, 2002, Mr Sinclair exercised options over 114,000 ‘A’ Ordinary Non-Voting shares when the market price was £6.58. On 21st January, 2003, Mr Williams exercised options over 142,000 such shares when the market price was £5.375, having sold 16,000 shares at £6.48 on 2nd December, 2002. These exercises are deemed to have given rise to respective gains of £483,000 and £459,000, as set out on page 41, although both Directors retained all of the shares acquired.

(ix) There were 4,155,735 options outstanding under both schemes at the end of the year, as set out in Note 32 to the Balance Sheets. This represents 1.04% of the Company’s total issued share capital.

(x) The Company has been notified that, under sections 198 and 204 of the Companies Act 1985, each of the Viscount Rothermere, Mr Hemingway and Mr Gray were deemed to have been interested as shareholders in 12,551,764 Ordinary shares at 28th September, 2003 and 12,556,764 Ordinary shares at 29th September, 2002.

(xi) At 28th September, 2003 and at 29th September, 2002, the Viscount Rothermere was beneficially interested in 746,700 ordinary shares of Rothermere Continuation Limited, (‘RCL’), the Company’s ultimate holding company.

(xii) Directors’ shareholdings in Euromoney Institutional Investor plc (‘Euromoney’) were as follows:

(xiii) The Viscount Rothermere was beneficially interested in 68 ordinary shares in Associated Newspapers North America Inc. at 28th September, 2003 and at 29th September, 2002.

(xiv) At 28th September, 2003, Mr Fallon, held options in Euromoney, normally exercisable as follows:

The mid-market price of Euromoney’s shares was £3.75 at 28th September, 2003 and £2.05 at 29th September 2002. It ranged from £1.75 to £3.85 during the year.

(xv) All shareholdings were unchanged at 26th November, 2003.

(xvi) No Director of the Company has or had a disclosable interest in any contract of significance subsisting during or at the end of the year.

(xvii)Disclosable transactions by the Group under FRS 8, Related Party Transactions, are set out in Note 41. There have been no other disclosable transactions by the Company and its subsidiaries with directors of Group companies and with substantial shareholders since the publication of the last Annual Report.

On behalf of the Board

Rothermere
Chairman of the Remuneration Committee
26th November, 2003