AGM Statement

Character Group PLC
19 January 2005





Issued by Citigate Dewe Rogerson, Birmingham
Date: Wednesday 19 January 2005
                                                               Immediate Release

                            The Character Group plc
                             Annual General Meeting

At today's Annual General Meeting, Richard King, Chairman, The Character Group
updated shareholders on trading saying:

'The prospects for the financial year remain encouraging although the markets
remain tough. Our focus on operational efficiencies and the on-going expansion
of our own product range coupled with the development in value of our
Intellectual Property Rights provides a solid foundation from which to build
upon during 2005 calendar year.

'Taking into account the difficulties we have encountered and the market
conditions, we believe that the trading results for the first half will prove to
be disappointing, however, we believe that trading for the second half will
materially improve over the corresponding period for last year which will result
in a satisfactory outcome for the year as a whole.'

All Resolutions were duly passed.

The full text of the Chairman's script for the AGM follows:

'In general terms, I am pleased to report that toys and games have performed
well whilst giftware has underperformed. Our digital business is once again
making progress and slowly overcoming the difficulties that plagued it in the US
last year.

'There has been no shortage of recent press comment describing the difficult
retail market both in the UK and international arena, and our progress should be
measured against this background.

'Overall, the Group has produced a slightly disappointing performance for the
start of the current financial year, however, there are firm plans in place to
ensure that progress can and will be made by each of our businesses.

'As shareholders will be aware, the Group trades in very competitive areas and
to ensure that we remain competitive, efficient and offer the right product mix
we have to continually improve our performance in all areas to ensure that we
can produce sustained growth in both sales and profitability.

'We have no doubt that as the retailers fight to improve their businesses, they
will look to suppliers like ourselves to work with them so that the end consumer
will be able to purchase quality products at keener prices. To implement these
necessary improvements there will be an initial cost to us as suppliers,
however, we are committed to improving our performance at every level to ensure
that we have a solid future in the marketplace.

'I am already encouraged by the recognition that our customers give us - the
service we give to our customers and suppliers has recently been the subject of
several complimentary comments and it is our desire to strive for continuous
improvement across all our businesses.'

continued...

                                      -2-

Toys Games and Gifts Division
'I am sure that shareholders are all aware that we are the UK distributor for
'Robosapien' which has proved to be a star at retail. Although the product was
in short supply and we were unable to fulfil the demand in the run up to
Christmas, I am delighted to report that pre-Christmas orders have now been met
and that post Christmas sales of 'Robosapien' continue to be strong.

'The Robosapien range is being expanded this year and we shall be previewing the
new and exciting range to our customers at The Toy Fair being held at ExCel in
London at the end of January.

'The new Robosapien products were introduced in the USA at the Consumer
Electronics Show earlier this month where they received no less than 3 out of 5
awards. There has already been an enormous amount of interest in the new
products and to date some 80,000 hits have been recorded on the Robosapien's US
web-site.

'The Group is expecting another exciting year for Robosapien as these products
are introduced to the UK market. Already development is underway on further
additions to the range for 2006 and we believe that this category should
continue to grow for us for some time.

'Whilst overall, retail trading has been difficult and remains so, we
nevertheless ended the 2004 calendar year with many product winners some of
which have been successfully developed in-house and clearly supports our
strategic decision to produce more of our own developed products.

'Our Girls activity range, GR8 Gear, has sold well both in the UK, and
internationally in the limited territories where it was placed. We will be
introducing new and exciting lines to this range. The success of this product
coupled with a substantially expanded distribution base in 2005 lead us to
expect strong growth, both domestically and internationally. The GR8 Kit for
boys has also started well and will be developed further this year. Other
potentially successful ranges developed by us include Strawberry Shortcake,
Peppa Pig, as well as toys and games relating to new Batman and Star Wars movies
to be released this year.

'Our games offering has continued to improve and we had several successful items
at Christmas which will continue into 2005. Again, the strategy of developing
more of our own products is working well for us. We have entered the 2005
calendar year with exciting new products and we should experience our best year
yet as our international sales increase in line with our domestic sales.

'Any company wishing to be successful in the current environment has to seek
improvements in its operational base on an on-going basis.

'From 1 January the Toys and Games operations were fully integrated and I am
confident that the benefits of this action will be seen by both our customers
and suppliers in due course. In addition, to both improve efficiencies and
benefit from Group functions such as sales & marketing, it is proposed that the
operations of Downpace, our gift business will be moved from Kingsbury, West
London to Oldham, Lancashire where its logistics will be fully integrated into
the Toys and Games operations, whilst, it is proposed that product development
and some sales will relocate to the Group's Head Office in New Malden, Surrey.

'It is with regret that through this action we are likely to lose many of the
loyal, dedicated and long serving Directors and staff within this business -
with the demands of the industry increasing each year and if we are to remain
competitive we believe that we have no alternative other than to protect our
position by partnering our customers and focussing on continuous efficiencies
and cost savings across the Group.



continued...

                                      -3-

'Whilst we are aiming to consolidate the gift business we do not anticipate any
cost benefits in the current financial year although we believe that the
improvement in operational efficiencies that we anticipate from this proposal
will result in an improved trading performance from this business in the
financial year to August 2006 from when, we also expect to make overall savings
of approximately £500k per annum.'

Digital Division
'The problems we encountered in America in 2004 distribution and which has
previously been reported on were resolved in November 2004. As this resulted in
a number of repercussions across the business as a whole, I am now pleased to
say that this disruptive period is now behind us.

'The digital market is an ever-changing and very competitive environment - our
competitors include some of the largest consumer brands in the world such as
Sony, Canon, Kodak and Olympus. Therefore, it is crucial that we remain in touch
with the latest trends.

'Despite the intense market competition coupled with the severe trading problems
relating to our US distribution we have continued to improve our product
offering by introducing new exciting hi-spec digital cameras.

'Petters, our new distributor in the US is already starting to make great
in-roads into the US market. As a result of this relationship, we have recently
commenced the supply of our cameras to one of the largest US retailers as well
as one of the largest drug store chains and we are expecting other retailers to
place orders over the coming weeks. We are confident that as these sales fall
into place, the benefits will be fed-through to a number of aspects of the
business.

'It was recently announced that Polaroid is the subject of an agreed merger. It
is interesting to note that the purchaser is Petters Worldwide, the holding
company of our US distributor.

'We are already working well with Petters and believe that our digital programme
is fundamental to their plans for Polaroid. This change for Polaroid should be
beneficial to us as it provides a number of expansion opportunities both in the
US and other international markets.

'As a direct result of the merger discussions between Petters and Polaroid, the
Group has suspended discussions with Polaroid regarding the extension of the
Group's current contracts and will resume discussions with the new management on
completion of the merger.

'The prospects for the financial year remain encouraging although the markets
remain tough. Our focus on operational efficiencies and the on-going expansion
of our own product range coupled with the development in value of our
Intellectual Property Rights provides a solid foundation from which to build
upon during 2005 calendar year.

'Taking into account the difficulties we have encountered and the market
conditions, we believe that the trading results for the first half will prove to
be disappointing, however, we believe that trading for the second half will
materially improve over the corresponding period for last year which will result
in a satisfactory outcome for the year as a whole.'

Enquiries:

Richard King, Chairman
Kiran Shah, Group Finance Director              Fiona Tooley, Director
The Character Group plc                         Citigate Dewe Rogerson
Today: 020 7282 8000 (up to 12.00 noon)         Today: 0207 282 8000
Thereafter: 020 8949 5898                       Thereafter: 0121 455 8370
Mobile: [phone] (RK)                       Mobile: [phone] (FMT)
Mobile: [phone] (KS)
www.charactergroup.plc.uk





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