ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, UNION STATION, SUITE 201
KANSAS CITY, MISSOURI 64108
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2005
To our shareholders:
The 2005 annual meeting of shareholders of Entertainment Properties Trust will
be held at the Leawood Town Centre Theatre, Leawood, Kansas, on May 11, 2005 at
10:00 a.m. (local time). At the meeting, our shareholders will vote upon
Item 1: The election of two Class II trustees for a three year term
Item 2: The ratification of the appointment of KPMG LLP as our independent
auditors for 2005
and transact any other business that may properly come before the meeting.
All holders of record of our common shares at the close of business on March 7,
2005 are entitled to vote at the meeting or any postponement or adjournment of
the meeting.
You are cordially invited to attend the meeting. Whether or not you intend to be
present at the meeting, our Board of Trustees asks that you sign, date and
return the enclosed proxy card promptly. A prepaid return envelope is provided
for your convenience. Your vote is important and all shareholders are encouraged
to attend in person or vote by proxy.
Thank you for your support and continued interest in our Company.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ Gregory K. Silvers
----------------------------------------------------
Gregory K. Silvers
VICE PRESIDENT, SECRETARY, GENERAL COUNSEL AND CHIEF
DEVELOPMENT OFFICER
Kansas City, Missouri
April 8, 2005
ENTERTAINMENT PROPERTIES TRUST
30 W. PERSHING ROAD, UNION STATION, SUITE 201
KANSAS CITY, MISSOURI 64108
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PROXY STATEMENT
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This proxy statement provides information about the annual meeting of
shareholders of Entertainment Properties Trust to be held at the Leawood Town
Centre Theatre, Leawood, Kansas, on May 11, 2005, beginning at 10:00 a.m., and
at any postponement or adjournment of the meeting.
This proxy statement and the enclosed proxy card were first mailed to
shareholders on or about April 11, 2005.
ABOUT THE MEETING
WHAT AM I VOTING ON?
The Board of Trustees is soliciting your vote for:
o The election of two Class II trustees for a three year term
o The ratification of the appointment of KPMG LLP as our independent
auditors for 2005
Our management will report on the performance of the Company during 2004
and respond to questions from shareholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Holders of record of our common shares at the close of business on March 7,
2005, are entitled to receive notice of the annual meeting and to vote their
common shares held on that date at the meeting.
HOW MANY VOTES DO I HAVE?
Each common share has one vote. The enclosed proxy card shows the number of
common shares you are entitled to vote.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of our common shares outstanding on the record date will constitute a
quorum, permitting the meeting to proceed. On the record date, 25,048,665 common
shares of the Company were outstanding. Proxies received but marked as
abstentions and broker non-votes will be included in the calculation of the
number of common shares present at the meeting for the purpose of establishing a
quorum.
HOW DO I VOTE?
If you complete and properly sign the enclosed proxy card and return it to
us before the meeting, your common shares will be voted as you direct. If you
are a shareholder of record and attend the meeting in person, you may deliver
your completed proxy card at the meeting. You are also invited to vote in person
at the meeting. You may request a ballot when you arrive.
If your shares are held in the name of a bank, broker or other nominee and
you wish to vote at the meeting, you must obtain a proxy form from the
institution that holds your shares.
If you are a participant in our dividend reinvestment and direct share
purchase plan, your plan shares will be voted as you instruct on your proxy
card.
DOES EPR HAVE A POLICY FOR CONFIDENTIAL VOTING?
We have a confidential voting policy. Your proxy will be kept confidential
and will not be disclosed to third parties, other than our inspector of election
and personnel involved in processing the proxy cards and tabulating the vote.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the meeting by sending a written notice of revocation or a duly
executed proxy with a later date to the Secretary of the Company. Your proxy
will also be revoked if you attend the meeting and vote in person. If you merely
attend the meeting but do not vote in person, your previously granted proxy will
not be revoked.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons named as
proxy holders on the proxy card will vote your common shares in accordance with
the recommendations of the Board of Trustees. The Board recommends you vote:
o FOR the election of the persons nominated as Class II trustees
o FOR the ratification of the appointment of KPMG LLP as our independent
auditors for 2005
If any other matter properly comes before the meeting, the proxy holders
will vote as recommended by the Board of Trustees or, if no recommendation is
given, in their own discretion.
HOW MANY VOTES ARE NEEDED TO APPROVE EACH ITEM?
ELECTION OF TRUSTEES. The affirmative vote of a plurality of the common
shares voted at the meeting is required for the election of the Class II
trustees. This means the two nominees in Class II receiving the greatest number
of votes will be elected. We will not count abstentions or broker non-votes in
the election of trustees. If you check "WITHHOLD AUTHORITY" under the nominees'
names on your proxy card, your shares will be voted against both nominees. You
may also vote against a nominee by striking through his name on your proxy card.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS. The affirmative vote
of a majority of the common shares voted at the meeting is required to ratify
the appointment of our independent auditors. We will not count broker non-votes
or abstentions in the ratification of our independent auditors.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
Some of your shares may be held in more than one account. Please date, sign
and return all of your proxy cards to ensure all your common shares are voted.
WHAT IF I RECEIVE ONLY ONE SET OF PROXY MATERIALS ALTHOUGH THERE ARE MULTIPLE
SHAREHOLDERS AT MY ADDRESS?
If you and other residents at your mailing address own common shares in
street name, your broker, bank or other nominee may have sent you a notice that
your household will receive only one annual report and proxy statement for each
company in which you hold shares through that broker, bank or nominee. This
practice is called "householding." If you did not respond that you did not want
to participate in householding, you are deemed to have consented to that
process. If these procedures apply to you, your nominee will have sent one copy
of our annual report and proxy statement to your address. You may revoke your
consent to householding at any time by contacting us at 30 W. Pershing Road,
Union Station, Suite 201, Kansas City, Missouri 64108, (816) 472-1700,
Attention: Secretary. If you did not receive an individual copy of our annual
report and proxy statement, we will send copies to you if you contact us at the
above address or telephone number.
ITEM I
ELECTION OF TRUSTEES
The Board of Trustees consists of five members and is divided into three
classes having three-year terms that expire in successive years. The
nominating/company governance committee of the Board of Trustees has nominated
Robert J. Druten and David M. Brain to serve as our Class II trustees for a term
expiring at the 2008 annual meeting or until their successors are duly elected
and qualified. Messrs. Druten and Brain have been nominated upon the
recommendation of our independent trustees. Unless you withhold authority to
vote for both nominees or you mark through one or both of the nominees' names on
your proxy card, the common shares represented by your properly executed proxy
will be voted for the election of both nominees for trustee.
Here is a brief description of the backgrounds and principal occupations of
the persons nominated for election as trustee and each trustee whose term of
office will continue after the annual meeting.
CLASS II TRUSTEES (NOMINATED FOR A TERM EXPIRING AT THE 2008 ANNUAL MEETING)
ROBERT J. DRUTEN Robert J. Druten, 57, is Chairman of our Board of Trustees.
TRUSTEE SINCE 1997 Mr. Druten is Executive Vice President and Chief Financial
Officer and a Corporate Officer of Hallmark Cards
Incorporated. Mr. Druten serves on the Boards of Directors
of Hallmark Cards Holdings, Ltd., Hallmark Entertainment,
Inc., Crown Media Holdings, Inc., a NASDAQ-listed company
that owns and operates cable television channels dedicated
to entertainment programming, and Kansas City Southern, a
leading NYSE-listed transportation company. Mr. Druten is
also Chairman of the audit committee of Kansas City
Southern. Mr. Druten received a BS in Accounting from The
University of Kansas and an MBA from Rockhurst University.
DAVID M. BRAIN David M. Brain, 49, has served as our President and Chief
TRUSTEE SINCE 1999 Executive Officer and as a trustee since October 1999. He
served as our Chief Financial Officer from 1997 to 1999 and
as our Chief Operating Officer from 1998 to 1999. Mr. Brain
acted as a consultant to AMC Entertainment, Inc. in the
formation of the Company in 1997. From 1996 until that time
he was a Senior Vice President in the investment banking and
corporate finance department of George K. Baum & Company, an
investment banking firm headquartered in Kansas City,
Missouri. Before joining George K. Baum & Company, Mr. Brain
was Managing Director of the Corporate Finance Group of KPMG
LLP, a practice unit he organized and managed for over 12
years. He received a BA in Economics from Tulane University,
where he was awarded an academic fellowship.
CLASS III TRUSTEES (SERVING FOR A TERM EXPIRING AT THE 2006 ANNUAL MEETING)
MORGAN G. Morgan G. ("Jerry") Earnest II, 49, is an Executive Vice
EARNEST II President of GMAC Commercial Mortgage Corporation where he
TRUSTEE SINCE 2003 serves as head of the Specialty Lending Group, which
consists of the Healthcare Financing Group, the Hospitality
Industry Division and the Golf Finance Group. He also
directly manages GMAC's Hospitality Industry Division and
Golf Finance Group. Mr. Earnest joined GMAC Commercial
Mortgage Corporation in March 1996. From 1992 through 1996,
Mr. Earnest was a principal of Lexington Mortgage Company, a
commercial mortgage banking firm active in the
securitization of commercial real estate mortgage loans
until its acquisition by GMAC Commercial Mortgage
Corporation in March 1996. From 1984 through 1991, Mr.
Earnest was a principal with Concord Properties and The
Earnest Corporation, which were involved in land development
and homebuilding. From 1980 through 1984, Mr. Earnest was an
Assistant Vice President in the Real Estate Department of
Continental Illinois National Bank and Trust Company. Mr.
Earnest is a member of the Industry Real Estate Financing
Advisory Council (IREFAC) of the American Hotel & Lodging
Association and a member of the Urban Land Institute. He is
an active speaker at lodging industry conferences and is
frequently quoted in industry publications. Mr. Earnest has
an MBA from the Colgate Darden Graduate School of Business
Administration of The University of Virginia and is a
graduate of Tulane University.
JAMES A. OLSON James A. Olson, 62, is a principal and the Chief Financial
TRUSTEE SINCE 2003 Officer of Plaza Belmont Management Group, LLC, manager of
the private equity fund Plaza Belmont LLC, which acquires
and operates companies in the food manufacturing industry.
Prior to joining Plaza Belmont in 1999, Mr. Olson was a
partner with Ernst & Young LLP. During his 32 years with
Ernst & Young, including six years in Europe, Mr. Olson
served as managing director of two of their offices and
worked with a number of multinational and domestic clients
in a variety of industries. In addition to providing his
client companies with the traditional audit services of
Ernst & Young, Mr. Olson advised them on their securities
offerings, mergers and acquisitions and corporate tax
strategies. He is a past president of the Missouri State
Board of Accountancy and a member of the American Institute
of Certified Public Accountants. Mr. Olson received his BS
and MS degrees from St. Louis University. Mr. Olson serves
on the Board of Directors and is Chairman of the audit
committee of SCS Transportation, Inc., a NASDAQ-listed
transportation company.
CLASS I TRUSTEE (SERVING FOR A TERM EXPIRING AT THE 2007 ANNUAL MEETING)
BARRETT BRADY Barrett Brady, 58, is Senior Vice President of Highwoods
TRUSTEE SINCE 2004 Properties, Inc., a NYSE-listed REIT. Mr. Brady served as
President and Chief Executive Officer of J.C. Nichols
Company, a real estate company headquartered in Kansas City,
Missouri, until its acquisition by Highwoods in 1998. Before
joining J.C. Nichols Company in 1995, Mr. Brady was
President and CEO of Dunn Industries, Inc., a major
construction contractor. Mr. Brady received a BSBA from
Southern Methodist University and an MBA from The University
of Missouri. Mr. Brady serves on the Boards of Directors of
Midwest Research Institute, North American Savings Bank and
Dunn Industries, Inc., and the Board of Trustees of The
University of Missouri at Kansas City.
Messrs. Druten and Brain have consented to serve on the Board of Trustees for
their respective terms. If Mr. Druten or Mr. Brain should become unavailable to
serve as a trustee (which is not expected), the nominating/company governance
committee may designate a substitute nominee. In that case, the persons named as
proxies will vote for the substitute nominee designated by the
nominating/company governance committee.
HOW ARE TRUSTEES COMPENSATED?
Each non-employee trustee receives:
o An annual retainer of $30,000, which must be taken in common shares,
valued at the latest closing price
o $1,500 in cash for each Board meeting they attend
o $1,000 in cash for each committee meeting they attend
o Reimbursement for any out-of-town travel expenses incurred in
attending Board or committee meetings and other expenses incurred on
behalf of the Company
The Chairman of the Board and the Chairmen of the audit, compensation and
nominating/company governance committees receive additional annual retainers of
$10,000, $10,000, $7,500 and $5,000, respectively, which may be taken in cash or
in common shares valued at 125% of the cash retainer amount.
Employees of the Company or its affiliates who are trustees are not paid
any additional compensation for their service on the Board.
Robert J. Druten received options to purchase 10,000 common shares on the
effective date of our initial public offering in 1997. Options to purchase 3,333
common shares were granted to each non-employee trustee on the date of each
annual meeting from 1998 to 2003, with an exercise price per share equal to the
closing price of our common shares on the annual meeting date. Commencing in
2004, the number of options granted annually to each non-employee trustee was
increased to 5,000. These options vest after one year and expire after ten years
unless terminated earlier because of a trustee's termination from the Board. All
of these options were issued under our 1997 Share Incentive Plan.
COMPANY GOVERNANCE
Our Board of Trustees is committed to effective company governance. We
adopted Company Governance Guidelines, Independence Standards for Trustees and a
Code of Business Conduct and Ethics in 2003 in response to the passage of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and the related rule
proposals of the Securities and Exchange Commission ("SEC") and the New York
Stock Exchange ("NYSE"). Following the adoption of revised governance rules by
the NYSE and the implementation of the SEC's rules on internal control over
financial reporting, we reexamined and made changes to our Company Governance
Guidelines, Independence Standards for Trustees and Code of Business Conduct and
Ethics and the charters of our audit, nominating/company governance and
compensation committees. These documents may be found at the Company Governance
section of our website at www.eprkc.com and are available in print to any
shareholder who requests them. The
amended and restated committee charters are also attached as Appendix A, B and C
to this proxy statement.
We are providing this summary in order to keep you apprised of our continued
efforts to improve our governance procedures and to further align the interests
of our trustees and management with our shareholders.
COMPANY GOVERNANCE GUIDELINES
Our Company Governance Guidelines address a number of topics, including the
role and responsibilities of our Board, the qualifications of independent
trustees, the ability of shareholders to communicate directly with the
independent trustees, Board committees, separation of the offices of Chairman
and CEO, trustee compensation and management succession. Our nominating/company
governance committee will continue to review our Company Governance Guidelines
on a periodic basis to ensure their effectiveness.
WHO ARE OUR INDEPENDENT TRUSTEES AND HOW WAS THAT DETERMINED?
Our Company Governance Guidelines and the governance rules of the NYSE
require that a majority of our trustees be independent. To qualify as
independent, our Board must affirmatively determine that a trustee has no
material relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship with the
Company). To assist our Board in making this determination, the Board has used
our Independence Standards for Trustees as categorical standards to evaluate the
independence of our independent trustees. Using those standards, the Board
reviewed the independence of Mr. Druten and the trustees whose term of office
will continue after the annual meeting. Based upon that review, the Board has
affirmatively determined that Messrs. Druten, Earnest, Olson and Brady, who
constitute a majority of our Board of Trustees, have no material relationship
with the Company and are thus independent in accordance with NYSE rules.
The following is a summary of our Independence Standards for Trustees. For
a complete description of those standards, please review our Independence
Standards for Trustees at the Company Governance section of our website at
www.eprkc.com.
o A trustee is not independent if:
(i) The trustee is, or has been within the last 3 years, an employee of
EPR, or an immediate family member of the trustee is, or has been
within the last 3 years, an executive officer of EPR.
(ii) The trustee has received, or has an immediate family member who has
received, during any 12 month period within the last 3 years, more
than $100,000 in direct compensation from EPR, other than trustee and
committee fees and pensions or other forms of deferred compensation
(provided such compensation is not contingent on future service).
(iii)(A) The trustee or an immediate family member is a current partner of
the firm that is EPR's internal or external auditor, (B) the trustee
is a current employee of the firm, (C) the trustee has an immediate
family member who is a current employee of the firm and who
participates in the firm's audit, assurance or tax compliance (but not
tax planning) practice, or (D) the trustee or an immediate family
member was within the last 3 years (but is no longer) a partner or
employee of the firm and personally worked on EPR's audit within that
time.
(iv) The trustee or an immediate family member is, or has been within the
last 3 years, employed as an executive officer of another company
where any of EPR's present executive officers at the same time serves
on that company's compensation committee.
(v) The trustee is a current employee, or an immediate family member is a
current executive officer, of a company that has made payments to, or
received payments from, EPR for property or services in an amount
which, in any of the last 3 years, exceeds the greater of $1 million
or 2% of such other company's consolidated gross revenues.
o A person who is an executive officer or affiliate of an entity that
provides non-advisory financial services such as lending, check
clearing, maintaining customer accounts, stock brokerage services or
custodial and cash management services to EPR or its affiliates may be
determined by the Board to be independent if the following conditions
are satisfied:
* the entity does not provide any advisory services to EPR
* the annual interest and/or fees payable to the entity by EPR do
not exceed the numerical limitation described above
* any loan provided by the entity is made in the ordinary course of
business of EPR and the lender and does not represent EPR's
principal source of credit or liquidity
* the trustee has no involvement in presenting, negotiating,
underwriting, documenting or closing any such non-advisory
financial services and is not compensated by EPR, the entity or
any of its affiliates in connection with those services
* the Board affirmatively determines that the terms of the
non-advisory financial services are fair and reasonable and
advantageous to the Company and no more favorable to the provider
than generally available from other providers
* the provider is a recognized financial institution, non-bank
commercial lender or securities broker
* the trustee abstains from voting as a trustee to approve the
transaction
* all material facts related to the transaction and the
relationship of the person to the provider are disclosed by EPR
in its Exchange Act reports and proxy statement
o No person who serves, or whose immediate family member serves, as a
partner, member, executive officer or comparable position of any firm
providing accounting, consulting, legal, investment banking or
financial advisory services to EPR, or as a securities analyst
covering EPR, shall be considered independent until after the end of
that relationship.
o No person who is, or who has an immediate family member who is, an
officer, director, more than 5% shareholder, partner, member,
attorney, consultant or affiliate of any tenant of the Company or any
affiliate of such tenant shall be considered independent until three
years after the end of the tenancy or such relationship.
As we have previously reported, Morgan G. Earnest II is an Executive Vice
President of GMAC Commercial Mortgage Corporation, whose Canadian affiliate has
provided US $97 million in mortgage
financing secured by our Canadian properties. The annual interest and loan fees
paid by us on the Canadian loan do not exceed the numerical limitations in our
Independence Standards for Trustees. Mr. Earnest has received no direct or
indirect compensation from any party in connection with the loan. The loan was
approved by our independent trustees other than Mr. Earnest. The independent
trustees other than Mr. Earnest have determined that the loan does not
constitute a material relationship between Mr. Earnest and the Company and that
Mr. Earnest is thus independent and qualified to serve as an independent trustee
and a member of the audit, nominating/company governance and compensation
committees.
HOW OFTEN DID THE BOARD MEET DURING 2004?
The Board of Trustees met five times in 2004. No trustee attended less than
90% of the meetings of the Board and committees on which he served. Our trustees
discharge their responsibilities throughout the year, not only at Board of
Trustee and committee meetings, but also through personal meetings, actions by
unanimous written consent and communications with members of management and
others regarding matters of interest and concern to the Company.
DO THE INDEPENDENT TRUSTEES HOLD REGULAR EXECUTIVE SESSIONS?
The independent trustees meet regularly in separate executive sessions
without management. Mr. Druten serves as the presiding trustee at those
meetings.
HOW CAN SHAREHOLDERS COMMUNICATE DIRECTLY WITH THE BOARD?
Any shareholder is welcome to send a written communication to the
non-management trustees about any matter of interest related to the Company. You
may communicate with the non-management trustees by either sending a letter to
our address listed on the cover page of this proxy statement, or by visiting the
Company Governance section of our website at www.eprkc.com, clicking on
"Procedures for Confidential Anonymous Submissions," and following the
instructions for making a confidential submission. Your communication will be
forwarded directly to the non-management trustees and will not be screened by
management. Shareholders may also make proposals and nominate candidates for
trustee for consideration at any annual meeting in accordance with the
procedures described in "Submission of Shareholder Proposals and Nominations"
below.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Trustees has established an audit committee, a
nominating/company governance committee and a compensation committee. All of our
non-management trustees serve on all three committees. The Board believes this
promotes access to a variety of views on all three committees and helps ensure
that all of the committees have a broad perspective on the Company's operations
as a whole. The Board has affirmatively determined that all of the committee
members are independent, as described above in "Who are our independent trustees
and how was that determined?" The members of our audit committee also meet the
additional independence standards prescribed by SEC Rule 10A-3. Each committee
has adopted a written charter governing its duties and responsibilities. The
charter of each committee was amended and restated in 2005. Copies of the
amended and restated charters are attached to this proxy statement as Appendix
A, B and C, respectively.
AUDIT COMMITTEE. The audit committee oversees the accounting, auditing and
financial reporting policies and practices of the Company. The committee is
directly responsible for assisting the Board of Trustees in its oversight of the
integrity of our financial statements, our compliance with legal and regulatory
requirements, the qualifications and independence of our independent auditors,
and the
performance of our internal audit function and the independent auditors. The
Board of Trustees has determined that all of the members of the audit committee
are "audit committee financial experts" as defined by SEC rules, by virtue of
their experience and positions held as described in their biographies listed
above. Mr. Olson serves as Chairman of the audit committee. The committee met
four times in 2004.
NOMINATING/COMPANY GOVERNANCE COMMITTEE. The nominating/company governance
committee evaluates and nominates candidates for election to the Board of
Trustees and assists the Board in ensuring the effectiveness of our governance
policies and practices. Candidates for nomination to the Board are evaluated and
recommended on the basis of the value they would add to the Board in light of
their integrity, experience, training and judgment, their financial literacy and
sophistication and knowledge of corporate and real estate finance, their
knowledge of the real estate and/or entertainment industry, their independence
from Company management and other factors. The committee will consider
nominations made by shareholders in compliance with the procedures described in
"Submission of Shareholder Proposals and Nominations" below. The committee will
use the same criteria to evaluate nominees recommended in good faith by
shareholders as it uses to evaluate its own nominees, but may give greater
weight to nominees recommended by holders of more than 5% of our outstanding
common shares. Mr. Druten serves as Chairman of the nominating/company
governance committee. The committee met two times in 2004.
COMPENSATION COMMITTEE. The compensation committee approves company goals
and objectives relevant to the compensation of our CEO, evaluates our CEO's
performance in light of those goals and objectives, determines and approves our
CEO's compensation, and makes recommendations to the Board regarding the
compensation of our other executive officers and our independent trustees, as
well as incentive compensation and equity-based plans that are subject to Board
approval. Mr. Earnest serves as Chairman of the compensation committee. The
committee met one time in 2004.
WHAT IS OUR POLICY REGARDING TRUSTEE ATTENDANCE AT ANNUAL MEETINGS?
Our trustees are expected to attend each annual meeting of shareholders,
although conflict situations can arise from time to time. All of our trustees
attended the 2004 annual meeting.
EXECUTIVE OFFICERS
Here are our executive officers and some brief information about their
backgrounds.
DAVID M. BRAIN, 49, is our President and Chief Executive Officer. His
background is described on page 4.
FRED L. KENNON, 49, has served as our Chief Financial Officer since 1999
and as Vice President and Treasurer since 1998. From 1984 to 1998 he was with
Payless Cashways, Inc., most recently serving as Vice President - Treasurer. Mr.
Kennon graduated from Pittsburg State University in 1978 and holds an MBA from
The University of Missouri at Kansas City.
GREGORY K. SILVERS, 41, has served as our Vice President, Secretary and
General Counsel since 1998 and as Chief Development Officer since 2001. From
1994 to 1998, he practiced with the law firm of Stinson, Morrison Hecker, L.L.P.
specializing in real estate law. Mr. Silvers received his JD in 1994 from The
University of Kansas.
MARK A. PETERSON, 41, was appointed our Vice President-Accounting and
Administration in June 2004. From 1998 to 2004, Mr. Peterson was with American
Italian Pasta Company, a publicly traded company and the largest pasta
manufacturer in North America, most recently serving as Vice
President-Accounting and Finance. Mr. Peterson was Chief Financial Officer of JC
Nichols Company, a real estate company headquartered in Kansas City, Missouri,
from 1995 until its acquisition by Highwoods Properties, Inc. in 1998. Prior to
joining JC Nichols Company, Mr. Peterson was an audit senior with Arthur
Andersen & Co. and a senior audit manager with Donnelly Meiners Jordan Kline, a
Kansas City-based accounting firm subsequently acquired by McGladrey Pullen LLP.
Mr. Peterson received a BS in Accounting, with highest honors, from the
University of Illinois in 1986.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table contains information on the compensation earned by our
CEO and each of our other most highly compensated executive officers whose
compensation exceeded $100,000 in 2004.
------------------------------ ---------- ------------------------------ --------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------ --------------------------------------------
AWARDS
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
RESTRICTED SECURITIES UNDERLYING
SALARY BONUS SHARE OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) AWARDS(2) (3) (#)
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
DAVID M. BRAIN President 2004 $385,688 $462,825 18,335 50,931
and Chief Executive Officer
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2003 $372,646 $447,174 15,449 42,913
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $358,313 $322,481 13,693 169,661
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
FRED L. KENNON Vice 2004 $243,280 $218,952 7,491 20,809
President, Chief Financial
Officer and Treasurer
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2003 $235,053 $211,548 6,312 17,533
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $226,013 $135,608 5,455 67,590
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
GREGORY K. SILVERS Vice 2004 $217,567 $217,567 7,052 19,589
President, Secretary,
General Counsel and Chief
Development Officer
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2003 $210,210 $191,008 5,699 15,831
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
2002 $202,125 $121,275 4,879 60,446
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
MARK A. PETERSON Vice 2004 $ 93,019 $48,125 1,300 3,611
President - Accounting and
Administration (4)
------------------------------ ---------- -------------- --------------- -------------- -----------------------------
(1) Performance bonuses are payable in cash, restricted common shares (valued
at 125% of the cash bonus amount for Messrs. Brain, Kennon and Silvers and
150% of the cash bonus amount for Mr. Peterson) or options (valued at 500%
of the cash bonus amount) or a combination of these, at the election of the
executive. Prior to 2003, bonuses paid in restricted shares were valued at
150% of the cash bonus amount.
(2) The restricted common share awards vest at the rate of 20% per year during
a five year period. The dollar value of the shares vested under each
officer's restricted share award will be based on the closing price of our
common shares on the NYSE on the applicable vesting date. The officers
receive dividends on the restricted shares from the date of issuance at the
same rate paid to our other common shareholders.
(3) The aggregate number of restricted common shares held by each named
executive officer on December 31, 2004 and the value of those shares (based
on the closing price of $44.55 for our common shares on the NYSE on that
date) were as follows:
---------------------- -------------------- ---------------------
OFFICER NO. OF SHARES 12/31/04 VALUE
---------------------- -------------------- ---------------------
David M. Brain 78,807 $3,510,852
---------------------- -------------------- ---------------------
Fred L. Kennon 20,006 $ 891,267
---------------------- -------------------- ---------------------
Gregory K. Silvers 26,551 $1,182,847
---------------------- -------------------- ---------------------
Mark A. Peterson --- ---
---------------------- -------------------- ---------------------
The shares are registered with the SEC under the Securities Act of 1933,
but are restricted against transfer for a period of one year after the
issue date under our Share Incentive Plan.
(4) Mr. Peterson was named our Vice President - Accounting and Administration
on June 14, 2004. His annual salary rate for 2004 was $165,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information about options awarded to the named
executive officers in 2004.
------------------------------------------------------------------------------------------------ ---------------------
INDIVIDUAL GRANTS
------------------------------------------------------------------------------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE GRANT DATE PRESENT
NAME GRANTED EMPLOYEES PRICE EXPIRATION VALUE
(#) IN FISCAL YEAR ($/SH)(1) DATE ($/SH)(2)
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
DAVID M. BRAIN 42,913 41% $39.80 3/2014 $0.81
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
FRED L. KENNON 17,533 17% $39.80 3/2014 $0.81
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
GREGORY K. SILVERS 15,831 15% $39.80 3/2014 $0.81
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
MARK A. PETERSON 20,000 19% $33.58 6/2014 $0.81
----------------------- ------------------ ----------------- ------------------- --------------- ---------------------
(1) The options vest at the rate of 20% per year for five years and are
exercisable during a 10-year period.
(2) Based on the Black-Scholes Valuation Model. Black-Scholes, Binomial and
Minimum Value calculations performed in accordance with the requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" and using the following assumptions: expected
volatility using 52 weekly share prices commencing on 1/1/04 (14.1%),
expected life (eight years), share prices on grant dates ($33.58 --
$39.80), exercise prices ($33.58 -- $39.80), expected dividend yield
(6.0%), risk free rate of return (4.0%).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS
VALUES
The following table provides information on the number of shares received
on exercise of options by the named executive officers in 2004 and the number of
shares under option to the named executive officers as of December 31, 2004.
------------------------ ---------------------- --------------------- ---------------------- ----------------------
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END AT FISCAL YEAR END
(#) ($)
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
NAME (#) ($)
------------------------ ---------------------- --------------------- ---------------------- ----------------------
DAVID M. BRAIN 56,327 $1,440,933 197,606/284,753 $5,306,652/$5,677,415
------------------------ ---------------------- --------------------- ---------------------- ----------------------
FRED L. KENNON 69,443 $1,863,486 55,825/115,480 $1,411,329/$2,305,903
------------------------ ---------------------- --------------------- ---------------------- ----------------------
GREGORY K. SILVERS 34,450 $ 821,185 60,906/96,633 $1,566,600/$1,840,269
------------------------ ---------------------- --------------------- ---------------------- ----------------------
MARK A. PETERSON --- --- ---/20,000 $0/$219,400
------------------------ ---------------------- --------------------- ---------------------- ----------------------
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information with respect to compensation plans
(including individual compensation arrangements) under which common shares of
the Company were authorized for issuance to officers, employees and trustees as
of December 31, 2004.
------------------------------- ------------------------ ------------------------- -----------------------------------
NUMBER OF SHARES TO BE WEIGHTED-AVERAGE NUMBER OF SHARES REMAINING
ISSUED UPON EXERCISE EXERCISE PRICE OF AVAILABLE FOR FUTURE ISSUANCE
PLAN CATEGORY OF OUTSTANDING OUTSTANDING OPTIONS, UNDER EQUITY COMPENSATION PLANS
OPTIONS, WARRANTS AND WARRANTS AND RIGHTS (EXCLUDING SHARES REFLECTED IN
RIGHTS COLUMN (A)) (2)
------------------------------- ------------------------ ------------------------- -----------------------------------
(A) (B) (C)
------------------------------- ------------------------ ------------------------- -----------------------------------
EQUITY COMPENSATION PLANS 980,677 $22.99 1,627,965
APPROVED BY SHAREHOLDERS(1)
------------------------------- ------------------------ ------------------------- -----------------------------------
EQUITY COMPENSATION PLANS NOT
APPROVED BY SHAREHOLDERS -- -- --
------------------------------- ------------------------ ------------------------- -----------------------------------
TOTAL 980,677 $22.99 1,627,965
------------------------------- ------------------------ ------------------------- -----------------------------------
(1) All options have been issued under the Share Incentive Plan.
(2) Restricted common shares as well as options may be awarded under the Share
Incentive Plan. The Share Incentive Plan does not separately quantify the
number of options or number of restricted shares which may be awarded under
the Plan.
EMPLOYMENT AGREEMENTS
In 2000, we entered into employment agreements with David M. Brain, Fred L.
Kennon and Gregory K. Silvers, each for a term of three years, with automatic
one-year extensions on each anniversary date. The employment agreements
generally provide for:
o an original annual base salary of $325,000 for Mr. Brain, $205,000 for
Mr. Kennon and $175,000 for Mr. Silvers, subject to any increases
awarded by the compensation committee. The 2004 base salary amounts
for Messrs. Brain, Kennon and Silvers are listed in the Summary
Compensation Table.
o an annual incentive bonus in an amount established by the compensation
committee if performance criteria adopted by the compensation
committee are achieved
o a loan to Mr. Brain of $1,407,645 for the purchase of 80,000 common
shares and loans of $281,250 to each of Mr. Kennon and Mr. Silvers for
the purchase of 20,000 common shares each under the Share Purchase
Program. The loans, which were made by us prior to passage of the
Sarbanes-Oxley Act, are evidenced by ten-year recourse promissory
notes, with principal and accrued interest payable at maturity. A
portion of each officer's share purchase loan will be forgiven upon
his death or permanent disability, or if he is terminated without
cause or terminates his employment for good reason, as defined in the
employment agreement. The entire amount of each executive's loan will
be forgiven if he is terminated without cause following a hostile
change in control of the Company. The officers are entitled to
reimbursement for taxes on income resulting from loan forgiveness.
o a rolling three-year term, subject to termination by the Company with
or without cause
o salary and bonus continuation following an officer's death, disability
or termination without cause
Mr. Brain is entitled to severance compensation equal to his base salary
and bonus for the remainder of any three-year employment period if he resigns
following a change in control of the Company or upon his death, termination by
the Company without cause or termination by Mr. Brain for good reason. Messrs.
Kennon and Silvers are entitled to similar severance compensation upon their
death, termination by the Company without cause or termination by the executive
for good reason.
We entered into an employment agreement with Mr. Peterson in 2005 on terms
similar to those of Messrs. Brain, Kennon and Silvers, except that no share
purchase loan has been or will be made to Mr. Peterson. The agreement is for a
term of two years with automatic one-year extensions on each anniversary date,
and provides for an original base salary of $181,500, subject to any increases
awarded by the compensation committee.
HOW ARE OUR EXECUTIVE OFFICERS COMPENSATED?
We have adopted various compensation programs to attract and retain
executive officers, to provide incentives to maximize our Funds from Operations,
and to provide executive officers with an interest in the Company parallel to
that of our shareholders.
Our executive compensation programs are administered by the compensation
committee, which is authorized to select from among EPR's eligible employees the
individuals to whom awards will be granted and to establish the terms and
conditions of those awards. No member of the compensation committee is eligible
to participate in any compensation program other than as a non-employee trustee
of the Company.
ANNUAL INCENTIVE PROGRAM. The Annual Incentive Program provides for
incentive bonuses to officers designated by the compensation committee if
selected performance criteria are achieved. The performance criteria and the
amount of the bonuses are established each year by the compensation committee.
SHARE INCENTIVE PLAN. We encourage our executive officers to own common
shares in the Company. To assist officers with this goal, we provide officers
the opportunity to acquire shares through various programs:
o SHARE PURCHASE PROGRAM. Allows officers to purchase common shares from
us at fair market value. The shares may be subject to transfer
restrictions and other conditions imposed by the compensation
committee.
o RESTRICTED SHARE PROGRAM. We may award restricted common shares to
officers, subject to conditions adopted by the compensation committee.
In general, restricted shares may not be sold until the restrictions
expire or are removed by the compensation committee. Restricted shares
have full voting and dividend rights from the date of issuance. All
restrictions on restricted shares lapse upon a change in control of
the Company.
o SHARE OPTION PROGRAM. We may grant options to our officers and
employees to purchase shares subject to conditions imposed by the
compensation committee.
Under the Share Incentive Plan, a maximum of 3,000,000 common shares,
subject to adjustment upon significant Company events, are reserved for issuance
under the Plan. There is no limit on the number of total options an individual
may receive under the Plan. The maximum number of shares or options which may be
awarded to an employee subject to the deductibility limitation of Section 162(m)
of the Internal Revenue Code is 250,000 for each twelve-month performance period
(or, to the extent the award is paid in cash, the maximum dollar amount equal to
the cash value of that number of shares).
COMPENSATION COMMITTEE REPORT
The Board of Trustees has appointed a compensation committee consisting of
all of the non-management trustees. All members of the compensation committee
are independent as described in "Company Governance - Who are our independent
trustees and how was that determined?" The primary responsibilities of the
compensation committee are to (i) review and approve Company goals and
objectives relevant to the CEO's compensation, evaluate the CEO's performance in
light of those goals and objectives, and determine and approve the CEO's
compensation level based on that evaluation, and (ii) make recommendations to
the Board regarding the compensation of the Company's other executive officers
and the independent trustees, as well as incentive compensation and equity-based
plans that are subject to Board approval.
The committee has adopted an amended and restated charter which is attached
to this proxy statement as Appendix C.
WHAT IS THE COMPANY'S EXECUTIVE COMPENSATION PHILOSOPHY?
EPR's compensation philosophy has several key objectives:
o create a well-balanced and competitive compensation program utilizing
base salary, annual incentives and equity-based compensation
o reward executives for performance on measures designed to increase
shareholder value
o use share awards and share options to ensure that executives are
focused on providing appropriate dividend levels and building
shareholder value
o create alignment between the Company's executives and its shareholders
by encouraging key executives to purchase shares
The compensation committee used the following compensation programs to meet
its compensation objectives for executive officers:
BASE SALARY. The compensation committee established base salaries of
$401,000 for Mr. Brain, $253,000 for Mr. Kennon, $253,000 for Mr. Silvers and
$181,500 for Mr. Peterson for 2005. The salary levels were intended to provide a
level of compensation competitive with those of other executives performing
similar functions at comparable companies and to reward EPR's executives for
their efforts on behalf of the Company and the Company's performance and
increase in share price during 2004.
ANNUAL INCENTIVE AWARDS. Under the Annual Incentive Plan, the compensation
committee established specific annual "performance targets" for each covered
executive. The performance targets were based on increases in Funds from
Operations per share and other factors aimed at providing
shareholders with an acceptable rate of return. Performance bonuses are payable
in cash, restricted common shares (valued at 125% of the cash bonus amount for
Messrs. Brain, Kennon and Silvers and 150% of the cash bonus amount for Mr.
Peterson), share options (valued at 500% of the cash bonus amount) or a
combination of two or more of those. The compensation committee awarded bonuses
of $462,825 to Mr. Brain, $218,952 to Mr. Kennon, $217,567 to Mr. Silvers and
$48,125 to Mr. Peterson for 2004.
LONG-TERM COMPENSATION AWARDS. The compensation committee made long term
compensation awards to the covered executives consisting of the restricted
shares and options disclosed in the columns entitled "Restricted Share Awards"
and "Securities Underlying Options" in the Summary Compensation Table.
HOW WAS THE COMPANY'S PRESIDENT AND CEO COMPENSATED?
EPR's President and CEO, David M. Brain, was compensated in 2004 pursuant
to an employment agreement entered into in 2000. In establishing Mr. Brain's
compensation, the compensation committee took into account the compensation of
similar officers of REITs with comparable market capitalizations, Mr. Brain's
contributions to the Company's performance, increase in share price and
achievement of its acquisition and financing strategies during 2004, and his
success in meeting the performance criteria established by the compensation
committee.
Mr. Brain received a base salary of $385,688 in 2004 and a bonus of
$462,825 for 2004. The incentive award paid to Mr. Brain was based on the
Company's achievement of target financial results and shareholder return, as
well as a subjective evaluation of Mr. Brain's performance during 2004.
HOW WILL 2005 INCENTIVE COMPENSATION BE DETERMINED?
The committee may rely on any of the following factors in determining
executive incentive compensation levels for 2005: Funds from Operations, Cash
Available for Distribution, return on equity, return on assets, return on
acquisitions, net operating income, total shareholder return, dividend growth,
financial statement management, and/or achievement of acquisition and financing
targets. In evaluating Company performance, the committee may consider 2005
performance against historical performance, budgeted performance, peer
organization performance, REIT indices performance, broad market indices
performance and/or other factors.
HOW IS EPR ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1,000,000 paid for
any fiscal year to the company's chief executive officer and the four other most
highly compensated executive officers. The statute exempts qualifying
performance-based compensation from the deduction limit if stated requirements
are met.
Although the compensation committee has designed the Company's executive
compensation program so that compensation will be deductible under Section
162(m), at some future time it may not be possible or practicable or in the
Company's best interests to qualify an executive officer's compensation under
Section 162(m). Accordingly, the compensation committee and the Board of
Trustees reserve the authority to award non-deductible compensation in
circumstances they consider appropriate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee is or has been an officer or
employee of the Company or any of its subsidiaries. No member of the
compensation committee had any contractual or other relationship with the
Company during 2004.
By the compensation committee:
Morgan G. Earnest II
Robert J. Druten
James A. Olson
Barrett Brady
THIS COMPENSATION COMMITTEE REPORT IS NOT DEEMED "SOLICITING MATERIAL" AND IS
NOT DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES
UNDER SECTION 18 OF THE EXCHANGE ACT.
TRANSACTIONS BETWEEN THE COMPANY AND
TRUSTEES, OFFICERS OR THEIR AFFILIATES
Pursuant to their 2000 employment agreements, Messrs. Brain, Kennon and
Silvers are indebted to the Company in the principal amounts of $1,407,645,
$281,250 and $281,250, respectively, for the purchase of 80,000, 20,000 and
20,000 common shares, respectively. Each loan is represented by a 10-year
recourse note with principal and interest at 6.24% per annum payable at
maturity.
For a discussion of the Board's determination of Mr. Earnest's independence
as a trustee in light of our Canadian mortgage financing, see "Company
Governance - Who are our independent trustees and how was that determined?"
COMPANY PERFORMANCE
The following performance graph shows a comparison of cumulative total
returns for EPR, the Morgan Stanley REIT Index (in which EPR is included) and
the Russell 2000 Index (in which EPR is included) for the five fiscal year
period beginning December 31, 1999 and ending December 31, 2004.
The graph assumes that $100 was invested on December 31, 1999 in each of
the Company's common shares, the Morgan Stanley REIT Index and the Russell 2000
Index, and that all dividends were reinvested. The information presented in the
performance graph is historical and is not intended to represent or guarantee
future returns.
TOTAL RETURN TO SHAREHOLDERS
(ASSUMES $100 INVESTMENT ON 12/31/99)
---------------------------------------------------------------------------------------------------------------
600-|
|
| %
|
500-|
|
|
|
400-| %
|
|
|
300-|
|
| % o
|
200-| o
| %
| o o
| o * *
100-%o* %* *
| *
|
|
0 | | | | | |
-----------------------------------------------------------------------------------------------------------
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
% Entertainment Properties Trust o Morgan Stanley REIT Index * Russell 2000 Index
---------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Total Return Analysis
12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004
--------------------------------------------------------------------------------------------------------------------------
Entertainment Properties Trust $ 100.00 $ 96.31 $ 188.12 $ 247.99 $ 391.24 $ 531.39
--------------------------------------------------------------------------------------------------------------------------
Morgan Stanley REIT Index $ 100.00 $ 126.81 $ 143.08 $ 148.30 $ 202.79 $ 266.64
--------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index $ 100.00 $ 95.80 $ 96.78 $ 75.90 $ 110.33 $ 129.09
--------------------------------------------------------------------------------------------------------------------------
THIS COMPANY PERFORMANCE INFORMATION IS NOT DEEMED "SOLICITING MATERIAL" AND IS
NOT DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES
UNDER SECTION 18 OF THE EXCHANGE ACT.
AUDIT COMMITTEE REPORT
The Board of Trustees has appointed an audit committee consisting of all of
the non-management trustees. All members of the audit committee are independent
as described in "Company Governance - Who are our independent trustees and how
was that determined?" The committee members also meet the additional
independence standards of SEC Rule 10A-3. We believe all members of the audit
committee are "audit committee financial experts," as defined by SEC rules, by
virtue of their experience and positions held as described elsewhere in this
proxy statement.
The primary responsibility of the audit committee is to assist Board
oversight of the integrity of the Company's financial statements, the Company's
compliance with legal and regulatory requirements, the qualifications and
independence of the independent auditors, and the performance of the Company's
internal audit function. The independent auditors are responsible for auditing
the Company's annual financial statements and expressing an opinion on the
conformity of those audited financial statements with generally accepted
accounting principles. The independent auditors are also responsible for
auditing the effectiveness of management's internal control over financial
reporting and expressing an opinion on management's evaluation of the
effectiveness of its internal control over financial reporting.
The committee has adopted an amended and restated charter which is attached
to this proxy statement as Appendix A.
The audit committee has sole authority to engage the independent auditors
to perform audit services (subject to shareholder ratification), audit-related
services, tax services and permitted non-audit services and the fees therefor.
The independent auditors report directly to the committee and are accountable to
the committee.
The audit committee has adopted policies and procedures for the
pre-approval of the auditors' performance of services on behalf of the Company.
Those policies generally provide that:
o the performance by the auditors of any audit services, audit-related
services, tax services or other permitted non-audit services, and the
fees therefor, must be specifically pre-approved by the committee or,
in the absence of one or more of the committee members, a designated
member of the committee
o pre-approvals must take into consideration, and be conducted in a
manner that promotes, the auditors' effectiveness and independence
o each particular service to be approved must be described in detail and
be supported by detailed back-up documentation
In fulfilling its oversight responsibilities, the audit committee reviewed
the Company's 2004 audited financial statements with management and the
auditors. The committee discussed with the auditors the matters required to be
discussed in Statement of Auditing Standards No. 61, "Communications with Audit
Committees," and the rules of the SEC and NYSE. This included a discussion of
the auditors' judgments regarding the quality, not just the acceptability, of
the Company's accounting principles and the other matters required to be
discussed with the committee under the rules of the NYSE and the Public Company
Accounting Oversight Board ("PCAOB"). In addition, the committee received from
the auditors the written disclosures and letter required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." The committee also discussed with the auditors their independence
from management and the Company, including the matters covered by the written
disclosures and letter provided by the auditors.
The committee discussed with management and the auditors the overall scope
and plans for the audit of the financial statements. The committee meets
periodically with management and the auditors to discuss the results of their
examinations, their evaluations of the Company, the Company's disclosure
controls and procedures, internal control over financial reporting and internal
audit function, and the overall quality of the Company's financial reporting.
The committee held four meetings during 2004.
The audit committee discussed with management and the auditors the critical
accounting policies of the Company, the impact of those policies on the 2004
financial statements, the impact of known trends, uncertainties, commitments and
contingencies on the application of those policies, and the probable impact on
the 2004 financial statements if different accounting policies had been applied.
Based on the reviews and discussions referred to above, the audit committee
recommended to the Board of Trustees, and the Board approved, that the audited
financial statements be included in the Company's annual report on Form 10-K for
the year ended December 31, 2004 for filing with the SEC.
The audit committee has engaged KPMG as the Company's independent auditors
to audit the 2005 financial statements, subject to shareholder ratification, and
has engaged KPMG to perform specific audit-related services and tax return
preparation and compliance, tax consulting and tax planning services during
2005. See Item II - "Ratification of Appointment of Independent Auditors."
The audit committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Company's
financial statements. The members of the audit committee are not professionally
engaged in the practice of accounting and, notwithstanding the designation of
the audit committee members as "audit committee financial experts" pursuant to
SEC rules, are not experts in the field of accounting or auditing, including
auditor independence. Members of the audit committee rely without independent
verification on the information provided to them and the representations made to
them by management and the auditors, and look to management to provide full and
timely disclosure of all material facts affecting the Company. Accordingly, the
audit committee's oversight does not provide an independent basis to determine
that management has maintained appropriate accounting and financial reporting
policies, appropriate internal controls and procedures to ensure compliance with
accounting standards and applicable laws and regulations, appropriate disclosure
controls and procedures, appropriate internal control over financial reporting,
or an appropriate internal audit function, or that the Company's reports and
information provided under the Exchange Act are accurate and complete.
Furthermore, the audit committee's considerations and discussions referred to
above and in its charter do not assure that the audit of the Company's financial
statements has been carried out in accordance with PCAOB rules, that the
financial statements are free of material misstatement or presented in
accordance with generally accepted accounting principles, that the Company's
auditors are in fact "independent," or that the matters required to be certified
by the Company's Chief Executive Officer and Chief Financial Officer in the
Company's annual reports on Form 10-K and quarterly reports on Form 10-Q under
the Sarbanes-Oxley Act and related SEC rules have been properly and accurately
certified.
By the audit committee:
James A. Olson
Robert J. Druten
Morgan G. Earnest II
Barrett Brady
THIS AUDIT COMMITTEE REPORT IS NOT DEEMED "SOLICITING MATERIAL" AND IS NOT
DEEMED FILED WITH THE SEC OR SUBJECT TO REGULATION 14A OR THE LIABILITIES UNDER
SECTION 18 OF THE EXCHANGE ACT.
ITEM II
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The audit committee has engaged, subject to shareholder ratification, the
registered public accounting firm of KPMG LLP as our independent registered
public accountants to audit our financial statements and management's internal
control over financial reporting for the year ending December 31, 2005. KPMG
audited our financial statements for the years ended December 31, 2004, 2003 and
2002 and audited our management's internal control over financial reporting as
of December 31, 2004.
Representatives of KPMG are expected to be present at the annual meeting
and will be available to respond to appropriate questions about their services.
AUDIT FEES
KPMG billed the Company an aggregate of $129,150 for professional services
rendered in the audit of our financial statements for the year ended December
31, 2003, and the review of the quarterly financial statements included in our
Form 10-Q reports filed with the SEC during 2003.
KPMG billed the Company an aggregate of $292,975 for professional services
rendered in the audit of our financial statements for the year ended December
31, 2004, the audit of management's internal control over financial reporting as
of December 31, 2004, the review of the quarterly financial statements included
in our Form 10-Q reports filed with the SEC during 2004, the review of other
filings we made with the SEC during 2004, and the provision of comfort letters
and performance of related procedures in connection with public offerings of
common shares conducted by us in 2004.
AUDIT-RELATED FEES
KPMG did not bill the Company for audit-related services during 2003. In
2004, KPMG billed the Company an aggregate of $122,330 for audit-related
services in connection with our acquisition of properties in Canada.
TAX FEES
KPMG billed the Company an aggregate of $106,404 in 2003 and $118,160 in
2004 for professional services rendered in the areas of tax return preparation
and compliance, tax consulting and advice and tax planning, including REIT tax
compliance, U.S. and Canadian tax compliance and the determination of the
portion of our dividends representing a return of capital. The fees for 2003 and
2004 also included $21,134 and $30,340, respectively, in charges incurred in
connection with a tax protest in the State of Florida. Of the $118,160 in tax
fees billed for 2004, a total of $73,175 was for tax return preparation and
compliance and $44,985 was for tax consulting and advice and tax planning.
ALL OTHER FEES
KPMG did not bill the Company for any other services during 2003 or 2004.
The audit committee has adopted policies which require that the provision
of services by the auditors, and the fees therefor, be pre-approved by the audit
committee. The policies are more particularly described in the audit committee
report included elsewhere in this proxy statement. The services provided by KPMG
in 2003 and 2004 were pre-approved by the audit committee in accordance with
those policies.
The audit committee considered whether KPMG's provision of tax services in
2003 and 2004 was compatible with maintaining its independence from management
and the Company, and determined that the provision of those services was
compatible with its independence.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our trustees, executive officers
and holders of more than 10% of our common shares to file reports with the SEC
regarding their ownership and changes in ownership of our shares.
We believe that, during 2004, our trustees and executive officers complied
with all Section 16(a) filing requirements. In making this statement, we have
relied upon an examination of the copies of Forms 3, 4 and 5 provided to us and
the written representations of our trustees and executive officers.
SHARE OWNERSHIP
WHO ARE THE LARGEST OWNERS OF OUR COMMON SHARES?
Except as stated below, we know of no single person or group that is the
beneficial owner of more than 5% of our common shares.
------------------------------------------- ----------------------------------- --------------------------------------
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF SHARES
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING
------------------------------------------- ----------------------------------- --------------------------------------
Barclays Global
Investors, N.A. 1,944,031 (1) 7.8%
45 Fremont Street, 17th Floor
San Francisco, CA 94105
------------------------------------------- ----------------------------------- --------------------------------------
Earnest Partners, LLC
75 Fourteenth Street, Suite 2300 1,593,402 (2) 6.4%
Atlanta, GA 30309
------------------------------------------- ----------------------------------- --------------------------------------
(1) Based solely on disclosures made by Barclays Global Investors, N.A.
and its affiliates in a report on Schedule 13G filed with the
Securities and Exchange Commission. Includes shares held by affiliates
of Barclays Global Investors, N.A. Certain affiliates of Barclays
Global Investors, N.A. have shared voting or investment power over
some of the shares.
(2) Based solely on disclosures made by Earnest Partners, LLC in a report
on Schedule 13G filed with the Securities and Exchange Commission.
Earnest Partners, LLC has shared voting power with others over a
portion of the shares.
HOW MANY SHARES DO OUR TRUSTEES AND EXECUTIVE OFFICERS OWN?
The following table shows as of December 31, 2004, the number of our common
shares beneficially owned by each of our trustees, the nominees for trustee and
our executive officers, and by all of the trustees and executive officers as a
group. All information regarding beneficial ownership was furnished by the
trustees, nominees and officers listed below.
------------------------------------------- -------------------------------------- ---------------------------
AMOUNT AND NATURE OF PERCENT OF SHARES
NAME OF BENEFICIAL OWNERS BENEFICIAL OWNERSHIP (1) OUTSTANDING (1)
------------------------------------------- -------------------------------------- ---------------------------
David M. Brain 618,186 2.47%
------------------------------------------- -------------------------------------- ---------------------------
Robert J. Druten 42,057 *
------------------------------------------- -------------------------------------- ---------------------------
James A. Olson 18,799 *
------------------------------------------- -------------------------------------- ---------------------------
Morgan G. Earnest II 19,708 *
------------------------------------------- -------------------------------------- ---------------------------
Barrett Brady 13,709 *
------------------------------------------- -------------------------------------- ---------------------------
Fred L. Kennon 189,792 *
------------------------------------------- -------------------------------------- ---------------------------
Gregory K. Silvers 155,445 *
------------------------------------------- -------------------------------------- ---------------------------
Mark A. Peterson --- ---
------------------------------------------- -------------------------------------- ---------------------------
All trustees and executive
officers as a group (8 persons) 1,057,696 4.22%
------------------------------------------- -------------------------------------- ---------------------------
* Less than 1 percent.
(1) Includes the following common shares which the named individuals have
the right to acquire within 60 days under existing options: David M.
Brain (301,345), Fred L. Kennon (97,794), Gregory K. Silvers (86,235),
Robert J. Druten (34,998), James A. Olson (18,333), Morgan G. Earnest
II (18,333) and Barrett Brady (12,500).
The above table reports beneficial ownership in accordance with Rule 13d-3
under the Exchange Act and includes common shares underlying options that are
exercisable within 60 days after December 31, 2004. This means all common shares
over which trustees, nominees and executive officers directly or indirectly have
or share voting or investment power are listed as beneficially owned. The
persons identified in the table have sole voting and investment power over all
shares described as beneficially owned by them.
SUBMISSION OF SHAREHOLDER PROPOSALS AND NOMINATIONS
DO I HAVE A RIGHT TO NOMINATE TRUSTEES OR MAKE PROPOSALS FOR CONSIDERATION BY
THE SHAREHOLDERS?
Yes. Our Declaration of Trust and Bylaws establish procedures which you
must follow if you wish to nominate trustees or make other proposals for
consideration at an annual shareholder meeting.
HOW DO I MAKE A NOMINATION?
If you are a common shareholder of record and wish to nominate someone to
the Board of Trustees, you must give written notice to the Company's Secretary.
Your notice must be given not less than 60 days and not more than 90 days prior
to the first anniversary of the date of the previous year's meeting. A
nomination received less than 60 days prior to the first anniversary of the date
of the previous year's meeting will be deemed untimely and will not be
considered. Your notice must include:
o for each person you intend to nominate for election as a trustee, all
information related to that person that is required to be disclosed in
solicitations of proxies for the election of trustees in an election
contest, or is otherwise required, pursuant to Regulation 14A under
the Exchange Act (including the person's written consent to being
named in the proxy statement as a nominee and to serve as a trustee if
elected)
o your name and address and the name and address of any person on whose
behalf you made the nomination, as they appear on the Company's books
o the number of common shares owned beneficially and of record by you
and any person on whose behalf you made the nomination
HOW DO I MAKE A PROPOSAL?
If you are a common shareholder of record and wish to make a proposal to be
considered at an annual shareholder meeting, you must give written notice to the
Company's Secretary. Pursuant to Rule 14a-8 of the SEC, your notice must be
received at the Company's executive offices not less than 120 calendar days
before the date of the Company's proxy statement released to shareholders in
connection with the previous year's meeting. Any proposal received less than 120
days before that date will be deemed untimely and will not be considered. Your
notice must include:
o a brief description of your proposal and your reasons for making the
proposal
o your name and address and the name and address of any person on whose
behalf you made the proposal, as they appear on the Company's books
o any material interest you or any person on whose behalf you made the
proposal have in the proposal
o the number of common shares owned beneficially and of record by you
and any person on whose behalf you made the proposal
ARE THERE ANY EXCEPTIONS TO THE DEADLINE FOR MAKING A NOMINATION OR PROPOSAL?
Yes. If the date of the annual meeting is scheduled more than 30 days prior
to or more than 60 days after the anniversary date of the previous year's
meeting, your notice must be delivered:
o not earlier than 90 days before the meeting; and
o not later than (a) 60 days before the meeting or (b) the 10th day
after the date we make our first public announcement of the meeting
date, whichever is earlier
If the Board increases the number of trustees to be elected but we do not
make a public announcement of the increased Board or the identity of the
additional nominees within 70 days prior to the first anniversary of the
previous year's meeting, your notice will be considered timely (but only with
respect to nominees for the new positions created by the increase) if it is
delivered to the Company's Secretary not later than the close of business on the
10th day following the date of our public announcement.
MUST THE BOARD OF TRUSTEES APPROVE MY PROPOSAL?
Our Declaration of Trust provides that the submission of any action to the
shareholders for their consideration must first be approved by the Board of
Trustees.
OTHER MATTERS
As of the date of this proxy statement, we have not been presented with any
other business for consideration at the annual meeting. If any other matter is
properly brought before the meeting for action by the shareholders, your proxy
(unless revoked) will be voted in accordance with the recommendation of the
Board of Trustees, or the judgment of the proxy holders if no recommendation is
made.
MISCELLANEOUS
PROXY SOLICITATION
The enclosed proxy is being solicited by the Board of Trustees. We will
bear all costs of the solicitation, including the cost of preparing and mailing
this proxy statement and the enclosed proxy card. After the initial mailing of
this proxy statement, proxies may be solicited by mail, telephone, telegram,
facsimile, e-mail or personally by trustees, officers, employees or agents of
the Company. Brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward soliciting materials to the beneficial owners of
shares held of record by them, and their reasonable out-of-pocket expenses,
together with those of our transfer agent, will be paid by us.
ANNUAL REPORT
Our annual report to shareholders, containing financial statements for the
year ended December 31, 2004, is being mailed with this proxy statement to all
shareholders entitled to vote at the annual meeting. You must not regard the
annual report as additional proxy solicitation material.
WE WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST TO THE SECRETARY OF
THE COMPANY AT THE ADDRESS LISTED ON THE COVER PAGE OF THIS PROXY STATEMENT, A
COPY OF OUR ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 2004.
SHAREHOLDER PROPOSALS FOR THE 2006 ANNUAL MEETING
At this time, we anticipate that the 2006 annual meeting of shareholders
will be held on May 10, 2006. Shareholder proposals intended for inclusion in
the proxy statement for the 2006 annual meeting must be received by the
Company's Secretary at 30 W. Pershing Road, Union Station, Suite 201, Kansas
City, Missouri 64108, within the time limits described in "Submission of
Shareholder Proposals and Nominations." Shareholder proposals and nominations
must also comply with the proxy solicitation rules of the SEC.
By the order of the Board of Trustees
Gregory K. Silvers
VICE PRESIDENT, SECRETARY, GENERAL COUNSEL AND CHIEF
DEVELOPMENT OFFICER
April 8, 2005
APPENDIX A
ENTERTAINMENT PROPERTIES TRUST
THIRD AMENDED AND RESTATED CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2005
The audit committee is appointed by the Board to assist in meeting the
Board's responsibilities regarding the quality and integrity of the Company's
financial statements and financial reporting and the performance and
independence of the Company's independent auditors.
MEMBERSHIP
The committee shall consist of no fewer than three members who meet the
independence requirements of the New York Stock Exchange and SEC Rule 10A-3, and
who are free from any relationship that, in the opinion of the Board, would
interfere with the exercise of their independent judgment as members of the
committee. No committee member shall be an "affiliated person" of EPR or any
subsidiary, as defined in SEC Rule 10A-3. No committee member shall receive,
directly or indirectly, any consulting, advisory or other compensatory fee from
EPR or its subsidiaries, other than ordinary course Board and committee fees and
fixed amounts of compensation under a retirement plan (including deferred
compensation) for prior service, provided the compensation is not contingent in
any way on continued service. No payment shall be made by EPR to any firm of
which a committee member is a partner, member, executive officer or comparable
position which provides accounting, consulting, legal, investment banking or
financial advisory services to EPR or any subsidiary. Non-advisory financial
services such as lending, check clearing, maintaining customer accounts, stock
brokerage services and custodial and cash management services shall not be
prohibited if the Board of Trustees affirmatively determines, in accordance with
EPR's independence standards for trustees, that the performance of those
services does not adversely affect the independence of the committee member.
All members of the committee shall be "financially literate" and have a
working familiarity with basic finance and accounting practices. At least one
member of the committee shall be an "audit committee financial expert" as
defined by Item 401(h) of SEC Regulation S-K.
The members of the committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the committee may
designate a Chairman.
The committee does not itself prepare financial statements or perform
audits, and its members are not auditors or certifiers of the Company's
financial statements. The members of the committee are not professionally
engaged in the practice of accounting and are not experts in the field of
accounting or auditing, including auditor independence. Members of the committee
rely without independent verification on the information provided to them and
the representations made to them by management and the auditors. Accordingly,
the committee's
oversight does not provide an independent basis to determine that management has
maintained appropriate accounting and financial reporting policies, appropriate
internal controls and procedures to ensure compliance with accounting standards
and applicable laws and regulations, effective disclosure controls and
procedures or effective internal control over financial reporting. Furthermore,
the committee's considerations and discussions referred to in this charter do
not assure that the audit of EPR's financial statements has been carried out in
accordance with the rules of the Public Company Accounting Oversight Board
("PCAOB"), that the financial statements are presented in accordance with
generally accepted accounting principles ("GAAP"), or that the auditors are in
fact "independent."
PURPOSE AND RESPONSIBILITIES
The committee shall be directly responsible for:
1. Assisting the Board in its oversight of the integrity of EPR's
financial statements, EPR's compliance with legal and regulatory
requirements, the qualifications and independence of the independent
auditors, and the performance of EPR's internal audit function and the
independent auditors
2. The engagement (subject to shareholder ratification), compensation,
retention and oversight of the independent auditors, who shall report
directly to the committee
3. Pre-approving the independent auditors' performance of audit services
(including review and attest services), audit-related services, tax
services and any other permitted services approved by the committee,
and the fees therefor, in accordance with applicable SEC rules and the
policies and procedures adopted by the committee from time to time
4. Resolving any disagreements between management and the independent
auditors over financial reporting
5. Establishing procedures for the receipt, retention and treatment of
complaints regarding accounting, internal accounting controls or
auditing matters, and the confidential anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters
6. At least annually, prior to the date the independent auditors' audit
report is filed with the SEC, obtaining and reviewing a report by the
independent auditors describing:
o The independent auditors' internal quality control procedures
o Any material issues raised by the independent auditors' most
recent internal quality control review, or peer review, or by any
inquiry or investigation by governmental or professional
authorities within the preceding five years, regarding one or
more independent audits carried out by the firm, and any steps
taken to deal with those issues
o All relationships between the independent auditors and the
Company
o The critical accounting policies and practices of the Company
o Material written communications between the independent auditors
and management, such as management letters, "internal control"
letters or schedules of material audit differences
o The independent auditors' responsibilities under PCAOB auditing
standards
o The process used by management in formulating particularly
sensitive accounting estimates and the basis for the independent
auditors' conclusions regarding the reasonableness of those
estimates
o The independent auditors' judgments about the quality of
management's accounting principles
o The independent auditors' responsibility for other information in
documents containing audited financial statements
o The independent auditors' views about significant matters that
were the subject of consultation with management
o Major issues discussed with management prior to the independent
auditors' engagement for the ensuing year
o Any audit problems or difficulties and management's response,
including:
(i) any restrictions on the scope of the independent auditors'
activities or on access to information
(ii) any significant disagreements with management
(iii)any accounting adjustments that were noted or proposed by
the independent auditors but were "passed" (as immaterial or
otherwise)
(iv) any communications between the audit team and the auditors'
national office regarding auditing or accounting issues
presented by the engagement
(v) any "management" or "internal control" letters issued, or
proposed to be issued, by the independent auditors
o All non-audit services provided by the independent auditors, any
other matters required to be discussed by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit
Committees," and any disclosed
relationships or services that may impact the objectivity and
independence of the independent auditors
7. Discussing EPR's annual audited financial statements, quarterly
financial statements, and the specific disclosures in "Management's
Discussion and Analysis" with management and the independent auditors
8. Reviewing the following matters with management and the independent
auditors:
o Major issues regarding accounting principles and financial
statement presentation, including any significant changes in the
selection or application of accounting principles, and major
issues regarding the adequacy of internal controls and any
special audit steps adopted in light of material control
deficiencies
o Assumptions used in making accounting estimates about matters
that are highly uncertain at the time the estimate is made
o The likelihood that different estimates EPR reasonably could have
used in the current period, or changes in the estimate reasonably
likely from period to period, would have a material impact on
financial condition, changes in financial condition or results of
operations
o The reasons why certain estimates or policies are or are not
considered critical and how current and anticipated future events
impact those determinations
o Management's disclosures regarding critical accounting estimates
o If an accounting treatment proposed does not comply with EPR's
existing accounting policies, or if an existing accounting policy
is not applicable, an explanation of why the existing policy was
not appropriate or applicable and the basis for the selection of
the alternative policy
o The range of alternatives available under GAAP that were
discussed between management and the independent auditors, the
reasons for not selecting those alternatives, and the
recognition, measurement and disclosure considerations related to
accounting for specific transactions
o If the accounting treatment selected was not the preferred method
in the independent auditors' opinion, an explanation of the
reasons why the auditors' preferred method was not selected by
management
o Methods used to account for significant or unusual transactions
o Effects of significant accounting policies in controversial or
emerging areas for which there is a lack of authoritative
guidance or consensus
o Any significant changes in EPR's critical accounting policies, or
proposals for change in those policies, that may have a
significant impact on EPR's financial reports
o The judgments and uncertainties affecting the application of
critical accounting policies, the impact of those policies on
EPR's financial reporting and performance, the effect changing
conditions may have on the impact of those policies, and the
likelihood that materially different financial results would be
reported under different conditions or using different
assumptions
o EPR's disclosure controls and procedures and internal control
over financial reporting, including design, documentation,
implementation, staffing, outsourcing, evaluation, effectiveness,
and any significant deficiencies or material weaknesses and steps
adopted by management to remedy the same
o The staffing and performance of EPR's internal audit function
o The analyses prepared by management and/or the independent
auditors regarding specific financial reporting issues and
judgments made in preparing the financials, including analyses of
the effects of alternative GAAP methods on the financials
o The effect of regulatory and accounting initiatives on the
financials
o The effect of off-balance sheet arrangements and related-party
transactions on the financials
o Management's compliance with any SEC comments on Exchange Act
reports
o The impact of any non-GAAP financial information provided by
management
o Management's policies regarding earnings information, including
the type and presentation of information in earnings releases,
and financial information and earnings guidance provided to
analysts and ratings agencies
o The guidelines and policies governing the process by which
management assesses and manages the Company's exposure to risk,
EPR's major financial risk exposures, and the steps management
has taken to monitor and control those exposures
9. Evaluating the independent auditors' qualifications, performance and
independence (taking into account the opinions of EPR's management and
internal auditors), including a review and evaluation of the lead
audit partner
10. Establishing clear hiring policies for employees or former employees
of the independent auditors
11. Reporting regularly to the Board on:
o The quality and integrity of EPR's financials
o EPR's compliance with legal and regulatory requirements
o The performance and independence of the independent auditors
o The performance of EPR's internal audit function
12. Reviewing the independent auditors' audit scope and approach and the
scope of any audit-related, tax and other services recommended by
management
13. Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements
provided to management by the independent auditors
14. Periodically consulting with the independent auditors out of the
presence of management about internal controls and the completeness
and accuracy of EPR's financial statements
15. Discussing with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, "Communications
with the Audit Committee"
16. In consultation with the independent auditors and management,
evaluating the quality and integrity of EPR's financial reporting
processes, both internal and external
17. Evaluating the independent auditors' judgments about the quality and
appropriateness of the Company's accounting policies as applied in its
financial reporting
18. Recommending to the Board whether the audited financial statements
should be included in EPR's annual report on Form 10-K
19. Preparing the audit committee report for inclusion in the annual proxy
statement
20. Establishing regular and separate systems of reporting to the
committee by management and the independent auditors regarding any
significant judgments made in management's preparation of the
financial statements and the view of each as to the appropriateness of
those judgments
21. Reviewing compliance with the Company's code of business conduct and
ethics
22. Reviewing the policies and procedures with respect to executive
officer expense accounts
23. Discussing with the General Counsel any significant legal matters that
may have a material impact on EPR's business or financials
The committee shall have authority, at EPR's expense, to engage independent
counsel and other advisers as the committee deems necessary to carry out its
duties. The committee shall have appropriate funding from the Company, as
determined by the committee, for payment of compensation to the independent
auditors for issuing their audit report and performing other audit services,
audit-related services, tax services and any other services for which the
independent auditors are engaged by the committee, the compensation of advisors
engaged by the committee, and administrative expenses necessary and appropriate
for carrying out the committee's duties.
The committee shall meet at least four times annually, or more frequently
as circumstances dictate. As part of its mission to foster open communication,
the committee shall meet periodically with management, the persons performing
EPR's internal audit function, the trustees and the independent auditors in
separate executive sessions to discuss any matters the committee or each of
these groups believes should be discussed.
The committee shall keep minutes and other records of its meetings and
proceedings.
The committee shall review and reassess the adequacy of this charter
annually and recommend any changes to the Board for approval.
The committee shall perform an annual self-evaluation of its effectiveness.
APPENDIX B
ENTERTAINMENT PROPERTIES TRUST
SECOND AMENDED AND RESTATED
CHARTER OF THE NOMINATING/COMPANY
GOVERNANCE COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2005
The nominating/company governance committee is appointed by the Board to
assist in meeting the Board's responsibilities for company governance and the
nomination of trustees.
MEMBERSHIP
The committee shall consist of no fewer than three members who meet the
independence requirements of the New York Stock Exchange.
The members of the committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the committee may
designate a Chairman.
PURPOSE AND RESPONSIBILITIES
The committee shall be directly responsible for:
1. Identifying individuals qualified to become Board members, consistent
with criteria approved by the Board.
2. Selecting, or recommending that the Board select, the trustee nominees
for each annual shareholders meeting.
3. Taking a leadership role in establishing and overseeing the governance
policies of the Company and developing and recommending to the Board a set of
governance guidelines for the Company.
4. Overseeing the evaluation of the Board and management of the Company.
The committee will consider trustee candidates recommended by shareholders
who comply with EPR's regular procedures for making shareholder proposals or
such alternative procedures as the Board may adopt and publicly disclose. The
committee will evaluate nominees recommended in good faith by shareholders in
the same manner and using the same criteria as applicable to the committee's own
nominees, but may give greater weight to nominees recommended by holders of more
than 5% of EPR's outstanding common shares. In evaluating candidates for
nomination to the Board, the committee will review their backgrounds and areas
of expertise, and may obtain the views of management, investment bankers and
other interested parties. The committee may engage third parties to assist in
identifying and evaluating candidates. The committee shall not be required to
disclose the reason for accepting or rejecting any nominee.
In nominating candidates for the Board, the committee shall take into
consideration such factors as it deems appropriate, including a candidate's
judgment, skill, diversity, experience and commitment to good governance
practices and the effective operation of the Board. The committee may consider
candidates recommended by management, but is not obligated to do so.
At a minimum, candidates for independent trustee, whether recommended by
the committee, shareholders or others, must meet the Company's independence
standards for trustees, be of high integrity and have sufficient business,
industry, financial and/or professional qualifications, skills and experience to
make a meaningful contribution to the Board. The committee will endeavor to
nominate candidates whose backgrounds and skills complement those of the other
trustees and management and who have expertise, experience and/or relationships
in one or more areas important to EPR's business.
Each nominee for independent trustee shall meet the independence
requirements of the New York Stock Exchange and the Company's independence
standards for trustees. Each member of the audit committee shall also meet the
additional independence requirements in SEC Rule 10A-3. Each member of the audit
committee shall be "financially literate" as contemplated by NYSE rules. At
least one member of the audit committee shall be an "audit committee financial
expert," as defined in Item 401(h) of SEC Regulation S-K. Each member of the
compensation committee shall meet the definition of "non-employee director"
within the meaning of SEC Rule 16b-3, and "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code. At least one member of the Board
should have experience in real estate and real estate finance. The committee
does not believe it should otherwise establish specific minimum standards that
must be met by any nominee.
In the event of a vacancy on the Board (including one caused by an increase
in the size of the Board) the committee shall recommend to the Board an
individual to fill such vacancy.
The committee shall have sole authority to retain and terminate any search
firm used to identify trustee candidates and to approve that firm's fees and
other retention terms. The committee shall also have authority to obtain advice
and assistance from internal or external legal, accounting or other advisors at
the expense of the Company.
The committee shall recommend from time to time any increase in the size or
change in the composition of the Board that the committee deems advisable.
The committee shall make regular reports to the Board.
The committee shall review and reassess the adequacy of the Company's
governance guidelines and this charter annually and recommend any changes to the
Board for approval.
The committee shall perform an annual self-evaluation of its effectiveness.
Nothing in this charter shall affect the terms of any contract to which EPR
is a party or the terms of any securities issued by EPR which provide for the
selection or nomination of trustees, including but not limited to the rights of
holders of preferred shares to elect trustees upon certain dividend defaults.
APPENDIX C
ENTERTAINMENT PROPERTIES TRUST
SECOND AMENDED AND RESTATED CHARTER OF THE
COMPENSATION COMMITTEE OF THE BOARD OF TRUSTEES
JANUARY 2005
The compensation committee is appointed by the Board to assist in meeting
the Board's responsibilities regarding the compensation of EPR's trustees and
executive officers.
MEMBERSHIP
The committee shall consist of no fewer than three members who meet the
independence requirements of the New York Stock Exchange. Each member of the
committee shall also meet the definition of "non-employee director" within the
meaning of SEC Rule 16b-3, and "outside director" within the meaning of Section
162(m) of the Internal Revenue Code.
The members of the committee shall be appointed and may be replaced by the
Board. Unless elected by the full Board, the members of the committee may
designate a Chairman.
PURPOSE AND RESPONSIBILITIES
The committee shall be directly responsible for:
1. Reviewing and approving Company goals and objectives relevant to CEO
compensation, evaluating the CEO's performance in light of those goals and
objectives, and, either as a committee or together with the other independent
trustees (as determined by the Board) determining and approving the CEO's
compensation based on that evaluation.
2. Reviewing the performance of other executive officers and recommending
their compensation to the Board.
3. Making recommendations to the Board regarding incentive-compensation and
equity-based compensation plans that are subject to Board approval.
4. Preparing the compensation committee report for inclusion in the annual
proxy statement.
In determining the long-term incentive component of the CEO's compensation,
the committee shall consider EPR's performance and relative shareholder return,
the value of similar incentive awards to CEOs at comparable companies, the
awards given to the CEO in past years, and such other factors as the committee
deems relevant. Nothing in this charter shall preclude discussion of CEO
compensation among the entire Board.
The committee may approve awards required to comply with applicable tax
laws, including but not limited to Section 162(m) of the Internal Revenue Code.
The committee shall have sole authority to retain and terminate any
compensation consultant used in evaluating and recommending trustee, CEO or
senior executive compensation and shall have sole authority to approve the
consultant's fees and other retention terms. The committee shall have authority
to obtain advice and assistance from internal or external legal, accounting or
other advisors.
The committee shall perform an annual review of trustee compensation and
make recommendations on trustee compensation to the Board.
The committee shall make an annual report to the Board on CEO succession
planning, including policies and principles for CEO selection and succession in
the event of an emergency or the retirement or removal of the CEO.
The committee shall review and reassess the adequacy of this charter
annually and recommend any changes to the Board for approval.
The committee shall perform an annual self-evaluation of its effectiveness.
ENTERTAINMENT PROPERTIES TRUST
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS MAY 11, 2005
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES
As a shareholder of Entertainment Properties Trust (the "Company"), I
appoint Fred L. Kennon and Gregory K. Silvers as my attorneys-in-fact and
proxies (with full power of substitution), and authorize each of them to
represent me at the Annual Meeting of Shareholders of the Company to be held at
the Leawood Town Centre Theatre, 11701 Nall, Leawood, Kansas, on Wednesday, May
11, 2005 at ten o'clock a.m., and at any adjournment of the meeting, and to vote
the common shares of beneficial interest in the Company held by me as designated
below on proposals 1 and 2.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
Proposal #1. Election of Trustees: Robert J. Druten and David M. Brain
|_| FOR the nominees listed above |_| WITHHOLD AUTHORITY to vote for
the nominees listed above (If
you do not check this box, your
shares will be vote in favor of
both nominees)
TO WITHHOLD AUTHORITY TO VOTE FOR EITHER NOMINEE, STRIKE THROUGH THAT
NOMINEE'S NAME ABOVE.
Proposal #2. Proposal to ratify the appointment of KPMG LLP as the Company's
independent auditors for 2005
|_| FOR |_| AGAINST |_| ABSTAIN
To act upon any other matters that may properly come before the meeting.
IF NO CHOICE IS INDICATED ON THE PROXY, THE PERSONS NAMED AS PROXIES
INTEND TO VOTE FOR BOTH PROPOSALS.
Please sign exactly as your name appears on this Proxy. When shares are held by
joint tenants, both should sign. When signing as attorney, executor, trustee or
other representative capacity, please give your full title. If a corporation,
please sign in full corporate name by President or other authorized officer.
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Signature of Shareholder
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Title
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Signature of Shareholder
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Dated