UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-09261
---------------------------------
Foxby Corp.
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(Exact name of registrant as specified in charter)
11 Hanover Square, New York, NY 10005
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(Address of principal executive offices) (Zipcode)
Thomas B. Winmill, President
11 Hanover Square
New York, NY 10005
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-212-344-6310
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Date of fiscal year end: 12/31
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Date of reporting period: 1/1/05 - 12/31/05
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Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policy making roles.
A registrant is required to disclose the information specified by Form
N-CSR and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a current valid Office of Management and Budget ("OMB")
control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under clearance requirements of 44 U.S.C. sec. 3507.
Item 1. Report to Stockholders
FOXBY
CORP.
ANNUAL REPORT
December 31, 2005
American Stock
Exchange Symbol:
FXX
www.foxbycorp.com
INVESTMENTS BY INDUSTRY*
[GRAPHIC APPEARS HERE] . Mining 20.61%
. National Commercial Banks 10.69%
. Insurance Agents, Brokers & Services 4.97%
. In Vitro & In Vivo Diagnostic Substances 4.86%
. Mineral & Ores 4.67%
. Patent Owners & Lessors 4.66%
. State Commercial Banks 4.17%
. Retail - Drug Stores & Proprietary Stores 4.15%
. Fire, Marine & Casualty Insurance 3.93%
. Soap, Detergents, Cleaning Preparations, Perfumes,
Cosmetics 3.91%
. Jewelry, Precious Metals 3.83%
. Semiconductors and Related Devices 3.79%
. Retail - Variety Stores 3.71%
. Industrial & Commercial Fans & Blowers & Air
Purifing Equipment 3.61%
. Malt Beverages 3.39%
. Converted Paper & Paperboard Products 3.33%
. Wholesale - Medical, Dental & Hospital
Equipment & Supplies 3.08%
. Cable and Other Pay TV Services 3.03%
. Radio & TV Broadcasting & Communications
Equipment 3.01%
. Wholesale - Farm Product Raw Materials 2.28%
. Natural Gas Distributions 1.36%
. Warrants 1.13%
------
102.17%
PORTFOLIO ANALYSIS*
U.S. Equities 71.88%
Foreign Equities 30.29%
102.17%
--------
* Investments by industry and portfolio analysis use approximate percentages of
total net assets, and may not add up to 100% due to leverage or other assets,
rounding, and other factors.
FOXBY American Stock
CORP. Exchange Symbol: FXX
================================================================================
11 Hanover Square, New York, NY 10005
www.foxbycorp.com
January 30, 2006
Fellow Shareholders:
We are pleased to submit this 2005 Annual Report for Foxby Corp., and to
welcome our new shareholders who find the Fund's flexible total return
investment approach attractive. As a non-diversified, closed end fund seeking
total return, the Fund uses a flexible strategy in the selection of securities,
and is not limited by the issuer's location, size, or market capitalization.
The Fund may invest in equity and fixed income securities of both new and
seasoned U.S. and foreign issuers, including securities convertible into common
stock and debt securities.The Fund also may employ aggressive and speculative
investment techniques, such as selling securities short, employing futures and
options, derivatives, and borrowing money for investment purposes, an approach
known as "leveraging," and may invest defensively in high grade money market
instruments.
At year end, the Fund's top ten holdings comprised approximately 46% of net
assets. As a percent of net assets, investments in U.S. equities accounted for
about 72% and foreign equities about 30%, reflecting leverage of about 2%.
Precious metals mining, our largest industry sector investment, accounted for
about 21% of net assets. As the Fund pursues its total return objective through
this flexible approach, these holdings and allocations are, of course, subject
to change at any time. By way of comparison, at December 31, 2004, the Fund's
top ten holdings comprised approximately 33% of total assets and as a percent
of net assets, investments in U.S. equities accounted for about 94% and foreign
equities about 21%, reflecting leverage of about 14%. Precious metals mining,
our largest industry sector investment at that time as well, accounted for
about 14% of net assets.
Market Review and Outlook
During the year the Federal Open Market Committee (FOMC) continued to raise
its key overnight Federal funds target rate, which at year end stood at 4.25%.
The minutes of the last meeting of the FOMC revealed, however, that Committee
members seemed to lack a consensus as to how many interest rate raises would be
needed to control inflation and that additional raises "would probably not be
large." Despite raising the rate to 4.25% by December 13, the Committee
reiterated that "only some further measured policy firming is likely to be
needed."
Surveying the economic scene, we note that the National Association of
Realtors reported 2005 sales of existing homes set a record for a fifth
consecutive year, although fourth quarter sales showed weakness. Recent
inflationary pressure from employment rates, salary changes, and raw material
prices has also been weak. Oil price increases, however, may spur inflation to
the extent not offset by decreases in consumer goods spending.
The Fund's strategy in view of these conditions during the year was to seek
companies with financial strength and growth prospects, or other special
features, and employ leverage from time to time. To balance its long precious
metals company positions, the Fund entered into a short sale on a precious
metals company deemed less attractive in the second half. The Fund also
employed S&P 500 futures in a market timing strategy at year end. For the year,
the Fund's total net asset value return was a negative 2.72% on a total market
return on the American Stock Exchange of a negative 7.66%. Over the course of
future market fluctuations, the Fund will seek opportunities to optimize its
holdings to enhance performance for a higher total return.
As outgoing Federal Reserve Board Chairman Alan Greenspan, has so often
said, the fear of inflation may be as important as inflation itself.
Accordingly, if labor costs or raw material prices increase, we might expect
the FOMC to continue to raise short term interest rates higher to combat
inflation fears. But, the FOMC's use of this strategy may be somewhat limited
since currently shorter term interest rates already are generally higher than
longer term rates. Historically when short term rates are much higher than long
term rates for an extended period, recessions have begun. Thus, should the
consumer lose faith in the economy from, for example, a decline in housing
markets, the FOMC might risk an increase in inflation to restore consumer
confidence and the economy by lowering rates, notwithstanding the potential
inflationary impact.
Litigation Settled
We are pleased to have announced on January 6, 2006 that the Fund and
Richard J. Shaker entered into a settlement of litigation pending in Maryland.
Under the terms of the settlement, the management fee paid to Foxby's
investment adviser, CEF Advisers, Inc., was reduced to an annual rate of 0.50%
of Foxby's average daily net assets. Mr. Shaker and his co-plaintiffs have
agreed to refrain from engaging in future efforts to seek control of Foxby. The
settlement was approved by the Board of Directors of the Fund. The parties have
filed a Stipulation of Dismissal with the Court. Mr. Shaker and his clients
have sold their stake in Foxby, 397,300 shares, to Investor Service Center,
Inc., an affiliate of CEF Advisers, for a total of $893,925. Affiliates of
management now own approximately 24.4% of the Fund's shares.
We appreciate your support and thank you for investing with Foxby.
Sincerely,
/s/ Thomas B. Winmill /s/ Marion E. Morris
------------------- -------------------
Thomas B. Winmill Marion E. Morris
President Senior Vice President
================================================================================
TOP TEN HOLDINGS
(at December 31, 2005)
1. Gammon Lake Resources Inc.
2. Brown & Brown, Inc.
3. IDEXX Laboratories, Inc.
4. Peru Copper Inc.
5. SurModics, Inc.
6. Randgold Resources Ltd.
7. Meridian Gold Inc.
8. State Street Corp.
9. Walgreen Co.
10. PMA Capital Corp.
Top ten holdings comprise approximately 46% of total net assets. This portfolio
information should not be considered as a recommendation to purchase or sell a
particular security and there is no assurance that any securities will remain
in or out of the Fund.
FOXBY CORP. 2
Schedule of Portfolio Investments - December 31, 2005
Shares Market Value
------ ------------
COMMON STOCKS (101.04%)
Cable and Other Pay Television Services (3.03%)
7,600 Comcast Corp./(1)/..................................................... $197,296
---------
Converted Paper & Paperboard Products (3.33%)
2,800 3M Co.................................................................. 217,000
---------
Fire, Marine & Casualty Insurance (3.93%)
28,000 PMA Capital Corporation/(1)/........................................... 255,640
---------
Industrial & Commercial Fans & Blowers & Air Purifing Equipment (3.61%)
7,400 Donaldson Company, Inc................................................. 235,320
---------
Insurance Agents, Brokers & Services (4.97%)
10,600 Brown & Brown, Inc..................................................... 323,724
---------
In Vitro & In Vivo Diagnostic Substances (4.86%)
4,400 IDEXX Laboratories, Inc./(1)/.......................................... 316,712
---------
Jewelry, Precious Metals (3.83%)
29,000 Dundee Precious Metals Inc./(1)/....................................... 249,486
---------
Malt Beverages (3.39%)
3,300 Molson Coors Company Class B........................................... 221,067
---------
Mineral & Ores (4.67%)
110,000 Peru Copper Inc./(1)/.................................................. 304,150
---------
Mining (20.61%)
40,000 Bolivar Gold Corp./(1)/................................................ 100,154
37,500 Desert Sun Mining Corp./(1)/........................................... 92,625
35,000 Gammon Lake Resources Inc./(1)/........................................ 416,500
50,000 Jaguar Mining Inc./(1)/................................................ 169,064
12,900 Meridian Gold Inc./(1)/................................................ 282,123
16,000 Randgold Resources Ltd./(1)/........................................... 282,080
---------
1,342,546
---------
National Commercial Banks (10.69%)
8,600 MBNA Corporation....................................................... 233,576
7,700 U.S. Bancorp........................................................... 230,153
3,700 Wells Fargo & Company.................................................. 232,471
---------
696,200
---------
Natural Gas Distribution (1.36%)
21,600 MetroGAS S.A. ADR/(1)/................................................. 88,344
---------
Patent Owners & Lessors (4.66%)
8,200 SurModics, Inc./(1)/................................................... 303,318
---------
See accompanying notes to financial statements. 3 FOXBY CORP.
Schedule of Portfolio Investments - December 31, 2005
Shares Market Value
------ ------------
COMMON STOCKS - continued
Radio & TV Broadcasting & Communications Equipment (3.01%)
12,800 NTT DoCoMo, Inc. ADR................................................ $196,096
----------
Retail - Drug Stores & Proprietary Stores (4.15%)
6,100 Walgreen Co......................................................... 269,986
----------
Retail - Variety Stores (3.71%)
4,400 Target Corporation.................................................. 241,868
----------
Semiconductors & Related Devices (3.79%)
9,900 Intel Corporation................................................... 247,104
----------
Soap, Detergents, Cleaning Preparations, Perfumes, Cosmetics (3.91%)
4,400 The Procter & Gamble Company........................................ 254,672
----------
State Commercial Banks (4.17%)
4,900 State Street Corporation............................................ 271,656
----------
Wholesale - Farm Product Raw Materials (2.28%)
38,000 Alliance One International, Inc..................................... 148,200
----------
Wholesale - Medical, Dental & Hospital Equipment & Supplies (3.08%)
6,000 Patterson Companies Inc./(1)/....................................... 200,400
----------
Total Common Stocks (cost: $5,898,442)........................... 6,580,785
----------
WARRANTS (1.13%)
20,000 Bolivar Gold Corp. Warrants expiring 12/22/09/(1)/.................. 6,463
9,375 Desert Sun Mining Corp. Warrants expiring 11/20/08/(1)/............. 8,828
25,000 Jaguar Mining Inc. Warrants expiring 12/31/07/(1)/.................. 15,194
55,000 Peru Copper Inc. Warrants expiring 3/18/06/(1)/..................... 43,175
----------
Total Warrants (cost: $0)........................................ 73,660
----------
Total Investments (cost: $5,898,442) (102.17%)............... $6,654,445
----------
Liabilities in Excess of Cash and Other Assets (-2.17%)...... (141,642)
----------
Total Net Assets (100.00%)................................ $6,512,803
==========
--------
/(1)/Non-income producing security.
ADR means "American Depository Receipt."
FOXBY CORP. 4 See accompanying notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2005
ASSETS:
Investments at market value
(cost: $5,898,442) (note 2)......................................... $ 6,654,445
Cash................................................................ 6,746
Dividend receivable................................................. 3,472
Other assets........................................................ 2,489
------------
Total assets.................................................... 6,667,152
------------
LIABILITIES:
Note payable (note 7)............................................... 84,776
Accrued expenses.................................................... 61,151
Investment management (note 4)...................................... 4,491
Administrative services (note 4).................................... 3,931
------------
Total liabilities............................................... 154,349
------------
NET ASSETS: (applicable to 2,602,847
shares outstanding: 500,000,000 shares of $.01par value authorized) $ 6,512,803
============
NET ASSET VALUE PER SHARE
($6,512,803 / 2,602,847 shares outstanding)......................... $ 2.50
============
At December 31, 2005, net assets consisted of:
Paid-in capital..................................................... $ 22,830,309
Net unrealized appreciation on investments.......................... 756,003
Accumulated net realized loss on investments and futures............ (17,073,509)
------------
$ 6,512,803
============
STATEMENT OF OPERATIONS
Year Ended December 31, 2005
INVESTMENT INCOME:
Dividends........................................................... $ 62,898
Interest............................................................ 471
------------
Total investment income......................................... 63,369
------------
EXPENSES:
Legal (note 9)...................................................... 316,704
Investment management (note 4)...................................... 63,595
Bookkeeping and pricing............................................. 22,646
Printing and postage................................................ 18,864
Audit............................................................... 16,600
Loan interest and fees.............................................. 14,214
Administrative services (note 4).................................... 11,802
Transfer agent...................................................... 9,463
Directors........................................................... 8,309
Custodian........................................................... 7,683
Exchange listing.................................................... 4,933
Other............................................................... 7,185
------------
Total expenses.................................................. 501,998
Expense reductions.............................................. (217)
------------
Total net expenses.............................................. 501,781
------------
Net investment loss.......................................... (438,412)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss):
Short sales..................................................... (255,111)
Sale of investments............................................. 164,324
Foreign currencies.............................................. 25,766
Unrealized appreciation on investments.............................. 317,063
------------
Net realized and unrealized gain on investments..................... 252,042
------------
Net decrease in net assets resulting from operations................ $ (186,370)
============
See accompanying notes to financial statements. 5 FOXBY CORP.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended December 31, 2005 and 2004
2005 2004
---------- -----------
OPERATIONS:
Net investment loss............................................. $ (438,412) $ (291,759)
Net realized gain (loss) on investment transactions............. (65,021) 1,153,414
Change in unrealized appreciation (depreciation) on investments. 317,063 (1,313,471)
---------- -----------
Net decrease in net assets resulting from operations........ (186,370) (451,816)
---------- -----------
Total change in net assets............................... (186,370) (451,816)
NET ASSETS:
Beginning of year............................................... 6,699,173 7,150,989
---------- -----------
End of year..................................................... $6,512,803 $ 6,699,173
========== ===========
STATEMENT OF CASH FLOWS
Year Ended December 31, 2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net decrease in net assets resulting from operations................................. $ (186,370)
Adjustments to reconcile net decrease in net assets resulting from operations to net
cash provided by (used in) operating activities:
Net change in unrealized appreciation of investments............................. (317,064)
Net realized loss on investments................................................. 65,021
Proceeds from sales and long term securities......................................... 3,071,223
Purchase of long term securities..................................................... (1,831,882)
Increase in accrued fees and expenses............................................ 31,937
Decrease in dividends receivable and other assets.................................... 2,338
Net purchases of short term securities............................................... (3,733)
-----------
Net cash provided by operating activities..................................... 831,470
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of bank line of credit..................................................... (824,724)
-----------
Net cash used in financing activities......................................... (824,724)
-----------
Net increase in cash.......................................................... 6,746
CASH:
Beginning of year.................................................................... --
-----------
End of year.......................................................................... $ 6,746
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................................................... $ 14,466
===========
FOXBY CORP. 6 See accompanying notes to financial statements.
Notes to Financial Statements
(1) Foxby Corp., a Maryland corporation registered under the Investment Company
Act of 1940, as amended (the "Act"), is a non-diversified, closed-end
management investment company whose shares are listed on the American Stock
Exchange.
(2) The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. With
respect to security valuation, securities traded on a national securities
exchange or the Nasdaq National Market System ("NMS") are valued at the last
reported sales price on the day the valuations are made. Such securities that
are not traded on a particular day and securities traded in the
over-the-counter market that are not on NMS are valued at the mean between the
current bid and asked prices. Certain of the securities in which the Fund
invests are priced through pricing services which may utilize a matrix pricing
system which takes into consideration factors such as yields, prices,
maturities, call features and ratings on comparable securities. Bonds may be
valued according to prices quoted by a dealer in bonds which offers pricing
services. Debt obligations with remaining maturities of 60 days or less are
valued at cost adjusted for amortization of premiums and accretion of
discounts. Securities denominated in foreign currencies are translated into
U.S. dollars at prevailing exchange rates. Securities for which quotations are
not readily available or reliable and other assets may be valued as determined
in good faith under the direction of and pursuant to procedures established by
the Fund's Board of Directors. Investment transactions are accounted for on the
trade date (the date the order to buy or sell is executed). Dividend income and
distributions to shareholders are recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Withholding taxes on foreign dividends
have been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates. In preparing financial statements in
conformity with accounting principles generally accepted in the United States
of America, management makes estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(3) No provision has been made for U.S. income taxes because the Fund's current
intention is to continue to qualify as a regulated investment company under the
Internal Revenue Code and to distribute to its shareholders substantially all
of its taxable income and net realized gains. Foreign securities held by the
Fund may be subject to foreign taxation. Foreign taxes, if any, are recorded
based on the tax regulations and rates that exist in the foreign markets in
which the Fund invests. At December 31, 2005, the Fund had net capital loss
carryovers that may be used to offset future realized capital gains for federal
income tax purposes of $16,793,145, of which $8,986,140, $6,343,522, $414,304,
$837,334, and $211,845 expires in 2008, 2009, 2010, 2011, and 2013,
respectively.
As of December 31, 2005, the components of distributable earnings on a tax
basis were as follows:
Capital loss carryover $(16,793,145)
"Post-October* net capital losses (280,364)
Unrealized appreciation 756,003
------------
$(16,317,506)
============
Federal income tax regulations permit "post-October" net capital losses to be
deferred and recognized on the tax return of the next succeeding taxable year.
Accounting principles generally accepted in the United States of America
require certain components of net assets to be reclassified between financial
and tax reporting. These reclassifications have no effect on net assets or net
asset value per share. For the year ended December 31, 2005, the Fund
reclassified $438,412 from accumulated investment loss to paid-in capital.
(4) The Fund retains CEF Advisers, Inc. as its Investment Manager. Under the
terms of the Investment Management Agreement, the Investment Manager receives a
management fee, payable monthly, based on the average daily net assets of the
Fund. Effective December 20, 2005 the annual rate of management fee
compensation was changed to 1/2 of 1% from 1%. Certain officers and directors
of the Fund are officers and
7 FOXBY CORP.
Notes to Financial Statements (continued)
directors of the Investment Manager. The Fund reimbursed the Investment Manager
$11,802 for providing at cost certain administrative services comprised of
compliance and accounting services during the year ended December 31, 2005.
Through arrangements with the Fund's custodian and cash management, credits
realized as a result of uninvested cash balances were used to reduce custody
and transfer agency expenses, respectively. For financial reporting purposes,
the Fund includes these credits as an expense offset in the Statement of
Operations.
(5) Purchases and sales of investment securities (excluding short term
investments) aggregated $1,831,882 and $3,071,223, respectively, for the year
ended December 31, 2005.
At December 31, 2005, for federal income tax purposes the aggregate cost of
securities was $5,898,440 and net unrealized appreciation was $756,003
comprised of gross unrealized appreciation of $1,159,217 and gross unrealized
depreciation of $403,214.
(6) The Fund may engage in transactions in futures contracts. Upon entering
into a futures contract, the Fund is required to deposit with the broker an
amount of cash or cash equivalents equal to a certain percentage of the
contract amount. This is known as the "initial margin." Subsequent payments
("variation margin") are made or received by the Fund each day, depending on
the daily fluctuation of the value of the contract. The daily change in the
contract is included in unrealized appreciation/depreciation on investments and
futures contracts. The Fund realizes a gain or loss when the contract is
closed. Futures transactions sometimes may reduce returns or increase
volatility. In addition, futures can be illiquid and highly sensitive to
changes in their underlying security, interest rate or index, and as a result
can be highly volatile. A small investment in certain futures could have a
potentially large impact on a Fund's performance. At December 31, 2005 the Fund
had no open futures contracts. At December 31, 2005, the Fund had $541,642 of
investments pledged as collateral for the variation margin account.
(7) The Fund, Global Income Fund, Inc., Midas Fund, Inc., and Midas Special
Equities Fund, Inc. (the "Borrowers") have entered into a committed secured
line of credit facility with State Street Bank & Trust Company ("Bank"). Global
Income Fund, Inc. is a closed-end investment company advised by the Investment
Manager Midas Fund, Inc. and Midas Special Equities Fund, Inc. are open-end
investment companies advised by Midas Management Corporation, an affiliate of
the Investment Manager. The Bank also acts as the Fund's custodian. The
aggregate amount of the line of credit is $9,000,000 and the borrowing of each
Borrower is collateralized by the underlying investments of such Borrower. The
Bank will make revolving loans to a Borrower not to exceed in the aggregate
outstanding at any time with respect to any one Borrower the least of
$9,000,000 or the maximum amount permitted pursuant to each Borrower's
investment policies or as permitted under the Act. The commitment fee on this
facility is 0.10% per annum on the unused portion of the commitment, based on a
360-day year. All loans under this facility will be available at the Borrower's
option of (i) overnight Federal funds or (ii) LIBOR (30, 60, 90 days), each as
in effect from time to time, plus 0.75% per annum, calculated on the basis of
actual days elapsed for a 360-day year. For the year ended December 31, 2005,
the weighted average interest rate was 3.76% based on the balances outstanding
during the period and the weighted average amount outstanding was $378,055.
(8) Of the 2,602,847 shares of common stock outstanding at December 31, 2005,
Investor Service Center, Inc., an affiliate of the Fund's Investment Manager,
owned 634,200 shares or 24.4% of the total shares outstanding.
(9) In the Circuit Court for Baltimore City, Maryland, Civil Action
No. 24-C-04-007613 filed on October 4, 2004, a group comprised of Richard J.
Shaker, Phillip Goldstein, Rajeev Das, and Andrew Dakos sued the Fund and its
directors, alleging various breaches by the directors of fiduciary duty under
Maryland law and seeking declaratory and injunctive relief. The lawsuit
generally arose out of the Fund's 2004 annual meeting of stockholders and the
Fund's Bylaws. On December 20, 2005 the parties entered into a settlement of
the lawsuit. Under the terms of the settlement, the management fee paid to the
Investment Manager was reduced to an annual rate of 0.50% of Foxby's average
daily net assets. The plaintiffs agreed to refrain from engaging in future
efforts to seek control of Foxby. The settlement was approved by the Board of
Directors of the Fund.
FOXBY CORP. 8
Notes to Financial Statements (concluded)
The parties have filed a Stipulation of Dismissal with the Court. Shaker and
his clients sold their stake in Foxby, 397,300 shares, to Investor Service
Center, Inc., an affiliate of the Investment Manager for a total of $893,925.
In connection with these and other legal matters, total legal expenses incurred
by the Fund were $316,704 and $83,200 for the years ended December 31, 2005 and
2004, respectively. Total litigation expenses incurred by the Fund on its own
behalf and as advances of legal and other expenses to the Fund's directors
before insurance recoveries reimbursed to the Fund pursuant to its director's
and officer's liability insurance policy were $881,450 and $36,512 for the
years ended December 31, 2005 and 2004, respectively. The Fund was reimbursed
$607,700 in cash pursuant to its director's and officer's liability insurance
policy for the year ended December 31, 2005.
FINANCIAL HIGHLIGHTS
Nine
Year Year Year Months Year Year
Ended Ended Ended Ended Ended Ended
12/31/05 12/31/04 12/31/03 12/31/02 3/31/02 3/31/01
-------- -------- -------- -------- ------- -------
PER SHARE DATA
Net asset value at beginning of period................. $ 2.57 $ 2.75 $ 2.59 $ 3.27 $ 3.77 $ 14.81
------ ------- ------ ------- ------ -------
Income from investment operations:
Net investment loss................................. (.17) (.11) (.10) (.04) (.08) (.09)
Net realized and unrealized gain (loss) on
investments....................................... .10 (.07) .26 (.64) (.16) (10.45)/(a)/
------ ------- ------ ------- ------ -------
Total from investment operations.................... (.07) (.18) .16 (.68) (.24) (10.54)
------ ------- ------ ------- ------ -------
Less distributions:
Distributions to shareholders....................... -- -- -- -- (.26) (.50)
------ ------- ------ ------- ------ -------
Net asset value at end of period....................... $ 2.50 $ 2.57 $ 2.75 $ 2.59 $ 3.27 $ 3.77
====== ======= ====== ======= ====== =======
Market value at end of period.......................... $ 2.05 $ 2.22 $ 2.40 $ 2.07 $ 3.00 $ 3.33
====== ======= ====== ======= ====== =======
TOTAL RETURN ON NET ASSET VALUE BASIS (b) (2.72)% (6.55)% 6.18% (20.80)% (6.65)% (73.46)%
====== ======= ====== ======= ====== =======
TOTAL RETURN ON MARKET VALUE BASIS (b) (7.66)% (7.50)% 15.94% (31.00)% (2.06)% (71.89)%
====== ======= ====== ======= ====== =======
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period (000's omitted)............ $6,513 $ 6,699 $7,151 $ 6,731 $8,503 $ 9,735
====== ======= ====== ======= ====== =======
Ratio of total expenses to average net assets.......... 7.76% 5.27% 4.39% 4.70%/(c)/ 3.17% 2.19%
====== ======= ====== ======= ====== =======
Ratio of net expenses to average net assets............ 7.76% 5.27% 4.39% 4.70%/(c)/ 3.17% 2.19%
====== ======= ====== ======= ====== =======
Ratio of net expenses excluding loan interest and fees
to average net assets................................ 7.54% 5.19% 4.39% 4.70%/(c)/ 3.17% 2.19%
====== ======= ====== ======= ====== =======
Ratio of net investment loss to average net assets..... (6.78)% (4.31)% (3.91)% (3.30)%/(c)/ (2.41)% (.93)%
====== ======= ====== ======= ====== =======
Portfolio turnover rate................................ 26.92% 164.08% 75.39% 267.87% 89.31% 550.56%
====== ======= ====== ======= ====== =======
--------
(a) Includes $0.06 of gains resulting from the buy back of treasury shares at
a discount to net asset value.
(b) Total return on market value basis is calculated assuming a purchase of
common stock on the opening of the first day and sale on the closing of
the last day of each period reported. Dividends and distributions, if any,
are assumed for purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Generally, total
return on net asset value basis will be higher than total return on market
value basis in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from
the beginning to the end of such periods. Conversely, total return on net
asset value basis will be lower than total return on market value basis in
periods where there is a decrease in the discount or an increase in the
premium of the market value to the net asset value from the beginning to
the end of such periods. Total return calculated for a period of less than
one year is not annualized. The calculation does not reflect brokerage
commissions, if any.
(c) Annualized.
9 FOXBY CORP.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Foxby Corp.:
We have audited the accompanying statement of assets and liabilities of Foxby
Corp. (the "Fund"), including the schedule of investments as of December 31,
2005, the related statement of operations and cash flows for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended and the nine months ended December 31, 2002, and the year
ended March 31, 2002.These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The financial highlights for the year ended March 31, 2001 were audited
by other auditors whose report dated May 14, 2001 expressed an unqualified
opinion on the financial highlights.
We conducted our audits in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are free of material
misstatement. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2005 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Foxby
Corp. as of December 31, 2005, the results of its operations and cash flows, the
changes in its net assets, and the financial highlights for the periods noted
above, in conformity with accounting principles generally accepted in the United
States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
January 19, 2006
FOXBY CORP. 10
PRIVACY POLICY
The Fund recognizes the importance of protecting the personal and financial
information of its shareholders. We consider each shareholder's personal
information to be private and confidential. This describes the practices
followed by us to protect our shareholders' privacy. We may obtain information
about you from the following sources: (1) information we receive from you on
forms and other information you provide to us whether in writing, by telephone,
electronically or by any other means; (2) information regarding your
transactions with us, our corporate affiliates, or others. We do not sell
shareholder personal information to third parties. We will collect and use
shareholder personal information only to service shareholder accounts. This
information may be used by us in connection with providing services or
financial products requested by shareholders. We will not disclose shareholder
personal information to any nonaffiliated third party except as permitted by
law. We take steps to safeguard shareholder information. We restrict access to
nonpublic personal information about you to those employees and service
providers who need to know that information to provide products or services to
you. With our service providers we maintain physical, electronic, and
procedural safeguards to guard your nonpublic personal information. Even if you
are no longer a shareholder, our Privacy Policy will continue to apply to you.
We reserve the right to modify, remove or add portions of this Privacy Policy
at any time.
DIVIDEND REINVESTMENT PLAN
The Fund has adopted a Dividend Reinvestment Plan (the "Plan"). Under the Plan,
each dividend and capital gain distribution, if any, declared by the Fund on
outstanding shares will, unless elected otherwise by each shareholder by
notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution, be paid on the payment date fixed by the
Board of Directors or a committee thereof in additional shares. If the Market
Price (as defined below) per share is equal to or exceeds the net asset value
per share at the time shares are valued for the purpose of determining the
number of shares equivalent to the cash dividend or capital gain distribution
(the "Valuation Date"), participants will be issued additional shares equal to
the amount of such dividend divided by the greater of that net asset value per
share or 95% of that Market Price per share. If the Market Price per share is
less than such net asset value on the Valuation Date, participants will be
issued additional shares equal to the amount of such dividend divided by the
Market Price. The Valuation Date is the day before the dividend or distribution
payment date or, if that day is not an American Stock Exchange trading day, the
next trading day. For all purposes of the Plan: (a) the Market Price of the
shares on a particular date shall be the average closing market price on the
five trading days the shares traded ex-dividend on the Exchange prior to such
date or, if no sale occurred on any of these days, then the mean between the
closing bid and asked quotations, for the shares on the Exchange on such day,
and (b) net asset value per share on a particular date shall be as determined
by or on behalf of the Fund.
PROXY VOTING
The Fund's Proxy Voting Guidelines (the "Guidelines") as well as its voting
record for the 12 months ended June 30, are available without charge, by
calling the Fund collect at 1-212-344-6310 and on the SEC's web-site at
http://www.sec.gov. The Guidelines are also posted on the Fund's website at
http://www.foxbycorp.com.
QUARTERLY HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the SEC's Internet site at http://www.sec.gov and may be
reviewed and copied at the SEC's Public Reference Room. Copies of this
information can be obtained, after paying a duplicating fee, by e-mail request
to publicinfo@sec.gov, or by writing to the SEC's Public Reference Section,
Washington, DC 20549-0102. The Fund's Investment Company Act file number is
811-09261. The Fund makes the information on Form N-Q available to shareholders
upon request free of charge by e-mail request to info@foxbycorp.com or by
calling the Fund collect at 1-212-344-6310.
Additional Information 11 FOXBY CORP.
WWW.FOXBYCORP.COM
Visit us on the Internet at www.foxbycorp. The site provides information about
the Fund including market performance, net asset value (NAV), dividends, press
releases, and shareholder reports. For further information, you can email us at
info@foxbycorp.com. The Fund is a member of the Closed-End Fund Association
(CEFA). Its website address is www.cefa.com. CEFA is solely responsible for the
content of its website.
FUND INFORMATION
Investment Manager Stock Transfer Agent and Registrar
CEF Advisers, Inc. American Stock Transfer & Trust Co.
11 Hanover Square 59 Maiden Lane
New York, NY 10005 New York, NY 10038
www.closedendfunds.net 1-800-278-4353
1-212-344-6310 www.amstock.com
Independent Registered Public
Accounting Firm Custodian
Tait, Weller & Baker State Street Bank & Trust Co.
1818 Market St., Suite 2400 801 Pennsylvania Avenue
Philadelphia, PA 19103 Kansas City, MO 64105
Internet
www.foxbycorp.com
email: info@foxbycorp.com
BOARD OF DIRECTORS' REVIEW OF THE INVESTMENT MANAGEMENT AGREEMENT
The annual continuance of the investment management agreement (the "Agreement")
between the Fund and the investment manager, CEF Advisers, Inc., was approved
at a meeting of the Board of Directors held in March 2005. The semi-annual
report to shareholders for the fiscal period ended June 30, 2005 includes a
discussion of the factors which the Board of Directors considered in the
approval of the continuance of the Agreement. In addition, at a meeting held on
September 14, 2005, the Board of Directors approved an amended investment
management agreement ("Amended Agreement") between the Fund and the investment
manager. The Amended Agreement is substantially similar to the Agreement,
except that it provides for a reduction in the investment management fee from
1.00% of the Fund's average daily net assets to 0.50% of the Fund's average
daily net assets. The Amended Agreement became effective on December 20, 2005.
FOXBY CORP. 12 Additional Information
RESULTS OF THE ANNUAL MEETING
The Fund's Annual Meeting was held on October 4, 2005 at the office of the Fund
at 11 Hanover Square, New York, New York for the purpose of electing the
following director to serve as follows with the votes received as set forth
below:
Director Class Term Expiring* Votes For Votes Withheld
-------- ----- ------- --------- --------- --------------
Peter K. Werner III 5 years 2010 2,153,743 414,841
--------
* And until his successor is duly elected and qualifies. Directors whose term
of office continued after the meeting are Thomas B. Winmill (Class IV), James
E. Hunt (Class I), and Bruce B. Huber (Class II).
DIRECTORS AND OFFICERS
The following table sets forth certain information concerning the other
Directors currently serving on the Board of the Fund. Unless otherwise noted,
the address of record for the directors and officers is 11 Hanover Square, New
York, New York 10005. Unless otherwise noted, the address of record for the
directors and officers is 11 Hanover Square, New York, New York 10005. Each
Director who is deemed to be an "interested person" because he is an
"affiliated person" as defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), is indicated by an asterisk.
Number of Portfolios Other Public
Name, Principal Occupation, Business in Investment Company
Experience for Past Five Years, Company Complex Directorships
Address, and Age Director Since Overseen by Director Held by Director*
------------------------------------ -------------- -------------------- -----------------
Class I:
JAMES E. HUNT - He is a Managing Director of 2004 5 0
Hunt, Howe Partners LLC executive
recruiting con-sultants.
He was born on December 14, 1930.
Class II:
BRUCE B. HUBER, CLU, ChFC, MSFS - 2004 5 0
He is a Financial Representative
with new England Financial,
specializing in financial, estate and
insur-ance matters. He was born
on February 7, 1930.
Class III:
PETER K. WERNER - Since 1996 he has taught 2002 5 0
and directed many programs at The
Governor Dummer Academy.
Previously he was Vice President
of Money Market Trading at
Lehman Bros. He was born on
August 16, 1959.
Class IV:
THOMAS B. WINMILL* - He is President, 2002 5 Bexil
Chief Executive Officer, and General Counsel of Corporation
the Fund, as well as the other
investment companies (collec-tively,
the "Investment Company Complex")
advised by the Investment Manager
and its affiliates, and of
Winmill & Co. Incorporated
and its affiliates ("WCI").
He also is President of the
Investment Manager. He is a
member of the New York State Bar
and the SEC Rules Committee
of the Investment Company Institute.
He was born on June 25, 1959.
Additional Information 13 FOXBY CORP.
--------
* He is an "interested person" of the Fund as defined in the 1940 Act due to
his affiliation with the Investment Manager.
** Refers to directorships held by a director in any company with a class of
securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934 or any company registered as an investment company under the
Investment Company Act of 1940.
Messrs. Huber, Hunt and Werner also serve on the Audit and Nominating
Committees of the Board. Mr. Winmill also serves on the Executive Committee of
the Board.
The executive officers, other than those who serve as Directors, and their
relevant biographical information are set forth below.
Name and Age Principal Occupation During the Past 5 years
------------ ------------------------------------------------------------------------------------------------------
Thomas O'Malley Chief Accounting Officer, Chief Financial Officer, Treasurer and Vice President since 2005. He is also
Born on July 22, 1958 Chief Accounting Officer, Chief Financial Officer, and Vice President of the Investment Company
Complex, the Investment Manager, and WCI. Previously, he served as Assistant Controller of Reich &
Tang Asset Management, LLC, Reich & Tang Services, Inc., and Reich & Tang Distributors, Inc. He is a
certified public accountant.
Marion E. Morris Senior Vice President since 2000. She is also a Senior Vice President of the Investment Company
Born on June 17, 1945 Complex, the Investment Manager, and WCI. She is Director of Fixed Income and a member of the
Investment Policy Committee of the Investment Manager. Previously, she served as Vice President of
Salomon Brothers, The First Boston Corporation and Cantor Fitzgerald.
John F. Ramirez Secretary and Chief Compliance Officer since 2005. He is also Secretary and Chief Compliance Officer
Born on April 29, 1977 of the Investment Company Complex, the Investment Manager, and WCI. He previously served as
Compliance Administrator and Assistant Secretary of the Investment Company Complex, the Investment
Manager, and WCI.
This report, including the financial statements herein, is transmitted to the
shareholders of the Fund for their information.The financial information
included herein is taken from the records of the Fund. This is not a
prospectus, circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. Pursuant to
Section 23 of the Investment Company Act of 1940, notice is hereby given that
the Fund may in the future, purchase shares of its common stock in the open
market. These purchases may be made from time to time, at such times, and in
such amounts, as may be deemed advantageous to the Fund, although nothing
herein shall be considered a commitment to purchase such shares.
FOXBY CORP. 14 Additional Information
FOXBY CORP.
11 Hanover Square
New York, NY 10005
Printed on recycled paper [LOGO]
Item 2. Code of Ethics.
a) The registrant has adopted a code of ethics (the "Code") that applies
to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party.
(b) No information need be disclosed pursuant to this paragraph.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) (1) The Code is attached hereto as Exhibit 99.CODE ETH.
(2) The text of the Code can be on the registrant's website,
www.foxbycorp.com.
(3) A copy of the Code may be obtained free of charge by calling
collect 1-212-344-6310.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that it has three "audit
committee financial experts" serving on its audit committee, each of whom are
"independent" Directors: Bruce B. Huber, James E. Hunt and Peter K. Werner.
Under applicable securities laws, a person who is determined to be an audit
committee financial expert will not be deemed an "expert" for any purpose,
including without limitation for the purposes of Section 11 of the Securities
Act of 1933, as a result of being designated or identified as an audit committee
financial expert. The designation or identification of a person as an audit
committee financial expert does not impose on such person any duties,
obligations, or liabilities that are greater than the duties, obligations, and
liabilities imposed on such person as a member of the audit committee and Board
of Directors in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services.
(a) Disclose, under the caption Audit Fees, the aggregate fees billed for each
of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those
fiscal years.
AUDIT FEES
2004 - $9,000
2005 - $11,000
(b) Disclose, under the caption Audit-Related Fees, the aggregate fees billed
in each of the last two fiscal years for assurance and related services by
the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported
under paragraph (a) of this Item. Registrants shall describe the nature of
the services comprising the fees disclosed under this category.
AUDIT RELATED FEES
2004 - $1,000
2005 - $1,000
Audit-related fees include amounts reasonably related to the performance of
the audit of the registrant's financial statements, including the issuance
of a report on internal controls and review of periodic reporting.
(c) Disclose, under the caption Tax Fees, the aggregate fees billed in each of
the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
TAX FEES
2004 - $3,000
2005 - $3,000
Tax fees include amounts related to tax compliance, tax planning, and tax
advice.
(d) Disclose, under the caption All Other Fees, the aggregate fees billed in
each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
ALL OTHER FEES
2004 - N/A
2005 - N/A
(e) (1) The registrant's audit committee has adopted a policy to consider
for pre-approval any non-audit services proposed to be provided by the
auditors to the registrant, and any non-audit services proposed to be
provided by such auditors to the registrant's investment manager, if
any, which have a direct impact on registrant operations or financial
reporting. Such pre-approval of non-audit services proposed to be
provided by the auditors to the registrant is not necessary, however,
under the following circumstances: (1) all such services do not
aggregate to more than 5% of total revenues paid by the registrant to
the auditor in the fiscal year in which services are provided, (2)
such services were not recognized as non-audit services at the time of
the engagement, and (3) such services are brought to the attention of
the audit committee, and approved by the audit committee, prior to the
completion of the audit.
(2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees proposed to be billed or billed for the most recent
fiscal year and the preceding fiscal year by the registrant's principal
accountant for non-audit services rendered to the registrant, its
investment manager, and any entity controlling, controlled by, or under
common control with the investment manager that provides ongoing services
to the registrant were $43,500 and $54,625, respectively.
(h) The registrant's audit committee has considered the provision of non-audit
services that were rendered by accountant to the registrant's investment
manager and its affiliates, including, if applicable, any that were not
pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation
S-X, to be compatible with maintaining the independence of the accountant,
taking into account representations from the accountant, in accordance with
Independence Standards Board requirements and the meaning of the Securities
laws administered by the SEC, regarding its independence from the
registrant, its investment manager and the investment manager's affiliates.
Item 5. Audit Committee of Listed Registrants.
The registrant has a standing audit committee. The members of the audit
committee are Bruce B. Huber, James E. Hunt and Peter K. Werner.
Item 6. Schedule of Investments.
Included as part of the report to shareholders filed under Item 1 of this
Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
AMENDED PROXY VOTING POLICIES AND PROCEDURES
Midas Dollar Reserves, Inc.
Midas Fund, Inc.
Midas Special Fund, Inc.
Global Income Fund, Inc.
Foxby Corp.
Global Income Fund, Inc. and Foxby Corp. (the "Funds") delegates the
responsibility for voting proxies of portfolio companies held in each Fund's
portfolio to Institutional Shareholder Services, Inc. ("ISS"). The Proxy Voting
Guidelines of ISS (see attached) are incorporated by reference herein as a
Fund's proxy voting policies and procedures, as supplemented by the terms
hereof. Each Fund retains the right to override the delegation to ISS on a
case-by-case basis, in which case the ADDENDUM - NON-DELEGATED PROXY VOTING
POLICIES AND PROCEDURES supercede the Proxy Voting Guidelines of ISS in their
entirety. In all cases, a Fund's proxies will be voted in the best interests of
the Fund.
With respect to a vote upon which a Fund overrides the delegation to ISS,
to the extent that such vote presents a material conflict of interest between
the Fund and its investment adviser or any affiliated person of the Investment
Manager, a Fund will disclose such conflict to, and obtain consent from, its
Independent Directors, or a committee thereof, prior to voting the proxy.
January 1, 2004
ADDENDUM
NON-DELEGATED PROXY VOTING POLICIES AND PROCEDURES
These proxy voting policies and procedures are intended to provide general
guidelines regarding the issues they address. As such, they cannot be
"violated." In each case the vote will be based on maximizing shareholder value
over the long term, as consistent with overall investment objectives and
policies.
Board and Governance Issues
Board of Director Composition
Typically, we will not object to slates with at least a majority of independent
directors.
We generally will not object to shareholder proposals that request that the
board audit, compensation and/or nominating committees include independent
directors exclusively.
Approval of IRPAF
We will evaluate on a case-by-case basis instances in which the audit firm has a
significant audit relationship with the company to determine whether we believe
independence has been compromised.
We will review and evaluate the resolutions seeking ratification of the auditor
when fees for financial systems design and implementation substantially exceed
audit and all other fees, as this can compromise the independence of the
auditor.
We will carefully review and evaluate the election of the audit committee chair
if the audit committee recommends an auditor whose fees for financial systems
design and implementation substantially exceed audit and all other fees, as this
can compromise the independence of the auditor.
Increase Authorized Common Stock
We will generally support the authorization of additional common stock necessary
to facilitate a stock split.
We will generally support the authorization of additional common stock.
Blank Check Preferred Stock
Blank check preferred is stock with a fixed dividend and a preferential claim on
company assets relative to common shares. The terms of the stock (voting,
dividend and conversion rights) are determined at the discretion of the Board
when the stock is issued. Although such an issue can in theory be used for
financing purposes, often it has been used in connection with a takeover
defense. Accordingly, we will generally evaluate the creation of blank check
preferred stock.
Classified or "Staggered" Board
On a classified (or staggered) board, directors are divided into separate
classes (usually three) with directors in each class elected to overlapping
three-year terms. Companies argue that such Boards offer continuity in direction
which promotes long-term planning. However, in some instances they may serve to
deter unwanted takeovers since a potential buyer would have to wait at least two
years to gain a majority of Board seats.
We will vote on a case-by-case basis on issues involving classified boards.
Supermajority Vote Requirements
Supermajority vote requirements in a company charter or bylaws require a level
of voting approval in excess of simple majority. Generally, supermajority
provisions require at least 2/3 affirmative vote for passage of issues.
We will vote on a case-by-case basis regarding issues involving supermajority
voting.
Restrictions on Shareholders to Act by Written Consent
Written consent allows shareholders to initiate and carry out a shareholder
action without waiting until the annual meeting or by calling a special meeting.
It permits action to be taken by the written consent of the same percentage or
outstanding shares that would be required to effect the proposed action at a
shareholder meeting.
We will generally not object to proposals seeking to preserve the right of
shareholders to act by written consent.
Restrictions on Shareholders to Call Meetings
We will generally not object to proposals seeking to preserve the right of the
shareholders to call meetings.
Limitations, Director Liability and Indemnification
Because of increased litigation brought against directors of corporations and
the increase costs of director liability insurance, many states have passed laws
limiting director liability for those acting in good faith. Shareholders,
however, often must opt into such statutes. In addition, many companies are
seeking to add indemnification of directors to corporate bylaws.
We will generally support director liability and indemnification resolutions
because it is important for companies to be able to attract the most qualified
individuals to their Boards.
Reincorporation
Corporations are in general bound by the laws of the state in which they are
incorporated. Companies reincorporate for a variety of reasons including
shifting incorporation to a state where the company has its most active
operations or corporate headquarters, or shifting incorporation to take
advantage of state corporate takeovers laws.
We typically will not object to reincorporation proposals.
Cumulative Voting
Cumulative voting allows shareholders to cumulate their votes behind one or a
few directors running for the board that is, cast more than one vote for a
director thereby helping a minority of shareholders to win board representation.
Cumulative voting generally gives minority shareholders an opportunity to effect
change in corporate affairs.
We typically will not object to proposals to adopt cumulative voting in the
election of directors.
Dual Classes of Stock
In order to maintain corporate control in the hands of a certain group of
shareholders, companies may seek to create multiple classes of stock with
differing rights pertaining to voting and dividends.
We will vote on a case-by-case basis dual classes of stock. However, we will
typically not object to dual classes of stock.
Limit Directors Tenure
In general, corporate directors may stand for re-election indefinitely.
Opponents of this practice suggest that limited tenure would inject new
perspectives into the boardroom as well as possibly creating room for directors
from diverse backgrounds; however, continuity is important to corporate
leadership and in some instances alternative means may be explored for injecting
new ideas or members from diverse backgrounds into corporate boardrooms.
Accordingly, we will vote on a case-by-case basis regarding attempts to limit
director tenure.
Minimum Director Stock Ownership
The director share ownership proposal requires that all corporate directors own
a minimum number of shares in the corporation. The purpose of this resolution is
to encourage directors to have the same interest as other shareholders.
We normally will not object to resolutions that require corporate directors to
own shares in the company.
Executive Compensation
Disclosure of CEO, Executive, Board and Management Compensation
On a case-by-case basis, we will support shareholder resolutions requesting
companies to disclose the salaries of top management and the Board of Directors.
Compensation for CEO, Executive, Board and Management
We typically will not object to proposals regarding executive compensation if we
believe the compensation clearly does not reflect the current and future
circumstances of the company.
Formation and Independence of Compensation Review Committee
We normally will not object to shareholder resolutions requesting the formation
of a committee of independent directors to review and examine executive
compensation. Stock Options for Board and Executives
We will generally review the overall impact of stock option plans that in total
offer greater than 25% of shares outstanding because of voting and earnings
dilution.
We will vote on a case-by-case basis option programs that allow the repricing of
underwater options.
In most cases, we will oppose stock option plans that have option exercise
prices below the marketplace on the day of the grant.
Generally, we will support options programs for outside directors subject to the
same constraints previously described.
Employee Stock Ownership Plan (ESOPs)
We will generally not object to ESOPs created to promote active employee
ownership. However, we will generally oppose any ESOP whose purpose is to
prevent a corporate takeover.
Changes to Charter or By-Laws
We will conduct a case-by-case review of the proposed changes with the voting
decision resting on whether the proposed changes are in shareholder best
interests.
Confidential Voting
Typically, proxy voting differs from voting in political elections in that the
company is made aware of shareholder votes as they are cast. This enables
management to contact dissenting shareholders in an attempt to get them to
change their votes.
We generally will not object to confidential voting.
Equal Access to Proxy
Equal access proposals ask companies to give shareholders access to proxy
materials to state their views on contested issues, including director
nominations. In some cases they would actually allow shareholders to nominate
directors. Companies suggest that such proposals would make an increasingly
complex process even more burdensome.
In general, we will not oppose resolutions for equal access proposals.
Golden Parachutes
Golden parachutes are severance payments to top executives who are terminated or
demoted pursuant to a takeover. Companies argue that such provisions are
necessary to keep executives from "jumping ship" during potential takeover
attempts.
We will not object to the right of shareholders to vote on golden parachutes
because they go above and beyond ordinary compensation practices. In evaluating
a particular golden parachute, we will examine if considered material total
management compensation, the employees covered by the plan, and the quality of
management and all other factors deemed pertinent.
Mergers and Acquisitions
Mergers, Restructuring and Spin-offs
A merger, restructuring, or spin-off in some way affects a change in control of
the company assets. In evaluating the merit of each issue, we will consider the
terms of each proposal. This will include an analysis of the potential long-term
value of the investment.
On a case by case basis, we will review management proposals for merger or
restructuring to determine the extent to which the transaction appears to offer
fair value and other proxy voting policies stated are not violated.
Poison Pills
Poison pills (or shareholder rights plans) are triggered by an unwanted takeover
attempt and cause a variety of events to occur which may make the company
financially less attractive to the suitor. Typically, directors have enacted
these plans without shareholder approval. Most poison pill resolutions deal with
putting poison pills up for a vote or repealing them altogether.
We typically will not object to most proposals to put rights plans up for a
shareholder vote. In general, poison pills will be reviewed for the additional
value provided to shareholders, if any.
Anti-Greenmail Proposals
Greenmail is the payment a corporate raider receives in exchange for his/her
shares. This payment is usually at a premium to the market price, so while
greenmail can ensure the continued independence of the company, it discriminates
against other shareholders.
We generally will support anti-greenmail provisions.
Opt-Out of State Anti-takeover Law
A strategy for dealing with anti-takeover issues has been a shareholder
resolution asking a company to opt-out of a particular state anti-takeover laws.
We generally will not object to bylaws changes requiring a company to opt out of
state anti-takeover laws. Resolutions requiring companies to opt into state
anti-takeover statutes generally will be subject to further review for
appropriateness.
Other Situations
In the event an issue is not addressed in the above guidelines, we will
determine on a case-by-case basis any proposals that may arise from management
or shareholders. To the extent that a proposal from management does not infringe
on shareholder rights, we will generally support management position. We may
also elect to abstain or not vote on any given matter.
, 2006
ISS PROXY VOTING GUIDELINES
SUMMARY
The following is a condensed version of all proxy voting recommendations
contained in The ISS Proxy Voting Manual.
1. OPERATIONAL ITEMS
Adjourn Meeting
Generally vote AGAINST proposals to provide management with the authority to
adjourn an annual or special meeting absent compelling reasons to support the
proposal.
Amend Quorum Requirements
Vote AGAINST proposals to reduce quorum requirements for shareholder meetings
below a majority of the shares outstanding unless there are compelling reasons
to support the proposal.
Amend Minor Bylaws
Vote FOR bylaw or charter changes that are of a housekeeping nature (updates or
corrections).
Change Company Name
Vote FOR proposals to change the corporate name.
Change Date, Time, or Location of Annual Meeting
Vote FOR management proposals to change the date/time/location of the annual
meeting unless the proposed change is unreasonable. Vote AGAINST shareholder
proposals to change the date/time/location of the annual meeting unless the
current scheduling or location is unreasonable.
Ratifying Auditors
Vote FOR proposals to ratify auditors, unless any of the following apply:
An auditor has a financial interest in or association with the company, and
is therefore not independent Fees for non-audit services are excessive, or
There is reason to believe that the independent auditor has rendered an opinion
which is neither accurate nor indicative of the company financial
position.
Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or
limit their auditors from engaging in non-audit services.
Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation,
taking into account the tenure of the audit firm, the length of rotation
specified in the proposal, any significant audit-related issues at the
company, and whether the company has a periodic renewal process where the
auditor is evaluated for both audit quality and competitive price.
Transact Other Business
Vote AGAINST proposals to approve other business when it appears as a voting
item.
2. BOARD OF DIRECTORS
Voting on Director Nominees in Uncontested Elections
Votes on director nominees should be made on a CASE-BY-CASE basis, examining the
following factors: composition of the board and key board committees, attendance
at board meetings, corporate governance provisions and takeover activity,
long-term company performance relative to a market index, directors investment
in the company, whether the chairman is also serving as CEO, and whether a
retired CEO sits on the board. However, there are some actions by directors that
should result in votes being WITHHELD. These instances include directors who:
Attend less than 75 percent of the board and committee meetings without a valid
excuse
Implement or renew a dead-hand or modified dead-hand poison pill
Ignore a shareholder proposal that is approved by a majority of the shares
outstanding
Ignore a shareholder proposal that is approved by a majority of the votes cast
for two consecutive years
Failed to act on takeover offers where the majority of the shareholders tendered
their shares Are inside directors or affiliated outsiders and sit on the audit,
compensation, or nominating committees
Are inside directors or affiliated outsiders and the full board serves as the
audit, compensation, or nominating committee or the company does not have one of
these committees
Are audit committee members and the non-audit fees paid to the auditor are
excessive.
Are inside directors or affiliated outside directors and the full board is less
than majority independent Sit on more than six boards
Are members of a compensation committee that has allowed a pay-for-performance
disconnect as described in Section 8 (Executive and Director Compensation).
In addition, directors who enacted egregious corporate governance policies or
failed to replace management as appropriate would be subject to recommendations
to WITHHOLD votes.
Age Limits
Vote AGAINST shareholder or management proposals to limit the tenure of outside
directors either through term limits or mandatory retirement ages.
Board Size
Vote FOR proposals seeking to fix the board size or designate a range for the
board size. Vote AGAINST proposals that give management the ability to alter the
size of the board outside of a specified range without shareholder approval.
Classification/Declassification of the Board
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors
annually.
Cumulative Voting
Vote AGAINST proposals to eliminate cumulative voting.
Vote proposals to restore or permit cumulative voting on a CASE-BY-CASE basis
relative to the company other governance provisions.
Director and Officer Indemnification and Liability Protection
Proposals on director and officer indemnification and liability protection
should be evaluated on a CASE-BY-CASE basis, using Delaware law as the standard.
Vote AGAINST proposals to eliminate entirely directors and officers liability
for monetary damages for violating the duty of care.
Vote AGAINST indemnification proposals that would expand coverage beyond just
legal expenses to actions, such as negligence, that are more serious violations
of fiduciary obligation than mere carelessness.
Vote FOR only those proposals providing such expanded coverage in cases when a
director or officer legal defense was unsuccessful if both of the following
apply:
The director was found to have acted in good faith and in a manner that he
reasonably believed was in the best interests of the company, and
Only if the director legal expenses would be covered.
Establish/Amend Nominee Qualifications
Vote CASE-BY-CASE on proposals that establish or amend director qualifications.
Votes should be based on how reasonable the criteria are and to what degree they
may preclude dissident nominees from joining the board.
Vote AGAINST shareholder proposals requiring two candidates per board seat.
Filling Vacancies/Removal of Directors
Vote AGAINST proposals that provide that directors may be removed only for
cause.
Vote FOR proposals to restore shareholder ability to remove directors
with or without cause.
Vote AGAINST proposals that provide that only continuing
directors may elect replacements to fill board vacancies. Vote FOR proposals
that permit shareholders to elect directors to fill board vacancies.
Independent Chairman (Separate Chairman/CEO)
Generally vote FOR shareholder proposals requiring the position of chairman be
filled by an independent director unless there are compelling reasons to
recommend against the proposal, such as a counterbalancing governance structure.
This should include all of the following:
Designated lead director, elected by and from the independent board members with
clearly delineated and comprehensive duties
Two-thirds independent board
All- independent key committees
Established governance guidelines
Majority of Independent Directors/Establishment of Committees
Vote FOR shareholder proposals asking that a majority or more of directors be
independent unless the board composition already meets the proposed threshold by
ISS definition of independence.
Vote FOR shareholder proposals asking that board audit, compensation, and/or
nominating committees be composed exclusively of independent directors if they
currently do not meet that standard.
Open Access
Vote CASE-BY-CASE on shareholder proposals asking for open access taking into
account the ownership threshold specified in the proposal and the proponent
rationale for targeting the company in terms of board and director conduct.
Stock Ownership Requirements
Generally vote AGAINST shareholder proposals that mandate a minimum amount of
stock that directors must own in order to qualify as a director or to remain on
the board. While ISS favors stock ownership on the part of directors, the
company should determine the appropriate ownership requirement.
Vote CASE-BY-CASE shareholder proposals asking that the company adopt a holding
or retention period for its executives (for holding stock after the vesting or
exercise of equity awards), taking into account any stock ownership requirements
or holding period/retention ratio already in place and the actual ownership
level of executives.
Term Limits
Vote AGAINST shareholder or management proposals to limit the tenure of outside
directors either through term limits or mandatory retirement ages.
3. PROXY CONTESTS
Voting for Director Nominees in Contested Elections
Votes in a contested election of directors must be evaluated on a CASE-BY-CASE
basis, considering the following factors:
Long-term financial performance of the target company relative to its industry
Management track record Background to the proxy contest
Qualifications of director nominees (both slates)
Evaluation of what each side is offering shareholders as well as the likelihood
that the proposed objectives and goals can be met; and stock ownership
positions.
Reimbursing Proxy Solicitation Expenses
Voting to reimburse proxy solicitation expenses should be analyzed on a
CASE-BY-CASE basis. In cases where ISS recommends in favor of the dissidents, we
also recommend voting for reimbursing proxy solicitation expenses.
Confidential Voting
Vote FOR shareholder proposals requesting that corporations adopt confidential
voting, use independent vote tabulators and use independent inspectors of
election, as long as the proposal includes a provision for proxy contests as
follows:
In the case of a contested election, management should be permitted to request
that the dissident group honor its confidential voting policy. If the dissidents
agree, the policy remains in place. If the dissidents will not agree, the
confidential voting policy is waived.
Vote FOR management proposals to adopt confidential voting.
4. ANTI-TAKEOVER DEFENSES AND VOTING RELATED ISSUES
Advance Notice Requirements for Shareholder Proposals/Nominations
Votes on advance notice proposals are determined on a CASE-BY-CASE basis, giving
support to those proposals that allow shareholders to submit proposals as close
to the meeting date as reasonably possible and within the broadest window
possible.
Amend Bylaws without Shareholder Consent
Vote AGAINST proposals giving the board exclusive authority to amend the bylaws.
Vote FOR proposals giving the board the ability to amend the bylaws in addition
to shareholders.
Poison Pills
Vote FOR shareholder proposals requesting that the company submit its poison
pill to a shareholder vote or redeem it.
Vote FOR shareholder proposals asking that any future pill be put to a
shareholder vote.
Shareholder Ability to Act by Written Consent
Vote AGAINST proposals to restrict or prohibit shareholder ability to take
action by written consent.
Vote FOR proposals to allow or make easier shareholder action by written
consent.
Shareholder Ability to Call Special Meetings
Vote AGAINST proposals to restrict or prohibit shareholder ability to call
special meetings.
Vote FOR proposals that remove restrictions on the right of shareholders to act
independently of management.
Supermajority Vote Requirements
Vote AGAINST proposals to require a supermajority shareholder vote.
Vote FOR proposals to lower supermajority vote requirements.
5. MERGERS AND CORPORATE RESTRUCTURINGS
Appraisal Rights
Vote FOR proposals to restore, or provide shareholders with, rights of
appraisal.
Asset Purchases
Vote CASE-BY-CASE on asset purchase proposals, considering the following
factors: Purchase price Fairness opinion Financial and strategic benefits How
the deal was negotiated Conflicts of interest Other alternatives for the
business Noncompletion risk.
Asset Sales
Votes on asset sales should be determined on a CASE-BY-CASE basis, considering
the following factors: Impact on the balance sheet/working capital Potential
elimination of diseconomies Anticipated financial and operating benefits
Anticipated use of funds Value received for the asset Fairness opinion How the
deal was negotiated Conflicts of interest.
Bundled Proposals
Review on a CASE-BY-CASE basis bundled or "conditioned" proxy proposals. In the
case of items that are conditioned upon each other, examine the benefits and
costs of the packaged items. In instances when the joint effect of the
conditioned items is not in shareholders best interests, vote against the
proposals. If the combined effect is positive, support such proposals.
Conversion of Securities
Votes on proposals regarding conversion of securities are determined on a
CASE-BY-CASE basis. When evaluating these proposals the investor should review
the dilution to existing shareholders, the conversion price relative to market
value, financial issues, control issues, termination penalties, and conflicts of
interest.
Vote FOR the conversion if it is expected that the company will be subject to
onerous penalties or will be forced to file for bankruptcy if the transaction is
not approved.
Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy
Plans/Reverse Leveraged Buyouts/Wrap Plans
Votes on proposals to increase common and/or preferred shares and to issue
shares as part of a debt restructuring plan are determined on a CASE-BY-CASE
basis, taking into consideration the following:
Dilution to existing shareholders' position Terms of the offer Financial issues
Management's efforts to pursue other alternatives
Control issues
Conflicts of interest.
Vote FOR the debt restructuring if it is expected that the company will file for
bankruptcy if the transaction is not approved.
Formation of Holding Company
Votes on proposals regarding the formation of a holding company should be
determined on a CASE-BY-CASE basis, taking into consideration the following:
The reasons for the change
Any financial or tax benefits
Regulatory benefits
Increases in capital structure
Changes to the articles of incorporation or bylaws of the company.
Absent compelling financial reasons to recommend the transaction, vote AGAINST
the formation of a holding company if the transaction would include either of
the following:
Increases in common or preferred stock in excess of the allowable maximum as
calculated by the ISS Capital Structure model
Adverse changes in shareholder rights
Going Private Transactions (LBOs and Minority Squeezeouts)
Vote going private transactions on a CASE-BY-CASE basis, taking into account the
following: offer price/premium, fairness opinion, how the deal was negotiated,
conflicts of interest, other alternatives/offers considered, and noncompletion
risk.
Joint Ventures
Vote CASE-BY-CASE on proposals to form joint ventures, taking into account the
following: percentage of assets/business contributed, percentage ownership,
financial and strategic benefits, governance structure, conflicts of interest,
other alternatives, and noncompletion risk.
Liquidations
Votes on liquidations should be made on a CASE-BY-CASE basis after reviewing
management efforts to pursue other alternatives, appraisal value of assets, and
the compensation plan for executives managing the liquidation.
Vote FOR the liquidation if the company will file for bankruptcy if the proposal
is not approved.
Mergers and Acquisitions/ Issuance of Shares to Facilitate Merger or Acquisition
Votes on mergers and acquisitions should be considered on a CASE-BY-CASE basis,
determining whether the transaction enhances shareholder value by giving
consideration to the following:
Prospects of the combined company, anticipated financial and operating benefits
Offer price
Fairness opinion
How the deal was negotiated
Changes in corporate governance
Change in the capital structure
Conflicts of interest.
Private Placements/Warrants/Convertible Debentures
Votes on proposals regarding private placements should be determined on a
CASE-BY-CASE basis. When evaluating these proposals the investor should review:
dilution to existing shareholders' position, terms of the offer, financial
issues, management efforts to pursue other alternatives, control issues, and
conflicts of interest. Vote FOR the private placement if it is expected that the
company will file for bankruptcy if the transaction is not approved.
Spinoffs
Votes on spinoffs should be considered on a CASE-BY-CASE basis depending on:
Tax and regulatory advantages
Planned use of the sale proceeds
Valuation of spinoff
Fairness opinion Benefits to the parent company
Conflicts of interest
Managerial incentives
Corporate governance changes
Changes in the capital structure.
Value Maximization Proposals
Vote CASE-BY-CASE on shareholder proposals seeking to maximize shareholder value
by hiring a financial advisor to explore strategic alternatives, selling the
company or liquidating the company and distributing the proceeds to
shareholders. These proposals should be evaluated based on the following
factors: prolonged poor performance with no turnaround in sight, signs of
entrenched board and management, strategic plan in place for improving value,
likelihood of receiving reasonable value in a sale or dissolution, and whether
company is actively exploring its strategic options, including retaining a
financial advisor.
6. STATE OF INCORPORATION
Control Share Acquisition Provisions
Vote FOR proposals to opt out of control share acquisition statutes unless doing
so would enable the completion of a takeover that would be detrimental to
shareholders. Vote AGAINST proposals to amend the charter to include control
share acquisition provisions. Vote FOR proposals to restore voting rights to the
control shares.
Control Share Cashout Provisions
Vote FOR proposals to opt out of control share cashout statutes.
Disgorgement Provisions
Vote FOR proposals to opt out of state disgorgement provisions.
Fair Price Provisions
Vote proposals to adopt fair price provisions on a CASE-BY-CASE basis,
evaluating factors such as the vote required to approve the proposed
acquisition, the vote required to repeal the fair price provision, and the
mechanism for determining the fair price. Generally, vote AGAINST fair price
provisions with shareholder vote requirements greater than a majority of
disinterested shares.
Freezeout Provisions
Vote FOR proposals to opt out of state freezeout provisions.
Greenmail
Vote FOR proposals to adopt antigreenmail charter of bylaw amendments or
otherwise restrict a company ability to make greenmail payments. Review on a
CASE-BY-CASE basis antigreenmail proposals when they are bundled with other
charter or bylaw amendments.
Reincorporation Proposals
Proposals to change a company's state of incorporation should be evaluated on a
CASE-BY-CASE basis, giving consideration to both financial and corporate
governance concerns, including the reasons for reincorporating, a comparison of
the governance provisions, and a comparison of the jurisdictional laws. Vote FOR
reincorporation when the economic factors outweigh any neutral or negative
governance changes.
Stakeholder Provisions
Vote AGAINST proposals that ask the board to consider nonshareholder
constituencies or other nonfinancial effects when evaluating a merger or
business combination.
State Antitakeover Statutes
Review on a CASE-BY-CASE basis proposals to opt in or out of state takeover
statutes (including control share acquisition statutes, control share cash-out
statutes, freezeout provisions, fair price provisions, stakeholder laws, poison
pill endorsements, severance pay and labor contract provisions, antigreenmail
provisions, and disgorgement provisions).
7. CAPITAL STRUCTURE
Adjustments to Par Value of Common Stock
Vote FOR management proposals to reduce the par value of common stock.
Common Stock Authorization
Votes on proposals to increase the number of shares of common stock authorized
for issuance are determined on a CASE-BY-CASE basis using a model developed by
ISS.
Vote AGAINST proposals at companies with dual-class capital structures to
increase the number of authorized shares of the class of stock that has superior
voting rights.
Vote FOR proposals to approve increases beyond the allowable increase when a
company's shares are in danger of being delisted or if a company's ability to
continue to operate as a going concern is uncertain.
Dual-class Stock
Vote AGAINST proposals to create a new class of common stock with superior
voting rights.
Vote FOR proposals to create a new class of nonvoting or subvoting common stock
if:
It is intended for financing purposes with minimal or no dilution to current
shareholders It is not designed to preserve the voting power of an insider or
significant shareholder
Issue Stock for Use with Rights Plan
Vote AGAINST proposals that increase authorized common stock for the explicit
purpose of implementing a shareholder rights plan (poison pill).
Preemptive Rights
Review on a CASE-BY-CASE basis shareholder proposals that seek preemptive
rights. In evaluating proposals on preemptive rights, consider the size of a
company, the characteristics of its shareholder base, and the liquidity of the
stock.
Preferred Stock
Vote AGAINST proposals authorizing the creation of new classes of preferred
stock with unspecified voting, conversion, dividend distribution, and other
rights ("blank check" preferred stock).
Vote FOR proposals to create "declawed" blank check preferred stock (stock that
cannot be used as a takeover defense).
Vote FOR proposals to authorize preferred stock in cases where the company
specifies the voting, dividend, conversion, and other rights of such stock and
the terms of the preferred stock appear reasonable.
Vote AGAINST proposals to increase the number of blank check preferred stock
authorized for issuance when no shares have been issued or reserved for a
specific purpose.
Vote CASE-BY-CASE on proposals to increase the number of blank check preferred
shares after analyzing the number of preferred shares available for issue given
a company's industry and performance in terms of shareholder returns.
Recapitalization
Votes CASE-BY-CASE on recapitalizations (reclassifications of securities),
taking into account the following: more simplified capital structure, enhanced
liquidity, fairness of conversion terms, impact on
voting power and dividends, reasons for the reclassification, conflicts of
interest, and other alternatives considered.
Reverse Stock Splits
Vote FOR management proposals to implement a reverse stock split when the number
of authorized shares will be proportionately reduced.
Vote FOR management proposals to implement a reverse stock split to avoid
delisting. Votes on proposals to implement a reverse stock split that do not
proportionately reduce the number of shares authorized for issue should be
determined on a CASE-BY-CASE basis using a model developed by ISS.
Share Repurchase Programs
Vote FOR management proposals to institute open-market share repurchase plans in
which all shareholders may participate on equal terms.
Stock Distributions: Splits and Dividends
Vote FOR management proposals to increase the common share authorization for a
stock split or share dividend, provided that the increase in authorized shares
would not result in an excessive number of shares available for issuance as
determined using a model developed by ISS.
Tracking Stock
Votes on the creation of tracking stock are determined on a CASE-BY-CASE basis,
weighing the strategic value of the transaction against such factors as: adverse
governance changes, excessive increases in authorized capital stock, unfair
method of distribution, diminution of voting rights, adverse conversion
features, negative impact on stock option plans, and other alternatives such as
spinoff.
8. EXECUTIVE AND DIRECTOR COMPENSATION
Votes with respect to equity-based compensation plans should be determined on a
CASE-BY-CASE basis. Our methodology for reviewing compensation plans primarily
focuses on the transfer of shareholder wealth (the dollar cost of pay plans to
shareholders instead of simply focusing on voting power dilution). Using the
expanded compensation data disclosed under the SEC rules, ISS will value every
award type. ISS will include in its analyses an estimated dollar cost for the
proposed plan and all continuing plans. This cost, dilution to shareholders
equity, will also be expressed as a percentage figure for the transfer of
shareholder wealth, and will be considered along with dilution to voting power.
Once ISS determines the estimated cost of the plan, we compare it to a
company-specific dilution cap. Our model determines a company-specific allowable
pool of shareholder wealth that may be transferred from the company to plan
participants, adjusted for:
Long-term corporate performance (on an absolute basis and relative to a
standard industry peer group and an appropriate market index),
Cash compensation, and
Categorization of the company as emerging, growth, or mature. These adjustments
are pegged to market capitalization.
Vote AGAINST plans that expressly permit the repricing of underwater stock
options without shareholder approval.
Generally vote AGAINST plans in which the CEO participates if there is a
disconnect between the CEO pay and company performance (an increase in pay and a
decrease in performance) and the main source of the pay increase (over half) is
equity-based. A decrease in performance is based on negative one- and three-
year total shareholder returns. An increase in pay is based on the CEO total
direct compensation (salary, cash bonus, present value of stock options, face
value of restricted stock, face value of long-term incentive plan payouts, and
all other compensation) increasing over the previous year. Also WITHHOLD votes
from the Compensation Committee members.
Director Compensation
Votes on compensation plans for directors are determined on a CASE-BY-CASE
basis, using a proprietary, quantitative model developed by ISS.
Stock Plans in Lieu of Cash
Votes for plans that provide participants with the option of taking all or a
portion of their cash compensation in the form of stock are determined on a
CASE-BY-CASE basis.
Vote FOR plans which provide a dollar-for-dollar cash for stock exchange.
Votes for plans that do not provide a dollar-for-dollar cash for stock exchange
should be determined on a CASE-BY-CASE basis using a proprietary, quantitative
model developed by ISS.
Director Retirement Plans
Vote AGAINST retirement plans for nonemployee directors.
Vote FOR shareholder proposals to eliminate retirement plans for nonemployee
directors.
Management Proposals Seeking Approval to Reprice Options
Votes on management proposals seeking approval to reprice options are evaluated
on a CASE-BY-CASE basis giving consideration to the following:
Historic trading patterns
Rationale for the repricing
Value-for-value exchange
Option vesting Term of the option
Exercise price Participation.
Employee Stock Purchase Plans
Votes on employee stock purchase plans should be determined on a CASE-BY-CASE
basis.
Vote FOR employee stock purchase plans where all of the following apply:
Purchase price is at least 85 percent of fair market value Offering period is
27 months or less, and
The number of shares allocated to the plan is ten percent or less of the
outstanding shares
Vote AGAINST employee stock purchase plans where any of the following apply:
Purchase price is less than 85 percent of fair market value, or
Offering period is greater than 27 months, or
The number of shares allocated to the plan is more than ten percent of the
outstanding shares
Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related Compensation
Proposals)
Vote FOR proposals that simply amend shareholder-approved compensation plans to
include administrative features or place a cap on the annual grants any one
participant may receive to comply with the provisions of Section 162(m).
Vote FOR proposals to add performance goals to existing compensation plans to
comply with the provisions of Section 162(m) unless they are clearly
inappropriate.
Votes to amend existing plans to increase shares reserved and to qualify for
favorable tax treatment under the provisions of Section 162(m) should be
considered on a CASE-BY-CASE basis using a proprietary, quantitative model
developed by ISS.
Generally vote FOR cash or cash and stock bonus plans that are submitted to
shareholders for the purpose of exempting compensation from taxes under the
provisions of Section 162(m) if no increase in shares is requested.
Employee Stock Ownership Plans (ESOPs)
Vote FOR proposals to implement an ESOP or increase authorized shares for
existing ESOPs, unless the number of shares allocated to the ESOP is excessive
(more than five percent of outstanding shares.)
401(k) Employee Benefit Plans
Vote FOR proposals to implement a 401(k) savings plan for employees.
Shareholder Proposals Regarding Executive and Director Pay
Generally, vote FOR shareholder proposals seeking additional disclosure of
executive and director pay information, provided the information requested is
relevant to shareholders' needs, would not put the company at a competitive
disadvantage relative to its industry, and is not unduly burdensome to the
company.
Vote AGAINST shareholder proposals seeking to set absolute levels on
compensation or otherwise dictate the amount or form of compensation.
Vote AGAINST shareholder proposals requiring director fees be paid in stock
only.
Vote FOR shareholder proposals to put option repricings to a shareholder
vote.
Vote on a CASE-BY-CASE basis for all other shareholder proposals regarding
executive and director pay, taking into account company performance, pay level
versus peers, pay level versus industry, and long term corporate outlook.
Option Expensing
Generally vote FOR shareholder proposals asking the company to expense stock
options, unless the company has already publicly committed to expensing options
by a specific date.
Performance-Based Stock Options
Generally vote FOR shareholder proposals advocating the use of performance-based
stock options (indexed, premium-priced, and performance-vested options), unless:
The proposal is overly restrictive (e.g., it mandates that awards to all
employees must be performance-based or all awards to top executives must be a
particular type, such as indexed options)
The company demonstrates that it is using a substantial portion of
performance-based awards for its top executives
Golden Parachutes and Executive Severance Agreements
Vote FOR shareholder proposals to require golden parachutes or executive
severance agreements to be submitted for shareholder ratification, unless the
proposal requires shareholder approval prior to entering into employment
contracts.
Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes.
An acceptable parachute should include the following:
The parachute should be less attractive than an ongoing employment opportunity
with the firm The triggering mechanism should be beyond the control of
management The amount should not exceed three times base salary plus guaranteed
benefits
Pension Plan Income Accounting
Generally vote FOR shareholder proposals to exclude pension plan income in the
calculation of earnings used in determining executive bonuses/compensation.
Supplemental Executive Retirement Plans (SERPs)
Generally vote FOR shareholder proposals requesting to put extraordinary
benefits contained in SERP agreements to a shareholder vote unless the company
executive pension plans do not contain excessive benefits beyond what is offered
under employee-wide plans.
9. SOCIAL AND ENVIRONMENTAL ISSUES
Consumer Issues and Public Safety
Animal Rights
Vote CASE-BY-CASE on proposals to phase out the use of animals in product
testing, taking into account:
The nature of the product and the degree that animal testing is necessary or
federally mandated (such as medical products),
The availability and feasibility of alternatives to animal testing to ensure
product safety, and
The degree that competitors are using animal - free testing.
Generally vote FOR proposals seeking a report on the company animal welfare
standards unless:
The company has already published a set of animal welfare standards and monitors
compliance
The company standards are comparable to or better than those of peer firms, and
There are no serious controversies surrounding the company treatment of animals
Drug Pricing
Vote CASE-BY-CASE on proposals asking the company to implement price restraints
on pharmaceutical products, taking into account:
Whether the proposal focuses on a specific drug and region
Whether the economic benefits of providing subsidized drugs (e.g., public
goodwill) outweigh the costs in terms of reduced profits, lower R&D spending,
and harm to competitiveness
The extent that reduced prices can be offset through the company marketing
budget without affecting R&D spending Whether the company already limits price
increases of its products
Whether the company already contributes life-saving pharmaceuticals to the needy
and Third World countries The extent that peer companies implement price
restraints
Genetically Modified Foods
Vote AGAINST proposals asking companies to voluntarily label genetically
engineered (GE) ingredients in their products or alternatively to provide
interim labeling and eventually eliminate GE ingredients due to the costs and
feasibility of labeling and/or phasing out the use of GE ingredients.
Vote CASE-BY-CASE on proposals asking for a report on the feasibility of
labeling products containing GE ingredients taking into account:
The relevance of the proposal in terms of the company's business and the
proportion of it affected by the resolution
The quality of the company disclosure on GE product labeling and related
voluntary initiatives and how this disclosure compares with peer company
disclosure
Company current disclosure on the feasibility of GE product labeling, including
information on the related costs
Any voluntary labeling initiatives undertaken or considered by the company.
Vote CASE-BY-CASE on proposals asking for the preparation of a report on the
financial, legal, and environmental impact of continued use of GE
ingredients/seeds.
The relevance of the proposal in terms of the company's business and the
proportion of it affected by the resolution
The quality of the company disclosure on risks related to GE product use and
how this disclosure compares with peer company disclosure
The percentage of revenue derived from international operations, particularly
in Europe, where GE products are more regulated and consumer backlash is more
pronounced.
Vote AGAINST proposals seeking a report on the health and environmental effects
of genetically modified organisms (GMOs). Health studies of this sort are better
undertaken by regulators and the scientific community.
Vote AGAINST proposals to completely phase out GE ingredients from the company's
products or proposals asking for reports outlining the steps necessary to
eliminate GE ingredients from the company products. Such resolutions presuppose
that there are proven health risks to GE ingredients (an issue better left to
federal regulators) that outweigh the economic benefits derived from
biotechnology.
Handguns
Generally vote AGAINST requests for reports on a company policies aimed at
curtailing gun violence in the United States unless the report is confined to
product safety information. Criminal misuse of firearms is beyond company
control and instead falls within the purview of law enforcement agencies.
HIV/AIDS
Vote CASE-BY-CASE on requests for reports outlining the impact of the health
pandemic (HIV/AIDS, malaria and tuberculosis) on the company Sub-Saharan
operations and how the company is responding to it, taking into account:
The nature and size of the company operations in Sub-Saharan Africa and the
number of local employees
The company existing healthcare policies, including benefits and healthcare
access for local workers Company donations to healthcare providers operating in
the region
Vote CASE-BY-CASE on proposals asking companies to establish, implement, and
report on a standard of response to the HIV/AIDS, tuberculosis and malaria
health pandemic in Africa and other developing countries, taking into account:
The company actions in developing countries to address HIV/AIDS, tuberculosis
and malaria, including donations of pharmaceuticals and work with public health
organizations
The companys initiatives in this regard compared to those of peer companies
Predatory Lending
Vote CASE-BY CASE on requests for reports on the company procedures for
preventing predatory lending, including the establishment of a board committee
for oversight, taking into account:
Whether the company has adequately disclosed mechanisms in place to prevent
abusive lending practices
Whether the company has adequately disclosed the financial risks of its subprime
business Whether the company has been subject to violations of lending laws or
serious lending controversies
Peer companies policies to prevent abusive lending practices.
Tobacco
Most tobacco-related proposals should be evaluated on a CASE-BY-CASE basis,
taking into account the following factors:
Second-hand smoke:
Whether the company complies with all local ordinances and regulations
The degree that voluntary restrictions beyond those mandated by law might hurt
the company competitiveness
The risk of any health-related liabilities.
Advertising to youth:
Whether the company complies with federal, state, and local laws on the
marketing of tobacco or if it has been fined for violations
Whether the company has gone as far as peers in restricting advertising
Whether the company entered into the Master Settlement Agreement, which
restricts marketing of tobacco to youth
Whether restrictions on marketing to youth extend to foreign countries
Cease production of tobacco-related products or avoid selling products to
tobacco companies:
The percentage of the company business affected The economic loss of eliminating
the business versus any potential tobacco-related liabilities.
Spinoff tobacco-related businesses:
The percentage of the company business affected
The feasibility of a spinoff
Potential future liabilities related to the company tobacco business. Stronger
product warnings:
Vote AGAINST proposals seeking stronger product warnings. Such decisions are
better left to public health authorities. Investment in tobacco stocks:
Vote AGAINST proposals prohibiting investment in tobacco equities. Such
decisions are better left to portfolio managers.
Environment and Energy
Arctic National Wildlife Refuge
Vote CASE-BY-CASE on reports outlining potential environmental damage from
drilling in the Arctic National Wildlife Refuge (ANWR), taking into account:
Whether there are publicly available environmental impact reports
Whether the company has a poor environmental track record, such as violations
of federal and state regulations or accidental spills
The current status of legislation regarding drilling in ANWR.
CERES Principles
Vote CASE-BY-CASE on proposals to adopt the CERES Principles, taking into
account:
The company current environmental disclosure beyond legal requirements,
including environmental health and safety (EHS) audits and reports that may
duplicate CERES
The company environmental performance record, including violations of federal
and state regulations, level of toxic emissions, and accidental spills
Environmentally conscious practices of peer companies, including endorsement of
CERES Costs of membership and implementation.
Environmental-Economic Risk Report
Vote CASE-BY-CASE on proposals requesting reports assessing economic risks of
environmental pollution or climate change, taking into account whether the
company has clearly disclosed the following in its public documents:
Approximate costs of complying with current or proposed environmental laws
Steps company is taking to reduce greenhouse gasses or other environmental
pollutants Measurements of the company emissions levels Reduction targets or
goals for environmental pollutants including greenhouse gasses
Environmental Reports
Generally vote FOR requests for reports disclosing the company environmental
policies unless it already has well-documented environmental management systems
that are available to the public.
Global Warming
Generally vote FOR reports on the level of greenhouse gas emissions from the
company operations and products, unless the report is duplicative of the company
current environmental disclosure and reporting or is not integral to the company
line of business. However, additional reporting may be warranted if:
The company level of disclosure lags that of its competitors, or
The company has a poor environmental track record, such as violations of federal
and state regulations.
Recycling
Vote CASE-BY-CASE on proposals to adopt a comprehensive recycling strategy,
taking into account:
The nature of the company business and the percentage affected
The extent that peer companies are recycling The timetable prescribed by the
proposal
The costs and methods of implementation Whether the company has a poor
environmental track record, such as violations of federal and state regulations.
Renewable Energy
Vote CASE-BY-CASE on proposals to invest in renewable energy sources, taking
into account:
The nature of the company business and the percentage affected
The extent that peer companies are switching from fossil fuels to cleaner
sources
The timetable and specific action prescribed by the proposal The costs of
implementation The company initiatives to address climate change
Generally vote FOR requests for reports on the feasibility of developing
renewable energy sources, unless the report is duplicative of the company
current environmental disclosure and reporting or is not integral to the company
line of business.
Sustainability Report
Generally vote FOR proposals requesting the company to report on its policies
and practices related to social, environmental, and economic sustainability,
unless the company is already reporting on its sustainability initiatives
through existing reports such as:
A combination of an EHS or other environmental report, code of conduct, and/or
supplier/vendor standards, and equal opportunity and diversity data and
programs, all of which are publicly available, or
A report based on Global Reporting Initiative (GRI) or similar guidelines.
Vote FOR shareholder proposals asking companies to provide a sustainability
report applying the GRI guidelines unless:
The company already has a comprehensive sustainability report or equivalent
addressing the essential elements of the GRI guidelines or
The company has publicly committed to using the GRI format by a specific date
General Corporate Issues
Link Executive Compensation to Social Performance
Vote CASE-BY-CASE on proposals to review ways of linking executive compensation
to social factors, such as corporate downsizings, customer or employee
satisfaction, community involvement, human rights, environmental performance,
predatory lending, and executive/employee pay disparities. Such resolutions
should be evaluated in the context of:
The relevance of the issue to be linked to pay
The degree that social performance is already included in the company pay
structure and disclosed
The degree that social performance is used by peer companies in setting pay
Violations or complaints filed against the company relating to the particular
social performance measure Artificial limits sought by the proposal, such as
freezing or capping executive pay Independence of the compensation committee
Current company pay levels.
Charitable/Political Contributions
Generally vote AGAINST proposals asking the company to affirm political
nonpartisanship in the workplace so long as:
The company is in compliance with laws governing corporate political activities,
and
The company has procedures in place to ensure that employee contributions to
company-sponsored political action committees (PACs) are strictly voluntary and
not coercive. Vote AGAINST proposals to report or publish in newspapers the
company political contributions. Federal and state laws restrict the amount of
corporate contributions and include reporting requirements. Vote AGAINST
proposals disallowing the company from making political contributions.
Businesses are affected by legislation at the federal, state, and local level
and barring contributions can put the company at a competitive disadvantage.
Vote AGAINST proposals restricting the company from making charitable
contributions.
Charitable contributions are generally useful for assisting worthwhile causes
and for creating goodwill in the community. In the absence of bad faith,
self-dealing, or gross negligence, management should determine which
contributions are in the best interests of the company.
Vote AGAINST proposals asking for a list of company executives, directors,
consultants, legal counsels, lobbyists, or investment bankers that have prior
government service and whether such service had a bearing on the business of the
company. Such a list would be burdensome to prepare without providing any
meaningful information to shareholders.
Labor Standards and Human Rights
China Principles
Vote AGAINST proposals to implement the China Principles unless:
There are serious controversies surrounding the company's China operations, and
The company does not have a code of conduct with standards similar to those
promulgated by the International Labor Organization (ILO).
Country-specific human rights reports
Vote CASE-BY-CASE on requests for reports detailing the company operations in a
particular country and steps to protect human rights, based on:
The nature and amount of company business in that country
The company workplace code of conduct
Proprietary and confidential information involved
Company compliance with U.S. regulations on investing in the country Level of
peer company involvement in the country.
International Codes of Conduct/Vendor Standards
Vote CASE-BY-CASE on proposals to implement certain human rights standards at
company facilities or those of its suppliers and to commit to outside,
independent monitoring. In evaluating these proposals, the following should be
considered:
The company current workplace code of conduct or adherence to other global
standards and the degree they meet the standards promulgated by the proponent
Agreements with foreign suppliers to meet certain workplace standards
Whether company and vendor facilities are monitored and how
Company participation in fair labor organizations
Type of business Proportion of business conducted overseas
Countries of operation with known human rights abuses
Whether the company has been recently involved in significant labor and human
rights controversies or violations Peer company standards and practices Union
presence in company international factories
Generally vote FOR reports outlining vendor standards compliance unless any of
the following apply:
The company does not operate in countries with significant human rights
violations The company has no recent human rights controversies or violations,
or The company already publicly discloses information on its vendor
standards compliance.
MacBride Principles
Vote CASE-BY-CASE on proposals to endorse or increase activity on the MacBride
Principles, taking into account:
Company compliance with or violations of the Fair Employment Act of 1989
Company anti-discrimination policies that already exceed the legal requirements
The cost and feasibility of adopting all nine principles The cost of duplicating
efforts to follow two sets of standards
(Fair Employment and the MacBride Principles)
The potential for charges of reverse discrimination
The potential that any company sales or contracts in the rest of the United
Kingdom could be negatively impacted The level of the company investment in
Northern Ireland The number of company employees in Northern Ireland
The degree that industry peers have adopted the MacBride Principles
Applicable state and municipal laws that limit contracts with companies that
have not adopted the MacBride
Principles.
Military Business
Foreign Military Sales/Offsets
Vote AGAINST reports on foreign military sales or offsets. Such disclosures may
involve sensitive and confidential information. Moreover, companies must comply
with government controls and reporting on foreign military sales.
Landmines and Cluster Bombs
Vote CASE-BY-CASE on proposals asking a company to renounce future involvement
in antipersonnel landmine production, taking into account:
Whether the company has in the past manufactured landmine components
Whether the company peers have renounced future production
Vote CASE-BY-CASE on proposals asking a company to renounce future involvement
in cluster bomb production, taking into account:
What weapons classifications the proponent views as cluster bombs
Whether the company currently or in the past has manufactured cluster bombs or
their components
The percentage of revenue derived from cluster bomb manufacturing
Whether the company peers have renounced future production
Nuclear Weapons
Vote AGAINST proposals asking a company to cease production of nuclear weapons
components and delivery systems, including disengaging from current and proposed
contracts. Components and delivery systems serve multiple military and non-
military uses, and withdrawal from these contracts could have a negative impact
on the company business.
Operations in Nations Sponsoring Terrorism (Iran)
Vote CASE-BY-CASE on requests for a board committee review and report outlining
the company financial and reputational risks from its operations in Iran, taking
into account current disclosure on:
The nature and purpose of the Iranian operations and the amount of business
involved (direct and indirect revenues and expenses) that could be affected by
political disruption
Compliance with U.S. sanctions and laws
Spaced-Based Weaponization
Generally vote FOR reports on a company involvement in spaced-based
weaponization unless:
The information is already publicly available or
The disclosures sought could compromise proprietary information.
Workplace Diversity
Board Diversity
Generally vote FOR reports on the company efforts to diversify the board,
unless:
The board composition is reasonably inclusive in relation to companies of
similar size and business or
The board already reports on its nominating procedures and diversity
initiatives.
Vote CASE-BY-CASE on proposals asking the company to increase the representation
of women and minorities on the board, taking into account:
The degree of board diversity
Comparison with peer companies
Established process for improving board diversity Existence of independent
nominating committee
Use of outside search firm History of EEO violations.
Equal Employment Opportunity (EEO)
Generally vote FOR reports outlining the company affirmative action initiatives
unless all of the following apply:
The company has well-documented equal opportunity programs
The company already publicly reports on its company-wide affirmative
initiatives and provides data on its workforce diversity, and
The company has no recent EEO-related violations or litigation.
Vote AGAINST proposals seeking information on the diversity efforts of suppliers
and service providers, which can pose a significant cost and administration
burden on the company.
Glass Ceiling
Generally vote FOR reports outlining the company progress towards the
Glass Ceiling Commission business recommendations, unless:
The composition of senior management and the board is fairly inclusive
The company has well-documented programs addressing diversity initiatives and
leadership development The company already issues public reports on its
company-wide affirmative initiatives and provides data on its
workforce diversity, and
The company has had no recent, significant EEO-related violations or litigation
Sexual Orientation
Vote FOR proposals seeking to amend a company EEO statement in order to prohibit
discrimination based on sexual orientation, unless the change would result in
excessive costs for the company.
Vote AGAINST proposals to extend company benefits to or eliminate benefits from
domestic partners. Benefits decisions should be left to the discretion of the
company.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Thomas B. Winmill is the portfolio manager of the registrant receives
compensation for her services. As of December 31, 2005, portfolio manager
compensation generally consists of base salary, benefit retirement plan, and
limited bonus.
The portfolio manager's base salary is determined annually by level of
responsibility and tenure at the Investment Manager or its affiliates. The
portfolio manager is paid a limited annual bonus based on one to four weeks'
salary.
The portfolio manager's compensation plan may give rise to potential
conflicts of interest. The portfolio manager's base pay tends to increase with
additional and more complex responsibilities that include increased assets under
management and a portion of the bonus relates to marketing efforts, which
together indirectly link compensation to sales. The management of multiple funds
and accounts (including proprietary accounts) may give rise to potential
conflicts of interest if the funds and accounts have different objectives,
benchmarks, time horizons, and fees as the portfolio manager must allocate her
time and investment ideas across multiple funds and accounts. The portfolio
manager may execute transactions for another fund or account that may adversely
impact the value of securities held by the registrant. Securities selected for
funds or accounts other than the registrant may outperform the securities
selected for the registrant. The management of personal accounts may give rise
to potential conflicts of interest; there is no assurance that the registrant's
code of ethics will adequately address such conflicts.
The following table provides information relating to other (non-registrant)
accounts where thie portfolio manager is primarily responsible for day-to-day
management as of December 31, 2005. The portfolio manager does not manage such
accounts or assets with performance-based advisory fees, or other pooled
investment vehicles.
Portfolio Managers Other (non-Funds) Registered Investment Other Accounts
Accounts Managed Companies
------------------ ----------------- --------------------- --------------
Thomas B. Winmill Number: 1 1
Assets (millions) $75 $10
As of December 31, 2005, the dollar range of registrant shares beneficially
owned by Thomas B. Winmill is $1 - $10,000.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a- 3(c) under the Investment Company Act
of 1940, as amended (the "1940 Act")) are effective as of a date within 90
days of the filing date of this report that includes the disclosure
required by this paragraph, based on their evaluation of the disclosure
controls and procedures required by Rule 30a-3(b) under the 1940 Act and
15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred
during the registrant's last fiscal half-year (the registrant's second
fiscal half-year in the case of an annual report) that have materially
affected, or are likely to materially affect the registrant's internal
control over financial reporting.
Item 12. Exhibits.
a) Code of Ethics for Principal Executive and Senior Financial Officers
attached hereto as Exhibit 99.CODE ETH.
(b) Certifications pursuant to Rule 30a-2(a) under the Investment Company
Act of 1940(17 CFR 270.360a-2) attached hereto as Exhibits EX-31 and EX-32.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Foxby Corp.
By: /s/ Thomas B. Winmill
---------------------------------------------
Thomas B. Winmill, President
Date: March 9, 2006
By: /s/ Thomas O'Malley
---------------------------------------------
Thomas O'Malley, Chief Financial Officer
Date: March 9, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Thomas B. Winmill
---------------------------------------------
Thomas B. Winmill, President
Date: March 9, 2006
By: /s/ Thomas O'Malley
---------------------------------------------
Thomas O'Malley, Chief Financial Officer
Date: March 9, 2006