Games Workshop Financial Results 2006

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.

Executive directors
The overall policy for executive directors is set out below:
a. 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;
b. 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;
c. 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:
a. basic salary, including benefits and pension contributions (fixed);
b. 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 its 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 which is 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 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 an 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 15 December 2005 and M Sherwin on 2 January 2006. 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 £36,250 in the year to 28 May 2006 in respect of his duties as an independent director of PlusNet plc.

Under the service agreements of the independent directors, the period of appointment is three years and may be terminated by either party on giving six months' notice.

The service agreements are also capable of termination by the Company on giving summary notice in the event of an independent director’s absence in excess of six calendar months in any twelve month period. There is no entitlement to compensation for loss of office in the event of termination of the agreement.

Agreements on this basis were entered into by C J Myatt, A J H Stewart and N J Donaldson on 13 February 2006 (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 small cap companies during the previous five years (i.e. 1 June 2001 to 1 June 2006). The index of the FTSE small cap companies has been used because the constituents of this index appropriately reflect the Company's size when compared to alternative indices.

The following sections of the remuneration report have been audited.

Directors' emoluments for the year ended 28 May 2006

	Fees 2006 £000	Salary 2006 £000	Bonus 2006 £000	Benefits in kind 2006 £000	Total emolu- ments 2006 £000	Total emolu- ments 2005 £000	Pension contri- butions 2006 £000	Pension contri- butions 2005 £000

Executive directors
T H F Kirby	-	350	-	5	355	355	35	35
M Sherwin	-	240	-	7	247	246	24	24
Independent directors
N J Donaldson	30	-	-	-	30	30	-	-
C J Myatt	35	-	-	-	35	35	-	-
A J H Stewart	30	-	-	-	30	30	-	-

	95	590	-	12	697	696	59	59
Gains on exercise of share options - M Sherwin	-	-	-	-	162	-	-	-

	95	590	-	12	859	696	59	59

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 28 May 2006 Ordinary shares of 5p each		As at 29 May 2005 Ordinary shares of 5p each
	Beneficial	Non-beneficial	Beneficial	Non-beneficial

T H F Kirby	1,487,509	354,000	1,487,509	354,000
M Sherwin	65,668	-	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 29 May 2005	Granted	Exercised	Lapsed	Number as at 28 May 2006	Exercise dates		Exercise price
	Number as at 29 May 2005	Granted	Exercised	Lapsed	Number as at 28 May 2006	Commencement	Expiry	Exercise price

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
	-	2,786	-	-	2,786	Nov 2008	Apr 2009	340p

The options above with exercise prices of 335p and 580p were granted under the Games Workshop Group PLC 1995 Sharesave Scheme. The options above with an exercise price of 340p were granted under the Games Workshop Group PLC 2005 Savings-Related Share Option Scheme. These schemes are open to all eligible employees and directors who satisfy a service qualification of at least one year. M Sherwin exercised an option over 1,408 shares under the sharesave scheme when the share price at the time of exercise was 387p per share.

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). 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. M Sherwin exercised his options under this scheme over 39,427 shares when the share price at the time of exercise was 410p per share.

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 28 May 2006 and the date of this report.

The mid-market price of the Company's shares on 28 May 2006 was 278p and the range of the market prices during the year was 266.25p to 446.5p.

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
24 July 2006

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