REMUNERATION REPORT

Remuneration and nomination committee
The committee comprises solely the independent directors being C J Myatt (chairman), A J H Stewart and N J Donaldson. T H F Kirby and M Sherwin present proposals as and when required and attend meetings at the committee’s request. No external advisers are currently retained by the committee.

Remuneration policy
Throughout the year the Company complied with the provisions of the Combined Code relating to the design of performance related remuneration. In preparing this report the board has followed the provisions of the Combined Code. The contents of this report also comply with the Directors’ Remuneration Report Regulations 2002.

Independent directors
The remuneration of all independent directors is reviewed on an annual basis by the executive directors. A recommendation is made to the board which determines any increase in their remuneration. The independent directors are only entitled to fees and do not participate in any of the Company’s bonus, pension or share schemes. As disclosed in the corporate governance report, independent directors do not have service contracts.

Executive directors
The overall policy for executive directors is set out below:

  1. the remuneration of executive directors (consisting of basic salary, pension benefits and benefits in kind) will be competitive with those of other comparable organisations so as to attract and retain high calibre individuals with the relevant experience;
  2. part of the remuneration will be based on the financial performance of the Group using predetermined targets so as to motivate and reward successful business performance which is in the interest of shareholders;
  3. personal reviews of the executive directors will be carried out annually to assess their performance in meeting individual objectives.

The fixed and variable related components of the remuneration packages for executive directors are as follows:

  1. basic salary, including benefits and pension contributions (fixed)
  2. performance related bonus (variable)

There are no plans to change this policy.

Salaries
Salaries are reviewed annually and, in deciding the appropriate salary levels, the committee takes into consideration a number of factors: the executive director’s experience, responsibility and market value. The committee also takes into consideration pay and employment conditions of employees elsewhere in the Group and in addition, from time to time, takes independent advice on salary benchmarking to assist in their review of remuneration packages of the executive directors. Salaries, excluding bonuses, are pensionable.

Bonuses
In order to reward the executive directors for enhancing value to shareholders, the remuneration committee believes that a significant proportion of the remuneration package should be clearly linked to the Group’s performance. This takes the form of an annual cash bonus which may be earned at up to 100% of salary for T H F Kirby and 75% of salary for M Sherwin. The performance conditions relate to growth in operating profit.

Benefits in kind
Each executive director is provided with fuel, private medical insurance and permanent health insurance.

Share option schemes
In the future, executive directors will only be able to participate in the sharesave scheme available to all employees. There are no performance conditions relating to sharesave share options. It is envisaged that no future awards will be made to the executive directors under the executive share option schemes or long-term share incentive plan.

Service contracts
Each of the executive directors has a service agreement with the Company which is capable of termination by either party on giving twelve months’ notice. If the Company gives notice then the Company reserves the right to pay salary in lieu of notice. The service agreements are silent regarding the payment that may be due in the event of early termination by the Company.

The service agreements are also capable of termination by the Company on giving three months’ notice in the event of the executive directors’ absence for ill health in excess of 120 business days in any twelve month period. No compensation is payable in the event of termination of the agreement due to gross misconduct.

Contracts on this basis were entered into by T H F Kirby on 28 September 1994 and M Sherwin on 18 June 1999. The contracts are for an unlimited duration.

The committee has agreed that, in the event that either executive director earns fees in respect of any non-executive appointment, he will retain those fees. M Sherwin retained fees of £27,500 in the year to 29 May 2005 in respect of his duties as an independent director of PlusNet plc.

Under the letters of appointment of the independent directors, the period of appointment is not specified and may terminate at any point without notice and without compensation. However, under normal circumstances the party terminating the agreement will seek to give the other six months’ notice of intention to terminate. Agreements on this basis were entered into by C J Myatt on 16 July 1999 which took effect from 18 April 1999, A J H Stewart on 16 July 1999 which took effect from 12 September 1999 and N J Donaldson on 18 April 2002 (which was also the effective date).

The articles provide that at least one third of the directors be subject to re-election by rotation at each general meeting.

Performance graph
The graph below represents the comparative total shareholder return performance of the Company against that of the index of the FTSE 350 companies during the previous five years (i.e. 1 June 2000 to 1 June 2005). The index of the FTSE 350 companies has been used because the constituents of this index appropriately reflect the Company’s size when compared to alternative indices. It is also the index used to measure the Group’s performance under the long-term share incentive plan.

Graph of Games Workshop shareholder return performance vs the FTSE 350 from 2000 to 2005. At 2000 GW and the FTSE match up. Between 2000 and 2001 GW rises above and below the FTSE 350, ending 2000 nearly twice the FTSE 350. Since 2001, GW has always been above the FTSE 350, though there are rises and falls, GW is at approximately 300 while the index remains at approximately 100.

The following sections of the remuneration report, with the exception of the table of directors' interests in shares, have been audited.

Directors' emoluments for the year ended 29 May 2005

  Fees
2004
£000		 Salary
2004
£000		 Bonus
2005
£000		 Benefits
in kind
2005
£000		 Total
emolu-
ments
2005
£000		 Total
emolu-
ments
2004
£000		 Pension
contri-
butions
2005
£000		 Pension
contri-
butions
2004
£000
A thin, black line.
Executive directors
T H F Kirby - 350 - 5 355 1,661 35 30
M Sherwin - 240 - 6 246 313 24 21

Independent directors
N J Donaldson 30 - - - 30 20 - -
C J Myatt 35 - - - 35 25 - -
A J H Stewart 30 - - - 30 20 - -
A thin, black line.
95 590 - 11 696 2,039 59 51
Gains on exercise of share options - M Sherwin - - - - - 26 - -
A thin, black line.
95 590 - 11 696 2,065 59 51
A thick, black line.

Pensions
The executive directors are members of the Warhammer Pension Scheme. The scheme is a defined contribution scheme and, accordingly, the Company’s contributions set out above reflect the full cost during the year of providing pension benefits to these directors.

Directors’ interests in shares of the Company
The directors' interests (including their families) in the shares of the Company were as follows:

  As at
29 May 2005
Ordinary shares
of 5p each		 As at
30 May 2004
Ordinary shares
of 5p each
Beneficial Non-beneficial Beneficial Non-beneficial
A thick, black line.
T H F Kirby 1,487,509 354,000 1,487,509 354,000
M Sherwin 41,000 - 41,000 -
C J Myatt 66,500 - 66,500 -
A J H Stewart 935,000 - 935,000 -
N J Donaldson 10,000 - 10,000 -

Share options of the directors were as follows:

  Number as at
30 May 2004		 Number as at
29 May 2005		 Exercise dates Exercise
price
Commencement Expiry
A thick, black line.
M Sherwin 1,408 1,408 Nov 2005 Apr 2006 335p
763 763 Nov 2006 Apr 2007 580p
39,427 39,427 June 2005 July 2008 nil

The options above with exercise prices of 335p and 580p were granted under the Games Workshop Group PLC 1995 Sharesave Scheme. This scheme is open to all eligible UK employees and directors who satisfy a service qualification of at least one year.

The options that were granted at nil cost were granted under the Games Workshop Group PLC Share Incentive Plan. This long-term share incentive plan had a performance period of three years from June 2000, with a maximum award of 60% annually made up of a basic share award of up to 36% of salary and a matching share award of up to 24% of salary (subject to the annual bonus being invested in shares at the end of the bonus period). Both the basic and the matching share awards were in the form of a promise that at the end of a three year period an option would be granted, subject to performance criteria being satisfied, over a number of shares. The exercise price of an option will be nil and the option will not normally be exercisable until five years after the date of the basic or matching share awards. 25% of the total award only vested if the Company’s share price growth was equal to or greater than the share price growth of the top one third of companies in the FTSE 350 at the end of the performance period. This condition was satisfied. The remaining 75% of the total award depended on the Company’s cumulative EPS growth over the three year performance period to May 2003. Cumulative EPS growth had to reach 15% per annum for the EPS related condition to be satisfied, and this condition was satisfied in full.

There were no other movements in directors’ share options during the year. No other directors have been granted share options in the shares of the Company.

There was no movement in directors’ interests in shares of the Company between 29 May 2005 and the date of this report.

The mid-market price of the Company's shares on 29 May 2005 was 410p and the range of the market prices during the year was 884p to 385p.

Apart from the interests disclosed above, no directors had any interest at any time in the year in the share capital of the Company or other group companies.

By order of the board

C J Myatt
Chairman
Remuneration and nomination committee
25 July 2005

<< Corporate governance Statement of directors' responsibilities >>