DIRECTORS' REPORT

The directors present their annual report together with the financial statements and independent auditors’
report for the year ended 1 June 2003. A review of the business is given in the operating review and financial review.

Principal activities
The principal activities of the Group are the design and manufacture of miniature figures and games and the retail and wholesale distribution of these products.

Dividend
The directors recommend a final dividend of 12.5 pence per share to be paid on 31 October 2003 to ordinary shareholders on the register at close of business on 10 October 2003.

Acquisition of own shares
The Company purchased 100,000 of its own ordinary shares on 2 October 2002 for a consideration of £435,000. This represents 0.3% of the Company’s share capital as at the start of the year.

Substantial shareholdings
The following interests in 3% or more of the issued share capital of the Company as at 15 July 2003 have been disclosed to the Company:

No. ordinary shares Percentage
A thin, black line.
Schroder Investment Management Limited 5,992,788 19.9
Fidelity International Limited 3,716,057 12.4
Henderson Investors Limited 2,339,693 7.8
Barclays Global Investors Limited 1,574,180 5.2
Standard Life Investments Limited 1,207,229 4.0
Legal & General Plc 896,880 3.0

The Company has not been notified of any other substantial shareholdings other than those of the directors which are disclosed in the remuneration report.

Directors
The present directors of the Company are listed here. All of the directors were members of the board throughout the year. A J H Stewart and T H F Kirby are retiring by rotation and being eligible, offer themselves for re-election.

Directors’ interests
The interests of the directors in the shares of the Company are disclosed in the remuneration report, together with details of share options granted to the directors. None of the directors had a material interest in any contract of significance to which the Company, or any of its subsidiaries, was a party during the year.

Information on executive directors
T H F Kirby (age 53). Tom Kirby joined Games Workshop in April 1986 as general manager and led the management buy-out in December 1991, becoming chief executive at that time. Between 1998 and 2000 he took the role of non-executive chairman, returning to the role of chief executive in September 2000. Prior to joining Games Workshop, he worked for six years for a distributor of fantasy games in the UK and was previously an Inspector of Taxes. He is also Visiting Professor of Business and Management to the Derbyshire Business School at the University of Derby.

M Sherwin (age 44), Finance Director. Prior to joining Games Workshop in June 1999, Michael Sherwin was group financial controller of Courtaulds Textiles plc where he had worked for six years. He was previously with Price Waterhouse for 12 years where he qualified as a chartered accountant in 1984.

Information on non-executive directors
C J Myatt (age 59). Chris Myatt is the senior non-executive director, joining the board on 18 April 1996. He is chairman of Glamorgan Aluminium Company Limited and Palgrave Brown Holdings Limited and a nonexecutive director of SRS Holdings Limited, Ying Tai (UK) Limited and Glamalco Limited. He was formerly a divisional managing director within Tarmac PLC.

A J H Stewart (age 43). Alan Stewart joined the board as a non-executive director on 12 September 1996. Alan was an executive director of Thomas Cook AG and chief executive of Thomas Cook UK Limited until earlier this year. He was previously an executive director with HSBC Investment Bank and is a qualified chartered accountant.

N J Donaldson (age 49). Nick Donaldson was appointed to the board on 18 April 2002. Nick, a barrister by profession, is head of corporate finance at Arbuthnot Securities Limited (formerly Old Mutual Securities Limited). He has spent the majority of his career to date in investment banking, and has previously held senior positions at Robert W Baird Limited and at Credit Lyonnais Securities.

Donations
The Group encourages staff to raise money for children’s charities by providing time and resources. During this financial year, staff in several of our businesses raised money for good causes through sponsored events. Games Workshop helped them to realise their fundraising targets by matching the sponsorship monies raised. This matching cost for the Group was £1,000 during the year. In addition to staff fundraising, gifts in kind have been donated to a number of charities. The Group made no contributions for political purposes.

Employees
The Group’s policy is to consult and discuss with employees, at meetings, matters likely to affect employees’ interests. Information on matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the Group’s performance.

The Group operates employee sharesave schemes as a means of further encouraging the involvement of employees in the Group’s performance.

The Group’s policy is to consider, for recruitment, disabled workers for those vacancies that they are able to fill. All necessary assistance with training courses is given. Once employed, a career plan is developed so as to ensure suitable opportunities for each disabled person. Arrangements are made, wherever possible, for retraining employees who become disabled, to enable them to perform work identified as appropriate to their aptitudes and abilities.

Creditor payment policy
The Company’s current policy concerning the payment of the majority of its trade creditors is to follow the DTI’s Prompt Payment Code (copies are available from the DTI, Admail 528, London SW1W 8YT). For other suppliers, the Company’s policy is to:

  1. settle the terms of payment with those suppliers when agreeing the terms of each transaction;
  2. ensure that those suppliers are made aware of the terms of payment by inclusion of the relevant terms in contracts;
  3. pay in accordance with its contractual and other legal obligations.

The payment policy applies to all payments to creditors for revenue and capital supplies of goods and services without exception. Wherever possible UK subsidiaries follow the same policy and overseas subsidiaries are encouraged to adopt similar policies, by applying local best practices.

The number of days credit taken by the Group from its suppliers at the year end is 39 days (2002: 44 days).

Special business at the annual general meeting
The directors are currently authorised to allot relevant securities under section 80 of the Companies Act 1985 and to allot equity securities under section 95 of the Companies Act 1985. Those authorities expire at the conclusion of the annual general meeting. Resolutions are therefore being put to the annual general meeting to renew those authorities, resolution 7, to give the directors authority to allot relevant securities up to an aggregate nominal amount of £501,161 (representing one third of the Company’s current issued share capital). The directors have no present intention of exercising this authority. Resolution 8 authorises the directors to allot equity securities for cash otherwise than on a pre-emptive basis in certain limited circumstances and otherwise up to an aggregate nominal amount of £75,174 (representing 5% of the Company’s current issued share capital).

The directors are also currently authorised to make market purchases of the Company’s shares pursuant to section 166 of the Companies Act 1985. This authority expires at the conclusion of the next annual general meeting of the Company. Resolution 9 renews this authority for up to a maximum of 4,480,384 ordinary shares (representing 14.9% of the Company’s current issued share capital). The directors’ intentions regarding exercising this authority are set out in the chairman’s preamble.

Auditors
On 1 August 2003, Deloitte & Touche will transfer their business to Deloitte & Touche LLP, a limited liability partnership incorporated under the Limited Liability Partnerships Act 2000. However, at present they remain the Company’s auditors and have signed the financial statements in that capacity. The Company has given its consent to treating the appointment of Deloitte & Touche as extending to Deloitte & Touche LLP with effect from 1 August 2003. Accordingly, although the financial statements have been signed in the name of Deloitte & Touche, resolution 5 for the re-appointment of Deloitte & Touche LLP will be proposed at the forthcoming annual general meeting.

By order of the board

M Sherwin
Secretary
28 July 2003

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