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This is the methodology for The Globe and Mail's 2010 Board Games rankings for income trusts with external management

Board Composition, worth 32 marks out of 100

1. What percentage of the company's directors are fully independent? That means directors who are not management, relatives of management, former members of management within the previous five years, or people whose firms do business with the company - including, for example, lawyers, accountants, suppliers, consultants or investment bankers. Board Games also marks as related those directors who are controlling shareholders of the company or who work for a parent company that controls the public subsidiary. Four marks for boards with at least two-thirds independence. Two marks if more than 50 per cent of directors are independent. Zero marks if there is a majority of related directors.

2. What percentage of the audit committee is fully independent? Three marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee.

3. What percentage of the compensation committee - the committee that determines executive pay - is fully independent? Four marks if the committee is fully independent. Two marks if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee.

4. What percentage of the nominating committee - the committee responsible for recommending new directors to join the board - is fully independent? Two marks if the committee is fully independent. One mark if there are one or more related directors who are not management. Zero marks if a member of management is on the committee or if there is no committee.

5. Is the role of chairperson and CEO split? Five marks if the roles are split and there is a fully independent chairperson. Two marks if they are split, but the chairperson is a related director. One mark if they are split, but the chairperson is a member of management. Zero marks if the roles are not split. (Note: There is no longer credit for not splitting the roles but having a lead director.) 6. a) Do two or more directors sit together on two or more other boards of publicly traded companies, creating the potential for a close-knit block of directors? Or, do three or more directors sit on any other corporate board? Two marks if no, zero if yes.

6. b) Do any directors sit on five or more S&P/TSX company boards? Onemark if no, zero if yes.

7. Are there any women on the board? Four marks if at least 33 per cent of directors are women. Two marks if 25 per cent to 33 per cent of the board are women. One mark if there is at least one woman on the board. Zero marks if there are no women.

8. Does the board have a system to evaluate its performance? Three marks if there is a formal board evaluation and a formal individual director evaluation including peer review, with detailed disclosure of what sort of process is used for both. Two marks if there is a formal board evaluation and director evaluation, but no peer review. Also two marks if the company has a formal peer review process but does not mention or describe any board or committee review process. One mark if there is a formal board assessment, but not an assessment of individual directors, or if there is reference to a director assessment but not a board or committee review. Zero marks if there is no evaluation or there is only a vague description of how the assessment is done with no details of the process used.

9. Do independent directors meet without management? Three marks if they meet without management at every board meeting. Two marks if they meet without management at regular board meetings, but not all board meetings. One mark if they meet sometimes, but not every regular board meeting. Zero marks if there is no mention or if there are no meetings without management. Also zero marks if the company uses vague wording - for example, that "time is available for in-camera meetings" - that do not specify whether the meetings are actually held.

10. Does the company provide information about its director education processes for the year, and is there evidence that a formal process is in place? This could include information about educational events offered to the entire board during the year, site visits to company facilities by directors, or specifics about special briefings, courses or training offered to some or all directors. The company does not have to specify which directors received which training, but must give details about the types of educational opportunities offered or taken. One mark if yes, zero if no.

Shareholding and compensation, worth 24 marks out of 100

11. a) Are directors required to own shares or share units? (Stock options don't count.) Four marks if the requirement is equal to at least three times the retainer paid to directors - including the value of grants of shares or share units. Two marks if there is a requirement, but it is lower than three times the value of the retainer and share units. Zero marks if there is no requirement.

11. b) How many shares do directors own? Four marks maximum, but minus one mark for each director who owns less than three times the annual retainer plus the value of grants of shares, share units or options. If a director has been on the board less than one year, the ownership requirement does not apply. If a director has been on the board one to two years, the required ownership level is reduced to one times the retainer and share units.

11. c) Are all directors increasing their share ownership over time? Does the board strive for new investment by directors? This generally means there is a mandatory director share unit program, but could mean there is any other method that leads to an increase in share ownership by directors. One mark if all directors increased their number of shares or units owned compared to the prior year. Zero if not.

12. Does the company have an external management contract? Four marks if no. Zero if yes.

13. a) Are full details provided in the proxy circular of who owns the management company? One mark if yes, zero if no.

13. b) Are full details provided in the proxy circular of how much was paid to the management company last year? One mark if yes, zero if any details are missing (such as the extra amount paid under a performance or incentive clause).

13. c) Is information provided in the proxy circular about how the top executive of the management company was paid in the previous year? Four marks if all details are provided; two marks if salary chart is given but there are details missing, such as payments earned from the individual's personal ownership stake in the management company; zero marks if no information is provided. NOTE: If executive receives options (or unit rights like options), two marks if the company does not disclose the value of gains reaped by executives from exercising stock options over the prior year.

14. a) Are there performance features in the management contract that directly tie the interests of the manager to increasing cash distributions? One mark if yes; zero marks if there is only a flat fee cash payment or if incentive fees are based only on the value of assets under management or for completing acquisitions.

14. b) Are full details provided in the proxy circular about the cost of cancelling the external management contract? Two marks if yes, zero if no.

14. c) Are unitholders locked in to a long-term management contract? Two marks if the current contract has a term of less than three years, one mark if the contract term is three to 10 years, zero marks if the contract term is more than 10 years.

Shareholder rights, 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 2010, 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.

Disclosure, worth 12 marks out of 100

21. Does the company provide a full explanation of which directors are related and unrelated and why? One mark if full disclosure, and if the disclosure is included in the part of the proxy circular where companies disclose which directors on the board are related or unrelated. Zero marks if company does not disclose a director's relationship in the proxy circular.

22. a) Does the company disclose detailed biographies to explain directors' qualifications to represent shareholders? Does the biography demonstrate why this director is a good candidate for election? Relevant information might include educational background, non-profit affiliations, industry experience, career highlights or special achievements. One mark if yes, zero marks if not.

22. b) Does the proxy circular specify the skills or areas of expertise of each director in the form of a "skills matrix" or in another format? The details must be explicitly laid out - it is not adequate to assume they can be inferred by reading a basic biography. One mark if yes, zero if no.

23. Did directors attend all meetings, and does the company remove directors with poor attendance? Two marks if all board and committee meeting attendance is disclosed and board members attended at least three-quarters of board and committee meetings. One mark if any board member has missed more than one-quarter of meetings and is not put up for re-election. Zero marks if committee attendance is not disclosed, or if a board member or a committee member missed more than one-quarter of meetings and is put up for re-election.

24. a) Does the company disclose the total accumulated value (a dollar amount, not just number of units held) of directors' equity holdings, including shares and share units? Two marks if yes, zero if no.

24. b) Does the company explain how each director's share ownership meets (or fails to meet) the required share ownership guideline? For example, does the equity ownership chart include a column showing how the ownership compares with the requirement as a percentage, multiple or dollar value of that requirement. One mark if yes, zero if no. Zero if there is no ownership requirement.

25. a) Does the company disclose the dollar value of fees paid to an outside compensation consultant? One mark if yes or if no consultant was used, zero if no.

25. b) Does the company disclose whether the compensation consultant provided any other services in the prior year, and, if so, how much money was paid for the other services? One mark if yes or if no consultant was used, zero marks if no.

26. a) Does the company disclose directors' ages? One mark if yes, zero marks if no.

26. b) Does the company disclose whether or not it has a retirement policy for directors, and what the details of the policy are? One mark if yes, or if company states it has no retirement policy for its directors. Zero marks if no disclosure.

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