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Board Games methodology: Income trusts with external management structures Add to ...

Shareholder rights issues, worth 32 marks out of 100 15. a) Does the company allow shareholders to vote for individual directors, or only the entire slate of nominees? Four marks if there is voting for individual directors with clear options beside each director's name. Two marks if investors must cross out or write in the names of directors for which they are not voting. Zero marks if there is only slate voting.

15. b) Does the company have a majority voting policy, asking directors to resign if they do not receive a majority of votes in support? Two marks if yes, zero if no.

16. a) Are stock options excessively dilutive? For 2009, Board Games once again assessed the dilution based on the number of options outstanding at the company's fiscal year-end as well as the number of options approved for future issuance, expressed as a percentage of all shares outstanding. Where the company has more than one class of shares, dilution is measured for whichever class of shares is diluted by the outstanding options.

Three marks if the dilution is less than 5 per cent of outstanding shares, or if the company has no option plan. Two marks if the dilution is between 5 per cent and 8 per cent of outstanding shares. Zero marks if the dilution is over 8 per cent. Zero marks if the company has adopted an evergreen option plan that automatically "reloads" the number of options available for issuance - even if the option dilution level falls within the guidelines listed above. And zero marks if the company has repriced any of its options within the prior year.

16. b) Is the annual stock option grant rate excessive? Two marks if the number of options granted in the prior fiscal year was less than 1 per cent of all shares outstanding. One mark if the grant rate was between 1 per cent to 1.49 per cent. Zero marks if the grant rate exceeded 1.5 per cent annually.

16. c) Is there a vesting period before options can be exercised? Three marks if yes. Zero marks if some options vest in less than 12 months after issuance, including director options.

17. a) Does the company calculate and display the year-end dilution level of stock options as a percentage of shares outstanding? One mark if yes, zero if no.

17. b) Does the company calculate and display the prior year's grant rate for option grants as a percentage of shares outstanding? One mark if yes, zero if no.

18. Does the company award stock options to directors? Two marks if no, zero if yes.

19. Are there excessive related-party transactions with officers or directors of the company? Did their value exceed 1 per cent of total revenue last year? Related-party transactions include loans, asset sales/purchases, discounted private placements, management contracts or other deals with officers or directors. Four marks if no, zero if yes.

20. a) Can shareholders elect the whole board, or are some trustees appointed (by a shareholder or manager, for example) so that their names don't appear on the proxy ballot? Five marks if all are elected, three marks if one trustee is appointed and not elected, two marks if more than one is appointed if not a majority, zero marks if a majority are appointed and not elected.

20. b) Does any party - an administrator, manager or shareholder, for example - have rights unequal to ownership? Can any party nominate trustees out of proportion to ownership? Can anyone veto key issues - such as changes to senior management, or assets sales and purchases - without owning a majority of the trust units? Five marks if all rights are equal, three marks if a party has disproportionate rights compared to ownership stake, zero marks if a party has rights that have little or no relationship to ownership stake.

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