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<SEC-DOCUMENT>0000909012-06-000316.txt : 20060310
<SEC-HEADER>0000909012-06-000316.hdr.sgml : 20060310
<ACCEPTANCE-DATETIME>20060310121551
ACCESSION NUMBER:		0000909012-06-000316
CONFORMED SUBMISSION TYPE:	N-CSR
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060310
DATE AS OF CHANGE:		20060310
EFFECTIVENESS DATE:		20060310

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CORNERSTONE STRATEGIC VALUE FUND INC/ NEW
		CENTRAL INDEX KEY:			0000814083
		IRS NUMBER:				133407699
		STATE OF INCORPORATION:			MD
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-CSR
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-05150
		FILM NUMBER:		06678248

	BUSINESS ADDRESS:	
		STREET 1:		BEAR STEARNS FUNDS MANAGEMENT INC.
		STREET 2:		383 MADISON AVENUE - 23RD FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10179
		BUSINESS PHONE:		2122722093

	MAIL ADDRESS:	
		STREET 1:		BEAR STEARNS FUNDS MANAGEMENT INC.
		STREET 2:		383 MADISON AVENUE - 23RD FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10179

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CLEMENTE STRATEGIC VALUE FUND INC
		DATE OF NAME CHANGE:	19990622

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CLEMENTE GLOBAL GROWTH FUND INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-CSR
<SEQUENCE>1
<FILENAME>t302414.txt
<TEXT>
================================================================================


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM N-CSR

                   CERTIFIED SHAREHOLDER REPORT OF REGISTERED
                         MANAGEMENT INVESTMENT COMPANIES

INVESTMENT COMPANY ACT FILE NUMBER 811-05150

                     CORNERSTONE STRATEGIC VALUE FUND, INC.

               (Exact name of registrant as specified in charter)

      383 Madison Avenue, New York, New York                     10179
- --------------------------------------------------------------------------------
     (Address of principal executive offices)                 (Zip code)

                                   Jodi Levine
                  383 Madison Avenue, New York, New York 10179
- --------------------------------------------------------------------------------
                     (Name and address of agent for service)

Registrant's telephone number, including area code: (212) 272-3550

Date of fiscal year end: December 31, 2005

Date of reporting period: December 31, 2005

         Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.

         A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.





================================================================================
<PAGE>

ITEM 1. REPORTS TO STOCKHOLDERS.

         The report of Cornerstone Strategic Value Fund, Inc. (the "Registrant")
to stockholders for the year ended December 31, 2005 follows.







================================================================================

                             CORNERSTONE STRATEGIC
                                VALUE FUND, INC.






















                                  ANNUAL REPORT
                               DECEMBER 31, 2005

================================================================================
<PAGE>

CONTENTS


Portfolio Summary                                                              1

Summary Schedule of Investments                                                2

Statement of Assets and Liabilities                                            4

Statement of Operations                                                        5

Statement of Changes in Net Assets                                             6

Financial Highlights                                                           7

Notes to Financial Statements                                                  8

Report of Independent Registered Public Accounting Firm                       12

Tax Information                                                               13

Additional Information Regarding the Fund's
        Directors and Corporate Officers                                      14

Description of Dividend Reinvestment Plan                                     17

Proxy Voting and Portfolio Holdings Information                               19

Privacy Policy Notice                                                         19

Summary of General Information                                                20

Shareholder Information                                                       20





================================================================================
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------

  SECTOR ALLOCATION
                                                                    Percent of
Sector                                                              Net Assets
- --------------------------------------------------------------------------------
Financials                                                             20.0
- --------------------------------------------------------------------------------
Information Technology                                                 15.1
- --------------------------------------------------------------------------------
Healthcare                                                             12.6
- --------------------------------------------------------------------------------
Consumer Discretionary                                                 10.7
- --------------------------------------------------------------------------------
Industrials                                                            10.5
- --------------------------------------------------------------------------------
Consumer Staples                                                       10.3
- --------------------------------------------------------------------------------
Energy                                                                  9.1
- --------------------------------------------------------------------------------
Utilities                                                               3.5
- --------------------------------------------------------------------------------
Telecommunication Services                                              2.9
- --------------------------------------------------------------------------------
Materials                                                               2.3
- --------------------------------------------------------------------------------
Closed-End Domestic Funds                                               2.2
- --------------------------------------------------------------------------------
Other                                                                   0.8
- --------------------------------------------------------------------------------


TOP TEN HOLDINGS, BY ISSUER
                                                                      Percent of
    Holding                                       Sector              Net Assets
- --------------------------------------------------------------------------------
 1. General Electric Co.                        Industrials               3.6
- --------------------------------------------------------------------------------
 2. Exxon Mobil Corp.                             Energy                  3.4
- --------------------------------------------------------------------------------
 3. Microsoft Corp.                       Information Technology          2.7
- --------------------------------------------------------------------------------
 4. Citigroup Inc.                              Financials                2.6
- --------------------------------------------------------------------------------
 5. Procter & Gamble Co. (The)               Consumer Staples             2.2
- --------------------------------------------------------------------------------
 6. EMC Corp.                             Information Technology          2.1
- --------------------------------------------------------------------------------
 7. Bank of America Corp.                       Financials                1.8
- --------------------------------------------------------------------------------
 8. American International Group, Inc.          Financials                1.8
- --------------------------------------------------------------------------------
 9. Johnson & Johnson                           Healthcare                1.8
- --------------------------------------------------------------------------------
10. Pfizer Inc.                                 Healthcare                1.7
- --------------------------------------------------------------------------------


================================================================================

                                                                               1
<PAGE>
<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2005
- --------------------------------------------------------------------------------

                                                         No. of
Description                                              Shares         Value
- --------------------------------------------------------------------------------
EQUITY SECURITIES - 99.39%
CLOSED-END DOMESTIC FUNDS - 2.21%
<S>                                                     <C>        <C>
Tri-Continental Corp.                                    77,000    $   1,430,660
Zweig Fund, Inc.                                        176,600          932,448
Other Closed-End
Domestic Funds (a)                                                       724,845
                                                                   -------------
                                                                       3,087,953
                                                                   -------------
CONSUMER DISCRETIONARY - 10.67%
Comcast Corp., Class A +                                 35,037          909,561
eBay, Inc. +                                             19,000          821,750
Home Depot, Inc. (The)                                   30,600        1,238,688
Time Warner Inc.                                         76,000        1,325,440
Other Consumer
Discretionary (a)                                                     10,610,494
                                                                   -------------
                                                                      14,905,933
                                                                   -------------
CONSUMER STAPLES - 10.33%
Altria Group, Inc.                                       29,300        2,189,296
Coca-Cola Co. (The)                                      32,500        1,310,075
PepsiCo, Inc.                                            24,800        1,465,184
Procter & Gamble Co. (The)                               53,297        3,084,830
Wal-Mart Stores, Inc.                                    39,800        1,862,640
Other Consumer Staples (a)                                             4,526,042
                                                                   -------------
                                                                      14,438,067
                                                                   -------------
ENERGY - 9.12%
ChevronTexaco Corp.                                      27,532        1,562,992
ConocoPhillips                                           17,974        1,045,727
Exxon Mobil Corp.                                        84,000        4,718,280
Schlumberger Ltd.                                        11,000        1,068,650
Other Energy (a)                                                       4,344,949
                                                                   -------------
                                                                      12,740,598
                                                                   -------------
FINANCIALS - 19.96%
American International
Group, Inc.                                              37,531        2,560,740
Bank of America Corp.                                    55,616        2,566,678
Citigroup Inc.                                           74,300        3,605,779
Freddie Mac                                              14,500          947,575





                                                         No. of
Description                                              Shares         Value
- --------------------------------------------------------------------------------

FINANCIALS (CONTINUED)
Goldman Sachs
Group, Inc. (The)                                         7,300    $     932,283
JPMorgan Chase & Co.                                     48,332        1,918,297
Morgan Stanley                                           15,500          879,470
U.S. Bancorp ^                                           28,401          848,906
Wachovia Corp. ^                                         22,600        1,194,636
Wells Fargo & Co.                                        24,200        1,520,486
Other Financials (a)                                                  10,908,663
                                                                   -------------
                                                                      27,883,513
                                                                   -------------
HEALTHCARE - 12.62%
Abbott Laboratories ^                                    21,000          828,030
Amgen Inc. +                                             18,900        1,490,454
Eli Lilly & Co.                                          14,500          820,555
Johnson & Johnson                                        40,900        2,458,090
Medtronic, Inc.                                          21,500        1,237,755
Merck & Co. Inc.                                         28,000          890,680
Pfizer Inc. ^                                            99,660        2,324,071
UnitedHealth Group Inc.                                  23,000        1,429,220
Wyeth                                                    19,200          884,544
Other Healthcare (a)                                                   5,268,027
                                                                   -------------
                                                                      17,631,426
                                                                   -------------
INDUSTRIALS - 10.44%
Boeing Company (The)                                     11,700          821,808
General Electric Co.                                    141,700        4,966,585
Tyco International Ltd.                                  33,397          963,837
United Parcel
Service, Inc., Class B                                   16,300        1,224,945
Other Industrials (a)                                                  6,604,458
                                                                   -------------
                                                                      14,581,633
                                                                   -------------
INFORMATION TECHNOLOGY - 15.10%
Cisco Systems, Inc. +                                    96,400        1,650,368
Dell Inc. +                                              29,700          890,703
EMC Corp. +                                             212,648        2,896,266
Intel Corp.                                              82,500        2,059,200
International Business
Machines Corp.                                           21,000        1,726,200



================================================================================
See accompanying notes to financial statements
2
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2005(CONTINUED)
- --------------------------------------------------------------------------------

                                                         No. of
Description                                              Shares         Value
- --------------------------------------------------------------------------------


INFORMATION TECHNOLOGY (CONTINUED)
Microsoft Corp.                                         142,100    $   3,715,915
QUALCOMM Inc. ^                                          21,000          904,680
Other Information
Technology (a)                                                         7,254,019
                                                                   -------------
                                                                      21,097,351
                                                                   -------------
MATERIALS - 2.28%
Total Materials (a)                                                    3,177,109
                                                                   -------------
REAL ESTATE INVESTMENT TRUSTS - 0.22%
Total Real Estate
Investment Trusts (a)                                                    306,520
                                                                   -------------
TELECOMMUNICATION SERVICES - 2.92%
AT&T Inc.                                                48,364        1,184,434
Sprint Corp.                                             38,446          898,099
Verizon
Communications Inc. ^                                    37,100        1,117,452
Other Telecommunication
Services (a)                                                             875,700
                                                                   -------------
                                                                       4,075,685
                                                                   -------------
UTILITIES - 3.52%
Total Utilities (a)                                                    4,926,918
                                                                   -------------
TOTAL EQUITY SECURITIES
(cost - $126,420,026)                                                138,852,706
                                                                   -------------





                                                        Principal
                                                         Amount
Description                                             (000's)            Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 2.11%
REPURCHASE AGREEMENTS - 2.11%
Bear, Stearns & Co. Inc.*
(Agreement dated 12/31/05
to be repurchased at
$2,945,898) (b)                                   $       2,945    $   2,944,899
                                                                   -------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $2,944,899)                                                    2,944,899
                                                                   -------------
TOTAL INVESTMENTS - 101.50%
(cost - $129,364,925)                                                141,797,605
                                                                   -------------

LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.50)%                                                (2,091,489)
                                                                   -------------

NET ASSETS - 100.00%                                               $ 139,706,116
                                                                   =============
<FN>

- ---------
+    Non-income producing security.
^    Security or a portion thereof is out on loan.
*    Includes investments purchased with cash collateral received for securities
     on loan.
(a)  Represents issues not identified as a top 50 holding in terms of market
     value and issues or issuers not exceeding 1% of net assets individually or
     in the aggregate, respectively, as of December 31, 2005.
(b)  At December 31, 2005, the maturity date for all repurchase agreements held
     was 01/03/06, with interest rates ranging from 2.00% to 4.00%, and
     collateralized by $3,035,279 in U.S. Treasury Bonds.
</FN>
</TABLE>








================================================================================
                                 See accompanying notes to financial statements.
                                                                               3
<PAGE>

<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2005
- --------------------------------------------------------------------------------

ASSETS

<S>                                                               <C>
Investments, at value, including
  collateral for securities on loan of
  $1,708,575 (Cost $129,364,925) (1)                              $ 141,797,605
Receivables:
Securities sold                                                         178,970
Dividends                                                               177,445
Interest                                                                  4,855
Prepaid expenses                                                          1,994
                                                                  -------------
Total Assets                                                        142,160,869
                                                                  -------------

LIABILITIES

Payables:
Upon return of securities loaned                                      1,708,575
Securities purchased                                                    537,266
Investment management fees                                              114,157
Directors' fees                                                          28,161
Other accrued expenses                                                   66,594
                                                                  -------------
Total Liabilities                                                     2,454,753
                                                                  -------------
NET ASSETS (applicable to 24,710,305
  shares of common stock outstanding)                             $ 139,706,116
                                                                  =============

NET ASSET VALUE PER SHARE
  ($139,706,116 / 24,710,305)                                     $        5.65
                                                                  =============

NET ASSETS CONSISTS OF

Capital stock, $0.001 par value;
  24,710,305 shares issued and outstanding
  (100,000,000 shares authorized)                                 $      24,710
Paid-in capital                                                     159,540,411
Cost of 2,239,440 shares repurchased                                (26,999,661)
Accumulated net realized loss on investments                         (5,292,024)
Net unrealized appreciation in value of investments                  12,432,680
                                                                  -------------
Net assets applicable to shares outstanding                       $ 139,706,116
                                                                  =============
<FN>

- ----------------
(1) Includes securities out on loan to brokers with a market value of
    $1,685,896.
</FN>
</TABLE>



================================================================================
See accompanying notes to financial statements.
 4
<PAGE>

<TABLE>
<CAPTION>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2005
- --------------------------------------------------------------------------------

INVESTMENT INCOME
Income:
<S>                                                                <C>
  Dividends (net of foreign taxes withheld of $428)                $  2,506,367
  Securities lending                                                     38,615
  Interest                                                               34,513
                                                                   ------------
  Total Investment Income                                             2,579,495
                                                                   ------------

Expenses:
  Investment management fees                                          1,446,817
  Administration fees                                                   144,796
  Legal and audit fees                                                  113,957
  Directors' fees                                                       108,000
  Printing                                                               41,533
  Accounting fees                                                        40,933
  Custodian fees                                                         26,072
  Transfer agent fees                                                    22,999
  Stock exchange listing fees                                            16,087
  Insurance                                                               7,199
  Miscellaneous                                                           4,000
                                                                   ------------
  Total Expenses                                                      1,972,393
  Less: Management fee waivers                                         (153,244)
  Less: Fees paid indirectly                                            (74,407)
                                                                   ------------
    Net Expenses                                                      1,744,742
                                                                   ------------
  Net Investment Income                                                 834,753
                                                                   ------------

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments                                   27,008,793
Net change in unrealized appreciation in value of investments       (22,438,516)
                                                                   ------------
Net realized and unrealized gain on investments                       4,570,277
                                                                   ------------

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $  5,405,030
                                                                   ============
</TABLE>



================================================================================
                                 See accompanying notes to financial statements.
                                                                               5
<PAGE>

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

                                                               For the Years Ended
                                                                    December 31,
                                                          ------------------------------
                                                               2005             2004
                                                          -------------    -------------

INCREASE/(DECREASE) IN NET ASSETS

Operations:
<S>                                                       <C>              <C>
  Net investment income                                   $     834,753    $     646,242
  Net realized gain/(loss) from investments                  27,008,793         (127,914)
  Net change in unrealized appreciation
        in value of investments                             (22,438,516)      12,198,020
                                                          -------------    -------------
    Net increase in net assets resulting
        from operations                                       5,405,030       12,716,348
                                                          -------------    -------------

Dividends and distributions to shareholders:
  Net investment income                                        (980,195)        (729,442)
  Net realized capital gains                                (24,369,995)            --
  Return-of-capital                                                --        (13,677,285)
                                                          -------------    -------------
    Total dividends and distributions to shareholders       (25,350,190)     (14,406,727)
                                                          -------------    -------------

Capital stock transactions:
  Net assets received in conjunction
     with Merger Agreement                                         --        127,962,525
  Proceeds from 832,602 and 263,935 shares newly issued
    in reinvestment of dividends and distributions,
    respectively                                              4,961,290        1,852,533
                                                          -------------    -------------
    Net increase in net assets resulting
        from capital stock transactions                       4,961,290      129,815,058
                                                          -------------    -------------

  Total increase/(decrease) in net assets                   (14,983,870)     128,124,679
                                                          -------------    -------------


NET ASSETS

Beginning of year                                           154,689,986       26,565,307
                                                          -------------    -------------

End of year                                               $ 139,706,116    $ 154,689,986
                                                          =============    =============
</TABLE>


================================================================================
See accompanying notes to financial statements
 6
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each year indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                    For the Years Ended December 31,
                                                          2005        2004        2003        2002        2001
PER SHARE OPERATING
PERFORMANCE
<S>                                                    <C>          <C>         <C>         <C>         <C>
Net asset value, beginning of year                     $    6.48    $   6.90    $   6.41    $   9.20    $   11.31
                                                       ---------    --------    --------    --------    ---------
Net investment income/(loss) #                              0.03        0.05        0.04       (0.01)       (0.06)
Net realized and unrealized gain/(loss)
  on investments and foreign currency
  related translations                                      0.18        0.55        1.44       (2.29)       (2.13)
                                                       ---------    --------    --------    --------    ---------
Net increase/(decrease) in net assets
  resulting from operations                                 0.21        0.60        1.48       (2.30)       (2.19)
                                                       ---------    --------    --------    --------    ---------
Dividends and distributions to shareholders:
Net investment income                                      (0.04)      (0.05)      (0.04)       --           --
Net realized gain on investments and
  foreign currency related transactions                    (1.00)       --          --          --           --
Return-of-capital                                           --         (0.99)      (0.95)      (0.50)        --
                                                       ---------    --------    --------    --------    ---------
Total dividends and distributions to shareholders          (1.04)      (1.04)      (0.99)      (0.50)        --
                                                       ---------    --------    --------    --------    ---------
Capital stock transactions:
Anti-dilutive effect due to capital
  stock repurchased                                         --          --          --          0.02         0.08
Anti-dilutive/(dilutive) effect due to shares issued
  in reinvestment of dividends and distributions            --          0.02       --         (0.01)        --
                                                       ---------    --------    --------    --------    ---------
Total capital stock transactions                            --          0.02       --          0.01         0.08
                                                       ---------    --------    --------    --------    ---------
Net asset value, end of year                           $    5.65    $   6.48   $   6.90    $   6.41    $    9.20
                                                       =========    ========   ========    ========    =========
Market value, end of year                              $    7.05    $   8.51   $   9.00    $   5.85    $    8.05
                                                       =========    ========   ========    ========    =========
Total investment return (a)                                (1.32)%      8.38%     77.69%     (20.85)%     (23.98)%
                                                       =========    ========   ========    ========    =========

RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)                  $ 139,706    $ 154,690   $  26,565   $  24,376   $  35,256
Ratio of expenses to average net assets,
  net of fee waivers, if any (b)                            1.20%        1.28%       1.20%       1.80%        1.77%
Ratio of expenses to average net assets,
  excluding fee waivers, if any (c)                         1.36%        1.50%       1.59%       2.17%        2.11%
Ratio of expenses to average net assets,
  net of fee waivers, if any (c)                            1.26%        1.36%       1.25%       1.86%        1.95%
Ratio of net investment income/(loss) to
  average net assets                                        0.58%        0.73%       0.68%      (0.13)%      (0.64)%
Portfolio turnover rate                                    21.60%       39.05%      11.88%      29.63%       59.83%

<FN>

- ------------------------------------------------------------------------------------------------------------------
#    Based on average shares outstanding.
(a)  Total investment return at market value is based on the changes in market
     price of a share during the year and assumes reinvestment of dividends and
     distributions, if any, at actual prices pursuant to the Fund's dividend
     reinvestment plan. Total investment return does not reflect brokerage
     commissions.
(b)  Expenses are net of fees paid indirectly.
(c)  Expenses exclude the reduction for fees paid indirectly.
</FN>
</TABLE>

================================================================================
                                 See accompanying notes to financial statements.
                                                                               7
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES

Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company. On June 25, 2004, the
Fund consummated tax-free mergers with Progressive Return Fund, Inc. ("PGF") and
Investors First Fund, Inc. ("MGC") (collectively, the "Predecessor Funds").
Pursuant to the terms of the agreements governing the mergers, each share of
common stock of the Predecessor Funds was converted into an equivalent dollar
amount of full shares of common stock of the Fund, based on the net asset values
of the Fund, MGC and PGF as of June 25, 2004 ($6.47, $10.42 and $20.96,
respectively), resulting in a conversion ratio of 1.6094 and 3.2378 shares of
the Fund for each share of MGC and PGF, respectively. This resulted in the
issuance of 15,955,350 and 3,808,891 Fund shares for MGC and PGF, respectively.
Cash was paid in lieu of fractional shares. Net assets of the Fund, MGC and PGF
as of the merger date were $25,105,399, $103,302,250 and $24,660,275, including
unrealized appreciation/(depreciation) of $2,516,413, $23,078,675 and
$(2,519,953), respectively. In addition, PGF's net assets included undistributed
capital losses of $13,754,555. Total net assets after the merger were
$153,067,924.

The following is a summary of significant accounting policies consistently
followed by the Fund:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. Securities and assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Board. Fair valuation methodologies and procedures
may include, but are not limited to: analysis and review of financial and
non-financial information abut the company; comparisons to the valuation and
changes in valuation of similar securities, including reference to special
reports prepared by analysts and or reports published in the financial press,
the financial conditions and prospects of the issuer available, including
considering any recent management or capital structure changes or other recent
events that may impact the price of the security; and evaluation of any other
information that could be indicative of the value of the security. At December
31, 2005, the Fund held no securities valued in good faith by the Board of
Directors. The net asset value per share of the Fund is calculated weekly and on
the last business day of the month with the exception of those days on which the
American Stock Exchange, LLC is closed.


================================================================================
8
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Investment
Manager" or "Cornerstone") considers creditworthy. The seller under a repurchase
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the repurchase price plus
accrued interest. Cornerstone monitors daily, the mark-to-market of the value of
the collateral, and, if necessary, requires the seller to maintain additional
securities, so that the value of the collateral is not less than the repurchase
price. Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delays in connection with the
disposition of the underlying securities.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.

TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.

DISTRIBUTIONS OF INCOME AND GAINS: Effective June 25, 2002, the Fund initiated a
fixed, monthly distribution to shareholders. To the extent that these
distributions exceed the current earnings of the Fund, the balance will be
generated from sales of portfolio securities held by the Fund, which will either
be short-term or long-term capital gains or a tax-free return-of-capital. To the
extent these distributions are not represented by net investment income and
capital gains, they will not represent yield or investment return on the Fund's
investment portfolio. The Fund plans to maintain this distribution policy even
if regulatory requirements would make part of a return-of-capital, necessary to
maintain the distribution, taxable to shareholders and to disclose that portion
of the distribution that is classified as ordinary income. Although it has no
current intention to do so, the Board may terminate this distribution policy at
any time and such termination may have an adverse effect on the market price for
the Fund's common shares. The Fund determines annually whether to distribute any
net realized long-term capital gains in excess of net realized short-term
capital losses, including capital loss carryovers, if any. To the extent that
the Fund's taxable income in any calendar year exceeds the aggregate amount
distributed pursuant to this distribution policy, an additional distribution may
be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent
that the aggregate amount distributed in any calendar year exceeds the Fund's
taxable income, the amount of that excess may constitute a return-of-capital for
tax purposes. A return-of-capital distribution reduces the cost basis of an
investor's shares in the Fund. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.

NOTE B. AGREEMENTS
Cornerstone serves as the Fund's Investment Manager with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund, an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. During the year ended December
31, 2005, Cornerstone volun-


================================================================================
                                                                               9
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

tarily agreed to waive its management fees from the Fund to the extent that
monthly operating expenses exceed a rate of 0.10% of average net assets
calculated monthly. For the year 2006, Cornerstone undertakes to waive its
advisory fees to the extent that the Fund's net monthly operating expenses
(including basic legal fees but excluding other legal expenses) exceed a
specified rate of average net assets of 0.10%. For the year ended December 31,
2005, Cornerstone earned $1,446,817 for investment management services, of which
it waived $153,244. The Investment Manager may discontinue such undertaking at
any time during the fiscal year without notice to fund shareholders.

Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $74,407 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.

The Fund paid or accrued approximately $95,955 for the year ended December 31,
2005 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, serves as Secretary of the Fund.

NOTE C. INVESTMENT IN SECURITIES
For the year ended December 31, 2005, purchases and sales of securities, other
than short-term investments, were $31,215,063 and $51,120,254 respectively.

NOTE D. SECURITIES LENDING
To generate additional income, the Fund may lend up to 10% of its total assets.
The Fund receives payments from borrowers equivalent to the dividends and
interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers at
December 31, 2005, was $1,685,896.

During the year ended December 31, 2005, the Fund earned $38,615 in securities
lending income which is included under the caption Interest in the Statement of
Operations.

NOTE E. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.

The tax  character of dividends and  distributions  paid during
the years ended December 31, for the Fund were as follows:

                ORDINARY INCOME               RETURN-OF-CAPITAL
                ---------------               -----------------
              2005          2004            2005            2004
              ----          ----            ----            ----
            $980,195      $729,442           --         $13,677,285

                             LONG-TERM CAPITAL GAINS
                             -----------------------
                           2005                  2004
                           ----                  ----
                         $24,369,995              --

At December 31, 2005, the components of distributable earnings on a tax basis,
for the Fund were as follows:

Accumulated net realized loss                                      $ (5,292,024)
Unrealized appreciation                                              12,432,680
                                                                   ------------
Total distributable earnings                                       $  7,140,656
                                                                   ============

================================================================================
10
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

The Fund reclassified $145,442 from distributions in excess of net investment
income and $34,657 from accumulated net realized loss to paid-in capital to
adjust for certain permanent book/tax differences.
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2005, the Fund did not incur Post-October losses. At December 31, 2005, the
Fund had a capital loss carryforward for U.S. federal income tax purposes of
$5,292,024 of which $2,547,381 expires in 2008, $1,281,365 expires in 2009,
$693,207 expires in 2010, $635,700 expires in 2011 and $134,371 expires in 2012.
At December 31, 2005, the identified cost for federal income tax purposes, as
well as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation from investments were $129,364,925, $18,929,755,
$(6,497,075) and $12,432,680, respectively.
















================================================================================
                                                                              11
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2005, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended December 31, 2001 have been
audited by other auditors, whose report dated February 8, 2002 expressed an
unqualified opinion on such financial highlights.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2005 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cornerstone Strategic Value Fund, Inc. as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the four years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.



TAIT, WELLER & BAKER, LLP

Philadelphia, Pennsylvania
February 7, 2006




================================================================================
12
<PAGE>

2005 TAX INFORMATION (UNAUDITED)

Cornerstone Strategic Value Fund, Inc. (the "Fund") is required by Subchapter M
of the Internal Revenue Code of 1986, as amended, to advise its shareholders
within 60 days of the Fund's year end (December 31, 2005) as to the U.S. federal
tax status of the dividends and distributions received by the Fund's
shareholders in respect of such fiscal year. During the year ended December 31,
2005 the following dividends and distributions per share were paid by the Fund:
<TABLE>
<CAPTION>

                                            SOURCES OF DIVIDENDS AND DISTRIBUTIONS
                                                      (PER SHARE AMOUNTS)

<S>                          <C>        <C>           <C>           <C>           <C>           <C>
PAYMENT DATES:               1/31/05    2/28/05       3/31/05       4/29/05       5/31/05       6/30/05
                             -------    -------       -------       -------       -------       -------
Ordinary Income(1)           $ 0.003    $ 0.003       $ 0.003       $ 0.003       $ 0.003       $ 0.003
Long-term Capital Gains(2)   $ 0.084    $ 0.084       $ 0.084       $ 0.084       $ 0.084       $ 0.084
                             -------    -------       -------       -------       -------       -------
Total:                       $ 0.087    $ 0.087       $ 0.087       $ 0.087       $ 0.087       $ 0.087
                             =======    =======       =======       =======       =======       =======

PAYMENT DATES:               7/31/05    8/31/05       9/30/05       10/31/05      11/30/05      12/30/05
                             -------    -------       -------       --------      --------      --------
Ordinary Income(1)           $ 0.003    $ 0.003       $ 0.003       $ 0.003       $ 0.003       $ 0.003
Long-term Capital Gains(2)   $ 0.084    $ 0.084       $ 0.084       $ 0.084       $ 0.084       $ 0.084
                             -------    -------       -------       -------       -------       -------
Total:                       $ 0.087    $ 0.087       $ 0.087       $ 0.087       $ 0.087       $ 0.087
                             =======    =======       =======       =======       =======       =======
<FN>
- --------------------------------------------------------------------------------------------------------

(1)  ORDINARY INCOME DIVIDENDS - This is the total per share amount of ordinary
     income dividends and short-term capital gain distributions (if applicable)
     included in the amount reported in Box 1a on Form 1099-DIV.
(2)  LONG-TERM CAPITAL GAINS- This is the per share amount of the total
     long-term capital gain distributions reported in Box 2a on Form 1099-DIV.
</FN>
</TABLE>

The Fund has met the requirements to pass through all of its (100%) ordinary
income dividends as qualified dividends, which are subject to a maximum federal
tax rate of 15%. This is reported in Box 1b on Form 1099-DIV. Ordinary income
dividends should be reported as dividend income on Form 1040. Please note that
to utilize the lower tax rate for qualifying dividend income, shareholders
generally must have held their shares in the Fund for at least 61 days during
the 121 day period beginning 60 days before the ex-dividend date.

Long-term capital gain distributions arise from gains on securities held by the
Fund for more than one year. They are subject to a maximum federal rate of 15%.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of their distribution(s).

In general, distributions received by tax-exempt recipients (e.g., IRA's and
Keoghs) need not be reported as taxable income for U.S. federal income tax
purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7)
plans) may need this information for their annual information reporting.

Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investment in the Fund.


================================================================================
                                                                              13
<PAGE>

<TABLE>
<CAPTION>

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND
CORPORATE OFFICERS (UNAUDITED)
                                                                                                     NUMBER OF
                                                                                                     PORTFOLIOS IN
NAME AND                                                                               POSITION      FUND COMPLEX
ADDRESS              POSITION(S)           PRINCIPAL OCCUPATION                        WITH FUND     OVERSEEN BY
(AGE)*               HELD WITH FUND        OVER LAST 5 YEARS                           SINCE         DIRECTORS
- --------------------------------------------------------------------------------------------------------------------
<S>                  <C>                  <C>                                          <C>          <C>
Ralph W.             Chairman of the       President, Cornerstone Advisors, Inc.;      1998          2
Bradshaw**           Board of              Financial Consultant; previous Director
(55)                 Directors and         of The Austria Fund, Inc.; President
                     President             and Director of Cornerstone Total
                                           Return Fund, Inc.

William A.           Director and Vice     Director and Stockholder of                 2004          2
Clark**              President             Cornerstone Advisors, Inc., former
(60)                                       financial consultant of Deep Discount
                                           Advisors, Inc.; previous Director of
                                           The Austria Fund, Inc.; Director of
                                           Cornerstone Total Return Fund, Inc.

Glenn W.             Director; Audit       Chairman of the Board and Chief             2000          2
Wilcox, Sr.          Committee             Executive Officer of Wilcox Travel
(74)                 Chairman,             Agency, Inc.; Director, Champion
                     Nominating and        Industries, Inc.; Chairman of Tower
                     Corporate             Associates, Inc. (a real estate venture);
                     Governance            Director of Wachovia Corp. WNC
                     Committee             Regional Advisory Board; Director and
                     Member                Chairman of Audit Committee of
                                           Cornerstone Total Return Fund, Inc.

Thomas H.            Director; Audit,      Chairman of the Board of Photonics          1987          2
Lenagh               Nominating and        Products Group; Independent Financial
(83)                 Corporate             Adviser; Director of The Adams Express
                     Governance            Company and Petroleum and Resources
                     Committee             Corporation; Director of Cornerstone
                     Member                Total Return Fund, Inc.

Edwin                Director; Audit,      Distinguished Fellow, The Heritage          2001          2
Meese III            Nominating and        Foundation, Washington D.C.;
(74)                 Corporate             Distinguished Visiting Fellow at the
                     Governance            Hoover Institution, Stanford University;
                     Committee             Senior Adviser, Revelation L.P .; formerly
                     Member                U.S. Attorney General under President
                                           Ronald Reagan; Director of Carrington
                                           Laboratories Inc.; Director of
                                           Cornerstone Total Return Fund, Inc.



================================================================================
14
<PAGE>

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONTINUED)
                                                                                                     NUMBER OF
                                                                                                     PORTFOLIOS IN
NAME AND                                                                               POSITION      FUND COMPLEX
ADDRESS                POSITION(S)         PRINCIPAL OCCUPATION                        WITH FUND     OVERSEEN BY
(AGE)*                 HELD WITH FUND      OVER LAST 5 YEARS                           SINCE         DIRECTORS
- ----------------------------------------------------------------------------------------------------------------------
Scott B. Rogers        Director; Audit,    Chief Executive Officer, Asheville          2000          2
(50)                   Nominating and      Buncombe Community Christian
                       Corporate           Ministry; President, ABCCM Doctor's
                       Governance          Medical Clinic; Appointee, NC
                       Committee           Governor's Commission on Welfare to
                       Member              Work; Chairman and Director, Recycling
                                           Unlimited; Director of A-B Vision Board,
                                           Interdenominational Ministerial Alliance,
                                           Faith Partnerships, Inc.; Director of
                                           Cornerstone Total Return Fund, Inc.

Andrew A.              Director;           Attorney and senior member of Strauss       2000          2
Strauss                Chairman of         & Associates, P.A., Attorneys, Asheville
(52)                   Nominating and      and Hendersonville, NC; previous
                       Corporate           President of White Knight Healthcare,
                       Governance          Inc. and LMV Leasing, Inc., a wholly
                       Committees and      owned subsidiary of Xerox Credit
                       Audit Committee     Corporation; Director of Memorial
                       Member              Mission Hospital Foundation, Deerfield
                                           Episcopal Retirement Community and
                                           Asheville Symphony; Director of
                                           Cornerstone Total Return Fund, Inc.












================================================================================
                                                                              15
<PAGE>

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONCLUDED)

NAME AND                                                                                            POSITION
ADDRESS                       POSITION            PRINCIPAL OCCUPATION                              WITH FUND
(AGE)*                        HELD WITH FUND      OVER LAST 5 YEARS                                 SINCE
- -----------------------------------------------------------------------------------------------------------------
Gary A. Bentz**               Chief Compliance    Chief Financial Officer, Chairman and             2004
(49)                          Officer             Stockholder of Cornerstone Advisors, Inc.;
                                                  previous Director, Vice President and
                                                  Treasurer of the Fund and Cornerstone Total
                                                  Return Fund; previous Director of The Austria
                                                  Fund, Inc., Financial Consultant, Certified
                                                  Public Accountant; Chief Compliance Officer
                                                  of Cornerstone Total Return Fund, Inc.

Thomas R. Westle              Secretary           Partner, Blank Rome LLP, a law firm; previous     2000
405 Lexington Avenue                              partner, Spitzer & Feldman P.C., a law firm.
New York, NY 10174
(52)

Jodi B. Levine                Treasurer           Associate Director, Bear Stearns & Co. Inc.       2004
(36)
<FN>

- ------------------------------------------------------------------------------------------------------------------

*    The mailing address of each Director and/or Officer with respect to the
     Fund's operation is 383 Madison Ave.-23rd Floor, New York, NY 10179,
     unless otherwise indicated.
**   Designates a director who is an "interested person" of the Fund as defined
     by the Investment Company Act of 1940, as amended. Messrs. Bradshaw and
     Clark are interested persons of the Fund by virtue of their current
     positions with the Investment Manager of the Fund.
</FN>
</TABLE>









================================================================================
16
<PAGE>

DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)

Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment Plan (the "Plan"),
unless and until an election is made to withdraw from the Plan on behalf of such
participating shareholders. Shareholders who do not wish to have distributions
automatically reinvested should so notify American Stock Transfer & Trust Co.
(the "Agent") at P.O. Box 922, Wall Street Station, New York, NY 10269-0560 or
call (877) 248-6416. Under the Plan, all of the Fund's dividends and other
distributions to shareholders are reinvested in full and fractional Shares as
described below.

When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Distribution" and collectively, "Distributions"), the
Agent, on the shareholders' behalf, will: (i) receive additional authorized
shares from the Fund either newly issued or repurchased from shareholders by the
Fund and held as treasury stock ("Newly Issued Shares") or, (ii) at the sole
discretion of the Board of Directors, be authorized to purchase outstanding
shares on the open market, on the American Stock Exchange, LLC or elsewhere,
with cash allocated to it by the Fund ("Open Market Purchases").

Shares acquired by the Agent in Open Market Purchases will be allocated to the
reinvesting shareholders based on the average cost of such Open Market
Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at the lower of (i) a price equal to the average
closing price of the Fund over the five trading days preceding the payment of
such distribution, or (ii) the net asset value of the Fund as last determined
prior to such payment date.

Registered shareholders who acquire their shares through Open Market Purchases
and who do not wish to have their Distributions automatically reinvested should
so notify the Fund in writing. If a Shareholder has not elected to receive cash
Distributions and the Agent does not receive notice of an election to receive
cash Distributions prior to the record date of any distribution, the shareholder
will automatically receive such Distributions in additional Shares.

Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Distribution payment date.
When a participant withdraws from the Plan, or upon termination of the Plan as
provided below, certificates for whole shares credited to his/her account under
the Plan will, upon request, be issued. Whether or not a participant requests
that certificates for whole shares be issued, a cash payment will be made for
any fraction of a Share credited to such account.

The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records. The Agent will hold shares in the
account of each Plan participant in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.

In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the Shareholder's name and held for the account of
beneficial owners participating in the Plan.

There will be no charge to participants for reinvesting Distributions other than
their share of brokerage commissions as discussed below. The Agent's fees for
administering the Plan and handling the reinvestment of Distributions will be
paid by the



================================================================================
                                                                              17
<PAGE>

DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)

Fund. Each participant's account will be charged a pro-rata share of brokerage
commissions incurred with respect to the Agent's Open Market Purchases in
connection with the reinvestment of Distributions.

Brokerage charges for purchasing small amounts of shares for individual accounts
through the Plan are expected to be less than the usual brokerage charges for
such transactions because the Agent will be purchasing shares for all the
participants in blocks and pro-rating the lower commission that may be
attainable.

The automatic reinvestment of Distributions will not relieve participants of any
income tax that may be payable on such Distributions. Participants who receive
shares pursuant to the Plan as described above will recognize taxable income in
the amount of the fair market value of those shares. In the case of non-U.S.
participants whose Distributions are subject to U.S. income tax withholding and
in the case of participants subject to 28% federal backup withholding, the Agent
will reinvest Distributions after deduction of the amount required to be
withheld.

The Fund reserves the right to amend or terminate the Plan by written notice to
participants. All correspondence concerning the Plan should be directed to the
Agent at the address referred to in the first paragraph of this section.











================================================================================
18
<PAGE>

PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)

Information regarding how the Cornerstone Strategic Value Fund, Inc. (the
"Fund") voted proxies related to its portfolio securities during the 12-month
period ended June 30 of each year as well as the policies and procedures that
the Fund uses to determine how to vote proxies relating to its portfolio
securities are available: o by calling (212) 272-3550; o on the website of the
Securities and Exchange Commission, http://www.sec.gov. This report incorporates
a Summary Schedule of Investments for the Fund. A complete Schedule of
Investments for the Fund may be obtained free of charge by contacting the Fund
at (212) 272-3550.

The Fund files a complete schedule of its portfolio holdings for the first and
third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the SEC's Public Reference Room may be obtained by calling
1-800-SEC-0330.

PRIVACY POLICY NOTICE (UNAUDITED)

The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.

CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:

     1.   Information from the Consumer: this category includes information the
          Fund receives from you on or in applications or other forms,
          correspondence, or conversations (such as your name, address, phone
          number, social security number, assets, income and date of birth); and

     2.   Information about the Consumer's transactions: this category includes
          information about your trans- actions with the Fund, its affiliates,
          or others (such as your account number and balance, payment history,
          parties to transactions, cost basis information, and other financial
          information).

CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.

CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.




================================================================================
                                                                              19
<PAGE>

SUMMARY OF GENERAL INFORMATION (UNAUDITED)

The Fund - Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified
investment company whose shares trade on the American Stock Exchange, LLC. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is managed by Cornerstone Advisors, Inc.

SHAREHOLDER INFORMATION (UNAUDITED)

The Fund is listed on the American Stock Exchange, LLC (symbol "CLM"). The share
price is published in: THE NEW YORK TIMES (daily) under the designation
"CornerStrt" and THE WALL STREET JOURNAL (daily) and BARRON'S (each Monday)
under the designation "CornstnStrat." The net asset value per share is available
weekly and may be obtained by contacting the Fund at the general inquiry phone
number.

- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
- --------------------------------------------------------------------------------


- --------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in the report.
- --------------------------------------------------------------------------------













================================================================================
20
<PAGE>






                     CORNERSTONE STRATEGIC VALUE FUND, INC.
<PAGE>

================================================================================
DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw           Chairman of the Board of
                              Directors and President
William A. Clark            Director and Vice President
Thomas H. Lenagh            Director
Edwin Meese III             Director
Scott B. Rogers             Director
Andrew A. Strauss           Director
Glenn W. Wilcox, Sr.        Director
Gary A. Bentz               Chief Compliance Officer
Thomas R. Westle            Secretary
Jodi B. Levine              Treasurer

                            STOCK TRANSFER AGENT
INVESTMENT MANAGER          AND REGISTRAR
Cornerstone Advisors, Inc.  American Stock Transfer &
One West Pack Square        Trust Co.
Suite 1650                  59 Maiden Lane
Asheville, NC 28801         New York, NY 10038

                            INDEPENDENT REGISTERED
ADMINISTRATOR               PUBLIC ACCOUNTING FIRM
Bear Stearns Funds          Tait, Weller & Baker, LLP
Management Inc.             1818 Market Street
383 Madison Avenue          Suite 2400
New York, NY 10179          Philadelphia, PA 19103

CUSTODIAN                   LEGAL COUNSEL
Custodial Trust Company     Blank Rome LLP
101 Carnegie Center         405 Lexington Avenue
Princeton, NJ 08540         New York, NY 10174

EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179

For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-3550.

    AMERICAN
STOCK EXCHANAGE(R)
     LISTED
    CLM(tm)
<PAGE>

ITEM 2. CODE OF ETHICS.

(a) As of the end of the period covered by this report, the Registrant has
adopted a code of ethics that applies to the Registrant's principal executive
officer, principal accounting officer, and persons performing similar functions.

(c) and (d). During the period covered by this report, there was no amendment
to, and no waiver granted from, any provision of the code of ethics that applies
to the Registrant's principal executive officer, principal accounting officer,
and persons performing similar functions.

(f)(1) Pursuant to Item 12(a), the Registrant is attaching as an exhibit
(EX-99.CODE ETH) a copy of its code of ethics that applies to its principal
executive officer, principal financial officer, and persons performing similar
functions.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The registrant's board of directors has determined that it does not have
an audit committee financial expert serving on its audit committee.

(a)(2) Not applicable

(a)(3) At this time, the registrant believes that the experience provided by
each member of the audit committee together offer the registrant adequate
oversight for the registrant's level of financial complexity.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) through (d). The information in the table below is provided for services
rendered to the registrant by its independent registered public accounting firm,
Tait, Weller & Baker, LLP, for the Registrant's fiscal years ended December 31,
2005 and December 31, 2004.

                                                       2005          2004
                                                     -------       -------
Audit Fees                                           $15,600       $15,000
Audit-related Fees                                        --            --
Tax (1)                                              $ 3,100       $ 3,000
Other                                                     --       $ 4,250*
                                                     -------       -------
Total                                                $18,700       $22,250
                                                     =======       =======

(1) Tax services in connection with the registrant's excise tax calculations and
review of the registrant's applicable tax returns.

* These fees are related to the mergers of Progressive Return Fund, Inc. and
Investors First Fund, Inc. with and into Cornerstone Strategic Value Fund, Inc.

(e)(1) Audit Committee Pre-Approval Policies and Procedures.

         Before the auditor is (i) engaged by the Registrant to render audit,
audit related or permissible non-audit services to the Registrant or (ii) with
respect to non-audit services to be provided by the auditor to the Registrant's
investment adviser or any entity in the investment Registrant complex, if the
nature of the services provided relate directly to the operations or financial
reporting of the Registrant, either: (a) the Audit Committee shall pre-approve
such engagement; or (b) such engagement shall be entered into pursuant to
pre-approval policies and procedures established by the Audit Committee. Any
such policies and procedures must be detailed as to the particular service and
not involve any delegation of the Audit Committee's responsibilities to the
Registrant's investment adviser. The Audit Committee may delegate to one or more
of its members the authority to grant pre-approvals. The pre-approval policies
and procedures shall include the requirement that the decisions of any member to
whom authority is delegated under this provision shall be presented to the full
Audit Committee at its next scheduled meeting. Under certain limited
circumstances, pre-approvals are not required if certain de minimis thresholds
are not exceeded, as such thresholds are set forth by the Audit Committee and in
accordance with applicable SEC rules and regulations.

(e)(2) None of the services provided to the Registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) There were no non-audit fees billed by Tait, Weller & Baker LLP for services
rendered to the Registrant, the Registrant's investment advisor (not including
any sub-advisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor) or any entity
controlling, controlled by, or under common control with the investment advisor
that provides ongoing services to the Registrant for the Registrant's last two
fiscal years (December 31, 2004 and December 31, 2005).

(h) No disclosures are required by this Item 4(h).

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) The Registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Securities and
Exchange Act of 1934, as amended. Glenn Wilcox (Chair), Edwin Meese, Thomas
Lenagh, Andy Strauss and Scott Rogers are the members of the Registrant's audit
committee.

(b) Not applicable.

ITEM 6. SCHEDULE OF INVESTMENTS.

<TABLE>
<CAPTION>


CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2005

  EQUITY SECURITIES - 99.39%                                SHARES       VALUE
                                                            ------       -----

  CLOSED-END DOMESTIC FUNDS - 2.21%
<S>                                                         <C>      <C>
     Adams Express Co.                                      49,500   $   621,225
     General American Investors Company, Inc.                3,000       103,620
     Tri-Continental Corp.                                  77,000     1,430,660
     Zweig Fund, Inc.                                      176,600       932,448
                                                                     -----------
                                                                       3,087,953
                                                                     ===========

  CONSUMER DISCRETIONARY - 10.67%
     Acco Brands Corporation                                   235         5,757
     Bed Bath & Beyond Inc. +                                4,200       151,830
     Best Buy Co., Inc. ^                                    7,125       309,795
     Black & Decker Corp.                                    3,000       260,880
     Carnival Corp.                                         11,800       630,946
     CCE Spinco, Inc. + ^^                                   1,100        14,410
     Circuit City Stores, Inc.                               5,000       112,950
     Clear Channel Communications, Inc.                      8,800       276,760
     Comcast Corp.,  Class A +                              35,037       909,561
     D.R. Horton, Inc.                                       7,000       250,110
     Eastman Kodak Co.                                       1,400        32,760
     eBay, Inc. +                                           19,000       821,750
     Federated Department Stores, Inc.                       5,526       366,540
     Ford Motor Company                                     26,300       203,036
     Fortune Brands, Inc.                                    3,500       273,070
     Gannett Co., Inc.                                       6,000       363,420
     Gap, Inc. (The) ^                                      12,200       215,208
     Goodyear Tire & Rubber Company (The) + ^                4,500        78,210
     Harley-Davidson, Inc. ^                                 4,400       226,556
     Hilton Hotels Corp.                                    11,200       270,032
     Home Depot, Inc. (The)                                 30,600     1,238,688
     J.C. Penney Company, Inc.                               4,500       250,200
     Kohl's Corp. + ^                                        5,000       243,000
     Lowe's Companies, Inc. ^                               11,200       746,592
     Marriott International, Inc., Class A                   2,100       140,637
     Mattel, Inc.                                            5,500        87,010
     McDonald's Corp. ^                                     17,600       593,472
     News Corporation, Class A                              30,000       466,500
     NIKE, Inc., Class B                                     2,300       199,617
     Omnicom Group Inc.                                      4,100       349,033
     Reebok International Ltd.                               1,500        87,345
     Sears Holdings Corp. +                                    503        58,112
     Staples, Inc.                                          10,800       245,268
     Starbucks Corp. +                                      10,800       324,108
     Target Corporation                                     11,800       648,646
     Time Warner Inc.                                       76,000     1,325,440
     TJX Companies, Inc. (The)                               7,000       162,610
     Univision Communications Inc., Class A +                7,000       205,730
     Viacom Inc., non-voting Class B                        23,900       779,140
     Walt Disney Co. (The)                                  29,200       699,924
     Yum! Brands, Inc.                                       6,000       281,280
                                                                     -----------
                                                                      14,905,933
                                                                     ===========
<PAGE>

  CONSUMER STAPLES - 10.33%
     Altria Group, Inc.                                     29,300     2,189,296
     Anheuser-Busch Companies, Inc.                         16,700       717,432
     Archer Daniels Midland Company                          5,460       134,644
     Campbell Soup Company                                   2,000        59,540
     Coca-Cola Co. (The)                                    32,500     1,310,075
     Coca-Cola Enterprises Inc.                              6,500       124,605
     Colgate-Palmolive Company                              11,100       608,835
     ConAgra Foods, Inc. ^                                   4,400        89,232
     Costco Wholesale Corp.                                  6,500       321,555
     CVS Corp.                                               5,000       132,100
     General Mills, Inc.                                     9,500       468,540
     H.J. Heinz Co.                                          6,600       222,552
     Kimberly-Clark Corporation                              6,900       411,585
     Kroger Co. (The) +                                      4,800        90,624
     Pepsi Bottling Group, Inc. (The)                        4,000       114,440
     PepsiCo, Inc.                                          24,800     1,465,184
     Procter & Gamble Co. (The)                             53,297     3,084,830
     Sara Lee Corp.                                         11,500       217,350
     Sysco Corp.                                             5,800       180,090
     Walgreen Co.                                           14,300       632,918
     Wal-Mart Stores, Inc.                                  39,800     1,862,640
                                                                     -----------
                                                                      14,438,067
                                                                     ===========

  ENERGY - 9.12%
     Anadarko Petroleum Corp.                                5,900       559,025
     Baker Hughes Inc. ^                                     8,100       492,318
     ChevronTexaco Corp.                                    27,532     1,562,992
     ConocoPhillips                                         17,974     1,045,727
     Devon Energy Corporation                                5,000       312,700
     Exxon Mobil Corp.                                      84,000     4,718,280
     FMC Technologies, Inc. +                                7,300       313,316
     Marathon Oil Corp.                                      7,500       457,275
     Occidental Petroleum Corp.                              8,000       639,040
     Peabody Energy Corp. ^                                  8,000       659,360
     Schlumberger Ltd.                                      11,000     1,068,650
     Transocean Inc. +                                       2,500       174,225
     Western Gas Resources, Inc.                            11,000       517,990
     XTO Energy Inc.                                         5,000       219,700
                                                                     -----------
                                                                      12,740,598
                                                                     ===========

  FINANCIALS - 19.96%
     AFLAC Inc.                                              7,000       324,940
     Allstate Corp. (The)                                    9,300       502,851
     American Express Company                               15,600       802,776
     American International Group, Inc.                     37,531     2,560,740
     Ameriprise Financial, Inc.                              3,120       127,920
     AONCorporation                                          4,900       176,155
     Bank of America Corp.                                  55,616     2,566,678
     Bank of New York Co., Inc. (The)                       11,400       363,090
     Charles Schwab Corporation (The)                       12,000       176,040
     Citigroup Inc.                                         74,300     3,605,779
     Fannie Mae                                             13,000       634,530
     Fifth Third Bancorp                                     9,000       339,480
     Franklin Resources, Inc. ^                              3,700       347,837
     Freddie Mac                                            14,500       947,575
     Goldman Sachs Group, Inc. (The)                         7,300       932,283
     Hartford Financial Services Group, Inc. (The)           6,000       515,340
     JPMorgan Chase & Co.                                   48,332     1,918,297
     Lehman Brothers Holding Inc.                            3,600       461,412
     Marsh & McLennan Companies, Inc. ^                     10,100       320,776
     MBNA Corp.                                             24,600       668,136
<PAGE>

     Merrill Lynch & Co., Inc.                              10,700       724,711
     MetLife, Inc.                                          15,200       744,800
     Morgan Stanley                                         15,500       879,470
     National City Corp.                                    12,700       426,339
     Northern Trust Corp. ^                                  3,500       181,370
     PNC Financial Services Group, Inc.                      7,100       438,993
     Prudential Financial, Inc. ^                            8,200       600,158
     St. Paul Travelers Companies, Inc. (The)                9,476       423,293
     State Street Corp.                                      3,500       194,040
     SunTrust Banks, Inc.                                    7,600       552,976
     U.S. Bancorp ^                                         28,401       848,906
     UnumProvident Corp.                                     8,100       184,275
     Wachovia Corp. ^                                       22,600     1,194,636
     Washington Mutual, Inc.                                15,550       676,425
     Wells Fargo & Co.                                      24,200     1,520,486
                                                                     -----------
                                                                      27,883,513
                                                                     ===========

  HEALTHCARE - 12.62%
     Abbott Laboratories ^                                  21,000       828,030
     Aetna Inc.                                              6,000       565,860
     Amgen Inc. +                                           18,900     1,490,454
     Applera Corp. - Applied Biosystems Group                8,000       212,480
     Becton, Dickinson & Co.                                 3,900       234,312
     Biogen Idec Inc.                                        8,000       362,640
     Boston Scientific Corp. +                              12,300       301,227
     Bristol-Myers Squibb Co. ^                             30,500       700,890
     Cardinal Health, Inc.                                   5,450       374,687
     Caremark Rx, Inc. +                                     9,000       466,110
     Eli Lilly & Co.                                        14,500       820,555
     Guidant Corp.                                           6,400       414,400
     HCA, Inc.                                               8,500       429,250
     Hospira, Inc. + ^                                       3,700       158,286
     IMS Health Inc.                                         7,400       184,408
     Johnson & Johnson                                      40,900     2,458,090
     McKesson Corp.                                          2,300       118,657
     Medco Health Solutions, Inc. +                          6,687       373,135
     Medtronic, Inc.                                        21,500     1,237,755
     Merck & Co. Inc.                                       28,000       890,680
     Pfizer Inc. ^                                          99,660     2,324,071
     Schering-Plough Corp.                                  17,000       354,450
     Tenet Healthcare Corp. +                                2,250        17,235
     United Health Group Inc.                               23,000     1,429,220
     Wyeth                                                  19,200       884,544
                                                                     -----------
                                                                      17,631,426
                                                                     ===========

  INDUSTRIALS - 10.44%
     3M Co.                                                 10,400       806,000
     Boeing Company (The)                                   11,700       821,808
     Caterpillar Inc.                                       11,800       681,686
     Cendant Corp.                                          19,000       327,750
     CSX Corp.                                               5,000       253,850
     Emerson Electric Co.                                    8,500       634,950
     FedEx Corp.                                             4,500       465,255
     General Dynamics Corp.                                  3,100       353,555
     General Electric Co.                                  141,700     4,966,585
     Honeywell International Inc.                           12,500       465,625
     Illinois Tool Works Inc.                                2,400       211,176
     Lockheed Martin Corp.                                   4,000       254,520
     Masco Corp.                                             4,200       126,798
     Northrop Grumman Corp.                                  5,000       300,550
<PAGE>

     Rockwell Automation, Inc.                               2,500       147,900
     Southwest Airlines Co.                                  6,450       105,973
     Tyco International Ltd.                                33,397       963,837
     Union Pacific Corp.                                     2,000       161,020
     United Parcel Service, Inc., Class B                   16,300     1,224,945
     United Technologies Corp.                              14,400       805,104
     Waste Management, Inc.                                  8,200       248,870
     Yellow Roadway Corp. +                                  5,691       253,876
                                                                     -----------
                                                                      14,581,633
                                                                     ===========

  INFORMATION TECHNOLOGY - 15.10%
     Adobe Systems Inc.                                      9,200       340,032
     Altera Corp. +                                          3,400        63,002
     Analog Devices, Inc.                                    6,700       240,329
     Apple Computer, Inc. +                                  3,000       215,670
     Applied Materials, Inc.                                23,800       426,972
     Automatic Data Processing, Inc.                         9,900       454,311
     Cisco Systems, Inc. +                                  96,400     1,650,368
     Corning Inc. +                                         17,000       334,220
     Dell Inc. +                                            29,700       890,703
     Electronic Arts Inc. +                                  2,000       104,620
     Electronic Data Systems Corp.                          10,000       240,400
     EMC Corp. +                                           212,648     2,896,266
     First Data Corporation                                 11,324       487,045
     Freescale Semiconductor Inc., Class B +                 6,512       163,907
     Hewlett-Packard Co.                                    27,900       798,777
     Intel Corp.                                            82,500     2,059,200
     International Business Machines Corp.                  21,000     1,726,200
     Linear Technology Corp. ^                               6,500       234,455
     Lucent Technologies Inc. +                             10,700        28,462
     Maxim Integrated Products, Inc.                         2,300        83,352
     Micron Technology, Inc. +                              11,500       153,065
     Microsoft Corp.                                       142,100     3,715,915
     Motorola, Inc.                                         34,700       783,873
     Oracle Corp. +                                         46,100       562,881
     Paychex, Inc.                                           4,200       160,104
     QUALCOMM Inc. ^                                        21,000       904,680
     Sanmina-SCI Corp. +                                     5,500        23,430
     Siebel Systems, Inc.                                    2,500        26,450
     Solectron Corp. + ^                                     3,000        10,980
     Sun Microsystems, Inc. + ^                              7,500        31,425
     Symantec Corp. +                                       10,000       175,000
     Texas Instruments Inc. ^                               23,900       766,473
     Yahoo! Inc. +                                           8,800       344,784
                                                                     -----------
                                                                      21,097,351
                                                                     ===========

  MATERIALS - 2.28%
     Air Products & Chemicals, Inc.                          1,000        59,190
     Alcoa Inc.                                             14,200       419,894
     Dow Chemical Co. (The)                                 15,400       674,828
     E.I. du Pont de Nemours & Co.                          14,800       629,000
     International Paper Co.                                10,500       352,905
     Monsanto Co.                                            5,080       393,852
     Newmont Mining Corporation                              7,000       373,800
     Praxair, Inc. ^                                         3,000       158,880
     Rohm & Haas Co.                                         1,000        48,420
     Weyerhaeuser Co.                                        1,000        66,340
                                                                     -----------
                                                                       3,177,109
                                                                     ===========
<PAGE>

  REAL ESTATE INVESTMENT TRUSTS- 0.22%
     Simon Property Group, Inc.                              4,000       306,520
                                                                     ===========

  TELECOMMUNICATIONS SERVICES - 2.92%
     ALLTEL Corporation                                      4,000       252,400
     AT&T Inc.                                              48,364     1,184,434
     BellSouth Corporation ^                                23,000       623,300
     Sprint Corp.                                           38,446       898,099
     Verizon Communications Inc. ^                          37,100     1,117,452
                                                                     -----------
                                                                       4,075,685
                                                                     ===========

  UTILITIES - 3.52%
     American Electric Power Co., Inc.                      10,700       396,863
     CenterPoint Energy, Inc. ^                             13,900       178,615
     Dominion Resources, Inc.                                7,100       548,120
     Duke Energy Corp.                                      13,300       365,085
     Edison International                                    4,000       174,440
     Exelon Corp.                                           11,000       584,540
     FirstEnergy Corp.                                       5,000       244,950
     FPL Group, Inc.                                         7,000       290,920
     PG&E Corp. Holdings Company ^                           9,000       334,080
     Progress Energy, Inc. ^                                 3,500       153,720
     Public Service Enterprises Group Inc.                   6,000       389,820
     Southern Co. (The)                                     11,900       410,907
     TXU Corp. ^                                             9,400       471,786
     Williams Companies, Inc. (The)                         10,000       231,700
     Xcel Energy, Inc. ^                                     8,200       151,372
                                                                     -----------
                                                                       4,926,918
                                                                     ===========

TOTAL EQUITY SECURITIES  (cost - $126,420,026)                       138,852,706
                                                                     ===========

SHORT-TERM INVESTMENTS - 2.11%
                                                     PRINCIPAL
  REPURCHASE AGREEMENTS - 2.11%                    AMOUNT (000'S)
                                                   --------------
     Bear, Stearns & Co. Inc.
     (Agreement dated 12/30/05 to be
     repurchased $1,236,764) 3.20%,
     01/03/06, collateralized by
     $1,273,982 in U.S. Treasury Bonds               $1,236            1,236,324

     Bear, Stearns & Co. Inc. * **
     (Agreement dated 12/30/05 to be
     repurchased at $900,293), 2.00%,
     01/03/06, collateralized by
     $928,220 in U.S. Treasury Bonds                    900              900,093

     Bear, Stearns & Co. Inc. * **
     (Agreement dated 12/30/05 to be
     repurchased at $808,841), 4.00%,
     01/03/06, collateralized by
     $833,077 in U.S. Treasury Bonds                    808              808,482
                                                                     -----------
      TOTAL SHORT-TERM INVESTMENTS
        (cost - $2,944,899)                                            2,944,899
                                                                     ===========
      TOTAL INVESTMENTS - 101.50%
        (cost - $129,364,925)                                        141,797,605
      LIABILITIES IN EXCESS OF OTHER ASSETS - (1.50%)                 (2,091,489)
                                                                   -------------
      NET ASSETS - 100%                                             $139,706,116
                                                                   =============
<FN>

- --------------------------------------------------------------------
+    Non-income producing security.
^    Security or a portion thereof is out on loan
^^   Effective January 9, 2006, CCE Spinco, Inc. changed its name to Live
     Nation, Inc.
*    Stated interest rate, before rebate earned by borrower of securities on
     loan.
**   Represents investment purchased with collateral received for securities on
     loan.
ADR  American Depository Receipts
</FN>
</TABLE>

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Shareholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2005, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the four years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for the year ended December 31, 2001 have been
audited by other auditors, whose report dated February 8, 2002 expressed an
unqualified opinion on such financial highlights.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 2005 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cornerstone Strategic Value Fund, Inc. as of December 31, 2005, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the financial highlights for each
of the four years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of investments in securities
as of December 31, 2005 appearing in Item 6 of this Form N-CSR is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. This additional information is the responsibility of the
Fund's management. Such information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.


                                                       TAIT, WELLER & BAKER LLP
Philadelphia, Pennsylvania
February 7, 2006
<PAGE>

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

      The Registrant and Cornerstone Advisors, Inc. share the same Proxy Voting
Policies and Procedures. The respective Proxy Voting Policies and Procedures of
the Registrant and Adviser are attached as EXHIBIT99.VOTEREG


ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a)(1) All information contained in this item and its subparts is as of the date
of this filing, unless otherwise noted. Ralph W. Bradshaw and William A. Clark
are employees of Cornerstone Advisors, Inc. (the Investment Manager) and
portfolio managers of the Fund. Ralph W. Bradshaw occupation for the last five
years is President of Cornerstone Advisors, Inc. and a Financial Consultant.
William A. Clark occupation for the last five years is Director and Stockholder
of Cornerstone Advisors, Inc. and a former financial consultant of Deep Discount
Advisors, Inc.

(a)(2)(i) Ralph W. Bradshaw and William A. Clark

(a)(2)(ii)(A) Registered Investment Companies - Ralph W. Bradshaw and
William A. Clark each manage one other registered closed-end fund.

(a)(2)(ii)(B) Not applicable

(a)(2)(ii)(C) Not applicable

(a)(2)(iii) None. Ralph W. Bradshaw and William A. Clark manage no accounts
where the Advisory Fee is based on the performance of the account.

(a)(2)(iv) None.

(a)(3) As of the most recent fiscal year end December 31, 2005, the compensation
paid to both Ralph W. Bradshaw and William A. Clark was fixed.

(a)(4) The dollar range of equity securities owned in the registrant
beneficially by each portfolio manager is as follows: for Ralph W. Bradshaw it
is in the range of $50,001-$100,000 and for William A. Clark it is over
$100,000.

(b) None.

<PAGE>

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.

None.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The Registrant's principal executive officer and principal financial officer
have evaluated the Registrant's disclosure controls and procedures as of a date
within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of such date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported timely.

(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Code of Ethics attached as EX-99.CODE ETH.

(a)(2) Separate certifications of Principal Executive and Financial Officers
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as
EX-99.CERT.

(b) Certification of Principal Executive and Financial Officers pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.

(99) Proxy Voting Policies of the Registrant and Adviser attached as
EX-99.VOTEREG.
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

By: /S/ RALPH W. BRADSHAW
- -------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: March 10, 2006


     Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.

Cornerstone Strategic Value Fund, Inc.

By: /S/ RALPH W. BRADSHAW
- -------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: March 10, 2006

By: /S/ JODI B. LEVINE
- ----------------------
Name: Jodi B. Levine
Title: Principal Financial Officer
Date: March 10, 2006
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.CODE ETH
<SEQUENCE>2
<FILENAME>codeofethics.txt
<TEXT>







                     CORNERSTONE STRATEGIC VALUE FUND, INC.

                       CORNERSTONE TOTAL RETURN FUND, INC.

                       CODE OF ETHICS FOR SENIOR OFFICERS


PREAMBLE

         Section 406 of the Sarbanes-Oxley Act of 2002 directs that rules be
adopted disclosing whether a company has a code of ethics for senior financial
officers. The U.S. Securities and Exchange Commission (the "SEC") has adopted
rules requiring annual disclosure of an investment company's code of ethics
applicable to the company's principal executive as well as principal financial
officers, if such a code has been adopted. In response, the Cornerstone
Strategic Value Fund, Inc. and Cornerstone Total Return Fund, Inc. (the "Funds")
have each adopted this Code of Ethics.

STATEMENT OF POLICY

         It is the obligation of the senior officers of each Fund to provide
full, fair, timely and comprehensible disclosure--financial and otherwise--to
the Fund's shareholders, regulatory authorities and the general public. In
fulfilling that obligation, senior officers must act ethically, honestly and
diligently. This Code is intended to enunciate guidelines to be followed by
persons who serve each Fund in senior officer positions. No Code of Ethics can
address every situation that a senior officer might face; however, as a guiding
principle, senior officers should strive to implement the spirit as well as the
letter of applicable laws, rules and regulations, and to provide the type of
clear and complete disclosure and information each Fund's shareholders have a
right to expect.

         The purpose of this Code of Ethics (the "Code") is to promote high
standards of ethical conduct by Covered Persons (as defined below) in their
capacities as officers of the Funds, to instruct them as to what is considered
to be inappropriate and unacceptable conduct or activities for officers and to
prohibit such conduct or activities. This Code supplements other policies that
the Funds and its adviser have adopted or may adopt in the future with which
Fund officers are also required to comply (e.g., code of ethics relating to
personal trading and conduct).

COVERED PERSONS

         This Code applies to those persons appointed by the each Fund's Board
of Directors as Chief Executive Officer, President, Chief Financial Officer and
Chief Accounting Officer, or persons performing similar functions.

PROMOTION OF HONEST AND ETHICAL CONDUCT

         In serving as an officer of a Fund, each Covered Person must maintain
high standards of honesty and ethical conduct and must encourage his colleagues
who provide services to a Fund, whether directly or indirectly, to do the same.


                                      -1-
<PAGE>


         Each Covered Person understands that as an officer of a Fund, he has a
duty to act in the best interests of the Fund and its shareholders. The
interests of the Covered Person's personal interests should not be allowed to
compromise the Covered Person from fulfilling his duties as an officer of the
Fund.

         If a Covered Person believes that his personal interests are likely to
materially compromise his objectivity or his ability to perform the duties of
his role as an officer of a Fund, he should consult with the Fund's chief legal
officer or outside counsel. Under appropriate circumstances, a Covered Person
should also consider whether to present the matter to the Directors of a Fund or
a committee thereof.

         No Covered Person shall suggest that any person providing, or
soliciting to be retained to provide, services to a Fund give a gift or an
economic benefit of any kind to him in connection with the person's retention or
the provision of services.

PROMOTION OF FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE

         No Covered Person shall create or further the creation of false or
misleading information in any SEC filing or report to Fund shareholders. No
Covered Person shall conceal or fail to disclose information within the Covered
Person's possession legally required to be disclosed or necessary to make the
disclosure made not misleading. If a Covered Person shall become aware that
information filed with the SEC or made available to the public contains any
false or misleading information or omits to disclose necessary information, he
shall promptly report it to Fund counsel, who shall advise such Covered Person
whether corrective action is necessary or appropriate.

         Each Covered Person, consistent with his responsibilities, shall
exercise appropriate supervision over, and shall assist, Fund service providers
in developing financial information and other disclosure that complies with
relevant law and presents information in a clear, comprehensible and complete
manner. Each Covered Person shall use his best efforts within his area of
expertise to assure that Fund reports reveal, rather than conceal, each Fund's
financial condition.

         Each Covered Person shall seek to obtain additional resources if he
believes that available resources are inadequate to enable the Fund to provide
full, fair and accurate financial information and other disclosure to regulators
and Fund shareholders.

         Each Covered Person shall inquire of other Fund officers and service
providers, as appropriate, to assure that information provided is accurate and
complete and presented in an understandable format using comprehensible
language.

         Each Covered Person shall diligently perform his services to the Fund,
so that information can be gathered and assessed early enough to facilitate
timely filings and issuance of reports and required certifications.



                                      -2-
<PAGE>



PROMOTION OF COMPLIANCE WITH APPLICABLE GOVERNMENT LAWS, RULES AND REGULATIONS

         Each Covered Person shall become and remain knowledgeable concerning
the laws and regulations relating to each Fund and their operations and shall
act with competence and due care in serving as an officer of a Fund. Each
Covered Person with specific responsibility for financial statement disclosure
will become and remain knowledgeable concerning relevant auditing standards,
generally accepted accounting principles, FASB pronouncements and other
accounting and tax literature and developments.

         Each Covered Person shall devote sufficient time to fulfilling his
responsibilities to the Funds.

         Each Covered Person shall cooperate with each Fund's independent
auditors, regulatory agencies and internal auditors in their review or
inspection of the Fund and its operations.

         No Covered Person shall knowingly violate any law or regulation
relating to a Fund or their operations or seek to illegally circumvent any such
law or regulation.

         No Covered Person shall engage in any conduct involving dishonesty,
fraud, deceit or misrepresentation involving a Fund or its operations.

PROMOTING PROMPT INTERNAL REPORTING OF VIOLATIONS

         Each Covered Person shall promptly report his own violations of this
Code and violations by other Covered Persons of which he is aware to the
Chairman of the Fund's Audit Committee.

         Any requests for a waiver from or an amendment to this Code shall be
made to the Chairman of the Fund's Audit Committee. All waivers and amendments
shall be disclosed as required by law.

SANCTIONS

         Failure to comply with this Code will subject the violator to
appropriate sanctions, which will vary based on the nature and severity of the
violation. Such sanctions may include censure, suspension or termination of
position as an officer of the Fund. Sanctions shall be imposed by the Fund's
Audit Committee, subject to review by the entire Board of Directors of the Fund.

         Each Covered Person shall be required to certify annually whether he
has complied with this Code.

NO RIGHTS CREATED

         This Code of Ethics is a statement of certain fundamental principles,
policies and procedures that govern the Fund's senior officers in the conduct of
the Fund's business. It is not intended to and does not create any rights in any
employee, investor, supplier, competitor, shareholder or any other person or
entity.



                                      -3-
<PAGE>


RECORDKEEPING

         Each Fund will maintain and preserve for a period of not less than six
(6) years from the date such action is taken, the first two (2) years in an
easily accessible place, a copy of the information or materials supplied to the
Board (i) that provided the basis for any amendment or waiver to this Code and
(ii) relating to any violation of the Code and sanctions imposed for such
violation, together with a written record of the approval or action taken by the
Board.

AMENDMENTS

         The Directors will make and approve such changes to this Code of Ethics
as they deem necessary or appropriate to effectuate the purposes of this Code.




                                      -4-
<PAGE>




                       CODE OF ETHICS FOR SENIOR OFFICERS





I HEREBY CERTIFY THAT:



         (1)      I have read and I understand the Code of Ethics for Senior
                  Officers adopted by the Cornerstone Strategic Value Fund, Inc.
                  and the Cornerstone Total Return Fund, Inc.(the "Code of
                  Ethics");

         (2)      I recognize that I am subject to the Code of Ethics;

         (3)      I have complied with the requirements of the Code of Ethics
                  during the calendar year ending December 31, _______; and

         (4)      I have reported all violations of the Code of Ethics required
                  to be reported pursuant to the requirements of the Code during
                  the calendar year ending December 31, _____.

         Set forth below exceptions to items (3) and (4), if any:


         -----------------------------------------------------------------------


Name:  _________________

Date:  _________________





                                      -5-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.CERT
<SEQUENCE>3
<FILENAME>exh99.txt
<TEXT>



EX-99.CERT
CERTIFICATIONS

I, Ralph A. Bradshaw, certify that:
1. I have reviewed this report on Form N-CSR of Cornerstone Strategic Value
Fund, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, changes in net assets, and cash
flows (if the financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) the registrant and have:

          (a)Designed such disclosure controls and procedures or caused such
disclosures controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

         (c) Evaluated the effectiveness of the registrant's disclosures
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date within 90
days prior to the filing date of this report based on such evaluation; and

         (d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

         (a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.


Date: March 10, 2006

/s/Ralph W. Bradshaw
- ------------------------
Ralph W. Bradshaw
Chairman and President (Principal Executive Officer)


<PAGE>


Exhibit 12(a)(2)
EX-99.CERT
CERTIFICATIONS

I, Jodi B. Levine, certify that:
1. I have reviewed this report on Form N-CSR of Cornerstone Strategic Value
Fund, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations, changes in net assets, and cash
flows (if the financial statements are required to include a statement of cash
flows) of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Rule 30a-3(c) under the Investment Company Act of 1940) and internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment
Company Act of 1940) the registrant and have:

          (a)Designed such disclosure controls and procedures or caused such
disclosures controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         (b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;

         (c) Evaluated the effectiveness of the registrant's disclosures
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of a date within 90
days prior to the filing date of this report based on such evaluation; and

         (d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's second
fiscal quarter of the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting; and


5. The registrant's other certifying officers and I have disclosed, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):

         (a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize, and report financial information; and

         (b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.


Date: March 10, 2006
/s/ Jodi B. Levine
- ------------------------
Jodi B. Levine
Treasurer (Principal Financial Officer)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.906CERT
<SEQUENCE>4
<FILENAME>exh906.txt
<TEXT>

EX-99.906CERT
SECTION 906 CERTIFICATIONS


                           SECTION 906 CERTIFICATIONS

Ralph W. Bradshaw, Principal Executive Officer, and Jodi B. Levine, Principal
Financial Officer, of the Cornerstone Strategic Value Fund, Inc. (the "Fund"),
each certify to his knowledge that:

(1)The Fund's periodic report on Form N-CSR for the period ended December 31,
2005 (the "Report") fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Fund.



/S/ RALPH W. BRADSHAW                            /S/ JODI B. LEVINE
- ---------------------                            ------------------
Ralph W. Bradshaw                                Jodi B. Levine
Chairman and President                           (Principal Financial Officer)
(Principal Executive Officer)                    March 10, 2006
March 10, 2006

A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within the electronic version of this written statement
required by Section 906, has been provided to the Fund and will be retained by
the Fund and furnished to the Securities and Exchange Commission or its staff
upon request.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>exh99votereg.txt
<DESCRIPTION>EX-99VOTEREG
<TEXT>


EX-99VOTEREG



1.  OPERATIONAL ITEMS..........................................................6
     Adjourn Meeting...........................................................6
     Amend Quorum Requirements.................................................6
     Amend Minor Bylaws........................................................6
     Change Company Name.......................................................6
     Change Date, Time, or Location of Annual Meeting..........................6
     Ratifying Auditors........................................................6
     Transact Other Business...................................................6

2.  BOARD OF DIRECTORS:........................................................7
     Voting on Director Nominees in Uncontested Elections......................7
     2006 Classification of Directors..........................................9
     Age Limits...............................................................10
     Board Size...............................................................10
     Classification/Declassification of the Board.............................10
     Cumulative Voting........................................................10
     Director and Officer Indemnification and Liability Protection............11
     Establish/Amend Nominee Qualifications...................................11
     Filling Vacancies/Removal of Directors...................................11
     Independent Chair (Separate Chair/CEO)...................................11
     Majority of Independent Directors/Establishment of Committees............12
     Majority Vote Shareholder Proposals......................................12
     Office of the Board......................................................13
     Open Access..............................................................13
     Stock Ownership Requirements.............................................13
     Term Limits..............................................................13

3.  PROXY CONTESTS............................................................14
     Voting for Director Nominees in Contested Elections......................14
     Reimbursing Proxy Solicitation Expenses..................................14
     Confidential Voting......................................................14

4.  ANTITAKEOVER DEFENSES AND VOTING RELATED ISSUES...........................15
     Advance Notice Requirements for Shareholder Proposals/Nominations........15
     Amend Bylaws without Shareholder Consent.................................15
     Poison Pills.............................................................15
     Shareholder Ability to Act by Written Consent............................15
     Shareholder Ability to Call Special Meetings.............................15
     Supermajority Vote Requirements..........................................15

5.  MERGERS AND CORPORATE RESTRUCTURINGS......................................16
     Overall Approach.........................................................16
     Appraisal Rights.........................................................16
     Asset Purchases..........................................................16
     Asset Sales..............................................................17
     Bundled Proposals........................................................17
     Conversion of Securities.................................................17
     Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy
     Plans/Reverse Leveraged Buyouts/Wrap Plans...............................17
     Formation of Holding Company.............................................17
     Going Private Transactions (LBOs, Minority Squeezeouts, and
     Going Dark)..............................................................18
     Joint Ventures...........................................................18
     Liquidations.............................................................18
     Mergers and Acquisitions/ Issuance of Shares to Facilitate Merger or
     Acquisition..............................................................18
     Private Placements/Warrants/Convertible Debentures.......................18
     Spinoffs.................................................................19
     Value Maximization Proposals.............................................19

(C) 2005 Institutional Shareholder Services Inc. All Rights Reserved.


                                                                               1
<PAGE>

6.  STATE OF INCORPORATION....................................................20
     Control Share Acquisition Provisions.....................................20
     Control Share Cash-out Provisions........................................20
     Disgorgement Provisions..................................................20
     Fair Price Provisions....................................................20
     Freeze-out Provisions....................................................20
     Greenmail................................................................20
     Reincorporation Proposals................................................21
     Stakeholder Provisions...................................................21
     State Antitakeover Statutes..............................................21

7.  CAPITAL STRUCTURE.........................................................22
     Adjustments to Par Value of Common Stock.................................22
     Common Stock Authorization...............................................22
     Dual-Class Stock.........................................................22
     Issue Stock for Use with Rights Plan.....................................22
     Preemptive Rights........................................................22
     Preferred Stock..........................................................22
     Recapitalization.........................................................23
     Reverse Stock Splits.....................................................23
     Share Repurchase Programs................................................23
     Stock Distributions: Splits and Dividends................................23
     Tracking Stock...........................................................23

8.  EXECUTIVE AND DIRECTOR COMPENSATION.......................................24
    Equity Compensation Plans.................................................24
     Cost of Equity Plans.....................................................24
     Repricing Provisions.....................................................24
     Pay-for Performance Disconnect...........................................24
     Three-Year Burn Rate/Burn Rate Commitment................................26
     Poor Pay Practices.......................................................27
    Specific Treatment of Certain Award Types in Equity Plan Evaluations:.....28
     Dividend Equivalent Rights...............................................28
     Liberal Share Recycling  Provisions......................................28
     Transferable Stock Option Awards.........................................28
    Other Compensation Proposals and Policies.................................28
     401(k) Employee Benefit Plans............................................28
     Director Compensation....................................................28
     Director Retirement Plans................................................29
     Disclosure of CEO Compensation-Tally Sheet...............................29
     Employee Stock Ownership Plans (ESOPs)...................................30
     Employee Stock Purchase Plans-- Qualified Plans..........................30
     Employee Stock Purchase Plans-- Non-Qualified Plans......................31
     Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related......31
     Compensation Proposals)..................................................31
     Option Exchange Programs/Repricing Options...............................31
     Stock Plans in Lieu of Cash..............................................32
     Transfer Programs of Stock Options.......................................32


                                                                               2
<PAGE>

    Shareholder Proposals on Compensation.....................................32
     Disclosure/Setting Levels or Types of Compensation for Executives and
     Directors................................................................32
     Option Expensing.........................................................33
     Option Repricing.........................................................33
     Pension Plan Income Accounting...........................................33
     Performance-Based Awards.................................................33
     Severance Agreements for Executives/Golden Parachutes....................33
     Supplemental Executive Retirement Plans (SERPs)..........................33

9.  CORPORATE RESPONSIBILITY..................................................34
    Consumer Issues and Public Safety.........................................34
     Animal Rights............................................................34
     Drug Pricing.............................................................34
     Drug Reimportation.......................................................34
     Genetically Modified Foods...............................................34
     Handguns.................................................................35
     HIV/AIDS.................................................................35
     Predatory Lending........................................................35
     Tobacco..................................................................36
     Toxic Chemicals..........................................................36
    Environment and Energy....................................................37
     Arctic National Wildlife Refuge..........................................37
     CERES Principles.........................................................37
     Concentrated Area Feeding Operations (CAFOs).............................37
     Environmental-Economic Risk Report.......................................37
     Environmental Reports....................................................37
     Global Warming...........................................................37
     Kyoto Protocol Compliance................................................38
     Land Use.................................................................38
     Nuclear Safety...........................................................38
     Operations in Protected Areas............................................38
     Recycling................................................................38
     Renewable Energy.........................................................38
     Sustainability Report....................................................39
    General Corporate Issues..................................................39
     Charitable/Political Contributions.......................................39
     Link Executive Compensation to Social Performance........................39
     Outsourcing/Offshoring...................................................40
    Labor Standards and Human Rights..........................................40
     China Principles.........................................................40
     Country-specific Human Rights Reports....................................40
     International Codes of Conduct/Vendor Standards..........................40
     MacBride Principles......................................................41
    Military Business.........................................................41
     Foreign Military Sales/Offsets...........................................41
     Landmines and Cluster Bombs..............................................41
     Nuclear Weapons..........................................................41
     Operations in Nations Sponsoring Terrorism (e.g., Iran)..................42
     Spaced-Based Weaponization...............................................42
    Workplace Diversity.......................................................42
     Board Diversity..........................................................42
     Equal Employment Opportunity (EEO).......................................42
     Glass Ceiling............................................................42
     Sexual Orientation.......................................................43


                                                                               3
<PAGE>

10. MUTUAL FUND PROXIES.......................................................44
     Election of Directors....................................................44
     Converting Closed-end Fund to Open-end Fund..............................44
     Proxy Contests...........................................................44
     Investment Advisory Agreements...........................................44
     Approving New Classes or Series of Shares................................44
     Preferred Stock Proposals................................................44
     1940 Act Policies........................................................44
     Changing a Fundamental Restriction to a Nonfundamental Restriction.......45
     Change Fundamental Investment Objective to Nonfundamental................45
     Name Change Proposals....................................................45
     Change in Fund's Subclassification.......................................45
     Disposition of Assets/Termination/Liquidation............................45
     Changes to the Charter Document..........................................45
     Changing the Domicile of a Fund..........................................46
     Authorizing the Board to Hire and Terminate Subadvisors Without
     Shareholder Approval.....................................................46
     Distribution Agreements..................................................46
     Master-Feeder Structure..................................................46
     Mergers..................................................................46
    Shareholder Proposals for Mutual Funds....................................46
     Establish Director Ownership Requirement.................................46
     Reimburse Shareholder for Expenses Incurred..............................46
     Terminate the Investment Advisor.........................................46


                                                                               4
<PAGE>

1. OPERATIONAL ITEMS

ADJOURN MEETING
Generally vote AGAINST proposals to provide management with the authority to
adjourn an annual or special meeting absent compelling reasons to support the
proposal. Vote FOR proposals that relate specifically to soliciting votes for a
merger or transaction if supporting that merger or transaction. Vote AGAINST
proposals if the wording is too vague or if the proposal includes "other
business."

AMEND QUORUM REQUIREMENTS
Vote AGAINST proposals to reduce quorum requirements for shareholder meetings
below a majority of the shares outstanding unless there are compelling reasons
to support the proposal.

AMEND MINOR BYLAWS
Vote FOR bylaw or charter changes that are of a housekeeping nature (updates or
corrections).

CHANGE COMPANY NAME
Vote FOR proposals to change the corporate name.

CHANGE DATE, TIME, OR LOCATION OF ANNUAL MEETING
Vote FOR management proposals to change the date/time/location of the annual
meeting unless the proposed change is unreasonable. Vote AGAINST shareholder
proposals to change the date/time/location of the annual meeting unless the
current scheduling or location is unreasonable.

RATIFYING AUDITORS
Vote FOR proposals to ratify auditors, unless any of the following apply:
     o    An auditor has a financial interest in or association with the
          company, and is therefore not independent,
     o    There is reason to believe that the independent auditor has rendered
          an opinion which is neither accurate nor indicative of the company's
          financial position, or
     o    Fees for non-audit services ("Other" fees) are excessive.

Non-audit fees are excessive if:

Non-audit ("other") fees >audit fees + audit-related fees + tax
compliance/preparation fees

Tax compliance and preparation include the preparation of original and amended
tax returns, refund claims and tax payment planning. All other services in the
tax category, such as tax advice, planning or consulting should be added to
"Other" fees. If the breakout of tax fees cannot be determined, add all tax fees
to "Other" fees.

Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit
their auditors from engaging in non-audit services. Vote CASE-BY-CASE on
shareholder proposals asking for audit firm rotation, taking into account the
tenure of the audit firm, the length of rotation specified in the proposal, any
significant audit-related issues at the company, the number of Audit Committee
meetings held each year, the number of financial experts serving on the
committee, and whether the company has a periodic renewal process where the
auditor is evaluated for both audit quality and competitive price.

TRANSACT OTHER BUSINESS
Vote AGAINST proposals to approve other business when it appears as voting item.


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<PAGE>

2. BOARD OF DIRECTORS:

VOTING ON DIRECTOR NOMINEES IN UNCONTESTED ELECTIONS
Vote CASE-BY-CASE on director nominees, examining, but not limited to, the
following factors:
     o    Composition of the board and key board committees;
     o    Attendance at board and committee meetings;
     o    Corporate governance provisions and takeover activity;
     o    Disclosures under Section 404 of Sarbanes-Oxley Act;
     o    Long-term company performance relative to a market and peer index;
     o    Extent of the director's investment in the company;
     o    Existence of related party transactions;
     o    Whether the chairman is also serving as CEO;
     o    Whether a retired CEO sits on the board;
     o    Number of outside boards at which a director serves.

WITHHOLD from individual directors who:
     o    Attend less than 75 percent of the board and committee meetings
          without a valid excuse (such as illness, service to the nation, work
          on behalf of the company);
     o    Sit on more than six public company boards;
     o    Are CEOs of public companies who sit on the boards of more than two
          public companies besides their own-- withhold only at their outside
          boards.

WITHHOLD from the entire board of directors, (excepting new nominees, who should
be considered on a CASE-BY-CASE basis) if:
     o    The company's poison pill has a dead-hand or modified dead-hand
          feature. Withhold every year until this feature is removed;
     o    The board adopts or renews a poison pill without shareholder approval
          since the beginning of 2005, does not commit to putting it to
          shareholder vote within 12 months of adoption or reneges on a
          commitment to put the pill to a vote and has not yet been withheld
          from for this issue;
     o    The board failed to act on a shareholder proposal that received
          approval by a majority of the shares outstanding the previous year;
     o    The board failed to act on a shareholder proposal that received
          approval of the majority of shares cast for the previous two
          consecutive years;
     o    The board failed to act on takeover offers where the majority of the
          shareholders tendered their shares;
     o    At the previous board election, any director received more than 50
          percent withhold votes of the shares cast and the company has failed
          to address the issue(s) that caused the high withhold rate;
     o    A Russell 3000 company underperformed its industry group (GICS group).
          The test will consist of the bottom performers within each industry
          group (GICS) based on a weighted average TSR. The weightings are as
          follows: 20 percent weight on 1-year TSR; 30 percent weight on 3-year
          TSR; and 50 percent weight on 5-year TSR. Company's response to
          performance issues will be considered before withholding.

WITHHOLD from Inside Directors and Affiliated Outside Directors (per the
Classification of Directors below) when:
     o    The inside or affiliated outside director serves on any of the three
          key committees: audit, compensation, or nominating;
     o    The company lacks an audit, compensation, or nominating committee so
          that the full board functions as that committee;
     o    The full board is less than majority independent.


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<PAGE>

WITHHOLD from the members of the Audit Committee if:
     o    The non -audit fees paid to the auditor are excessive (see discussion
          under Ratifying Auditors);
     o    A material weakness identified in the Section 404 Sarbanes-Oxley Act
          disclosures rises to a level of serious concern; there are chronic
          internal control issues and an absence of established effective
          control mechanisms.
WITHHOLD from the members of the Compensation Committee if:
     o    There is a negative correlation between chief executive pay and
          company performance (see discussion under Equity Compensation Plans);
     o    The company fails to submit one-time transfers of stock options to a
          shareholder vote;
     o    The company fails to fulfill the terms of a burn rate commitment they
          made to shareholders;
     o    The company has poor compensation practices, which include, but are
          not limited to:
          -    Egregious employment contracts including excessive severance
               provisions;
          -    Excessive perks that dominate compensation;
          -    Huge bonus payouts without justifiable performance linkage;
          -    Performance metrics that are changed during the performance
               period;
          -    Egregious SERP (Supplemental Executive Retirement Plans) payouts;
          -    New CEO with overly generous new hire package;
          -    Internal pay disparity;
          -    Other excessive compensation payouts or poor pay practices at the
               company.

WITHHOLD from directors, individually or the entire board, for egregious actions
or failure to replace management as appropriate.


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<PAGE>

2006 CLASSIFICATION OF DIRECTORS

INSIDE DIRECTOR (I)
     o    Employee of the company or one of its affiliates; (1)
     o    Non-employee officer of the company if among the five most highly paid
          individuals (excluding interim CEO);
     o    Listed as a Section 16 officer; (2)
     o    Current interim CEO;
     o    Beneficial owner of more than 50 percent of the company's voting power
          (this may be aggregated if voting power is distributed among more than
          one member of a defined group).

AFFILIATED OUTSIDE DIRECTOR (AO)
     o    Board attestation that an outside director is not independent;
     o    Former CEO of the company;
     o    Former CEO of an acquired company within the past five years;
     o    Former interim CEO if the service was longer than 18 months. If the
          service was between twelve and eighteen months an assessment of the
          interim CEO's employment agreement will be made;(3)
     o    Former executive of the company, an affiliate or an acquired firm
          within the past five years;
     o    Executive of a former parent or predecessor firm at the time the
          company was sold or split off from the parent/predecessor within the
          past five years;
     o    Executive, former executive, general or limited partner of a joint
          venture or partnership with the company;
     o    Relative (4) of a current employee of company or its affiliates;
     o    Relative (4) of former executive, including CEO, of company or its
          affiliate within the last five years;
     o    Currently provides (or a relative provides) professional services
          directly to the company, to an affiliate of the company or an
          individual officer of the company or one of its affiliates;
     o    Employed by (or a relative is employed by) a significant customer or
          supplier; (5)
     o    Has (or a relative has) any transactional relationship with the
          company or its affiliates excluding investments in the company through
          a private placement; (5)
     o    Any material financial tie or other related party transactional
          relationship to the company;
     o    Party to a voting agreement to vote in line with management on
          proposals being brought to shareholder vote;
     o    Has (or a relative has) an interlocking relationship as defined by the
          SEC involving members of the board of directors or its Compensation
          and Stock Option Committee; (6)
     o    Founder (7) of the company but not currently an employee;
     o    Is (or a relative is) a trustee, director or employee of a charitable
          or non-profit organization that receives grants or endowments(5) from
          the company or its affiliates. (1)

INDEPENDENT OUTSIDE DIRECTOR (IO)
     o    No material (8) connection to the company other than a board seat.

FOOTNOTES:

(1)  "Affiliate" includes a subsidiary, sibling company, or parent company. ISS
     uses 50 percent control ownership by the parent company as the standard for
     applying its affiliate designation.
(2)  "Executives" (officers subject to Section 16 of the Securities and Exchange
     Act of 1934) include the chief executive, operating, financial, legal,
     technology, and accounting officers of a company (including the president,
     treasurer, secretary, controller, or any vice president in charge of a
     principal business unit, division or policy function).
(3)  ISS will look at the terms of the interim CEO's employment contract to
     determine if it contains severance pay, long-term health and pension
     benefits or other such standard provisions typically contained in contracts
     of permanent, non-temporary CEOs. ISS will also consider if a formal search
     process was underway for a full-time CEO at the time.


                                                                               8
<PAGE>

(4)  "Relative" follows the NYSE definition of "immediate family members" which
     covers: spouses, parents, children, siblings, in-laws, and anyone sharing
     the director's home.
(5)  If the company makes or receives annual payments exceeding the greater of
     $200,000 or five percent of the recipient's gross revenues. (The recipient
     is the party receiving the financial proceeds from the transaction).
(6)  Interlocks include: (a) executive officers serving as directors on each
     other's compensation or similar committees (or, in the absence of such a
     committee, on the board) or (b) executive officers sitting on each other's
     boards and at least one serves on the other's compensation or similar
     committees (or, in the absence of such a committee, on the board).
(7)  The operating involvement of the Founder with the company will be
     considered. Little to no operating involvement may cause ISS to deem the
     Founder as an independent outsider.
(8)  For purposes of ISS' director independence classification, "material" will
     be defined as a standard of relationship (financial, personal or otherwise)
     that a reasonable person might conclude could potentially influence one's
     objectivity in the boardroom in a manner that would have a meaningful
     impact on an individual's ability to satisfy requisite fiduciary standards
     on behalf of shareholders.

AGE LIMITS
Vote AGAINST shareholder or management proposals to limit the tenure of outside
directors through mandatory retirement ages.

BOARD SIZE
Vote FOR proposals seeking to fix the board size or designate a range for the
board size.
Vote AGAINST proposals that give management the ability to alter the size of the
board outside of a specified range without shareholder approval.

CLASSIFICATION/DECLASSIFICATION OF THE BOARD
Vote AGAINST proposals to classify the board.
Vote FOR proposals to repeal classified boards and to elect all directors
annually.

CUMULATIVE VOTING
Generally vote AGAINST proposals to eliminate cumulative voting. Vote
CASE-BY-CASE if the company has in place one of the three corporate governance
structures that are listed below.

Vote CASE-BY-CASE on proposals to restore or permit cumulative voting. If one of
these three structures is present, vote AGAINST the proposal:
     o    the presence of a majority threshold voting standard;
     o    a proxy access provision in the company's bylaws or governance
          documents; or
     o    a counterbalancing governance structure coupled with acceptable
          relative performance.

The counterbalancing governance structure coupled with acceptable relative
performance should include all of the following:
     o    Annually elected board;
     o    Two-thirds of the board composed of independent directors;
     o    Nominating committee composed solely of independent directors;
     o    Confidential voting; however, there may be a provision for suspending
          confidential voting during proxy contests;
     o    Ability of shareholders to call special meetings or act by written
          consent with 90 days' notice;
     o    Absence of superior voting rights for one or more classes of stock;
     o    Board does not have the right to change the size of the board beyond a
          stated range that has been approved by shareholders;
     o    The company has not under-performed its peers and index on a one-year
          and three-year basis, unless there has been a change in the CEO
          position within the last three years;


                                                                               9
<PAGE>

     o    No director received WITHHOLD votes of 35% or more of the votes cast
          in the previous election.

DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY PROTECTION
Vote CASE-BY-CASE on proposals on director and officer indemnification and
liability protection using Delaware law as the standard.

Vote AGAINST proposals to eliminate entirely directors' and officers' liability
for monetary damages for violating the duty of care.

Vote AGAINST indemnification proposals that would expand coverage beyond just
legal expenses to acts, such as negligence, that are more serious violations of
fiduciary obligation than mere carelessness.

Vote FOR only those proposals providing such expanded coverage in cases when a
director's or officer's legal defense was unsuccessful if both of the following
apply:
     o    The director was found to have acted in good faith and in a manner
          that he reasonably believed was in the best interests of the company;
          and
     o    If only the director's legal expenses would be covered.

ESTABLISH/AMEND NOMINEE QUALIFICATIONS
Vote CASE-BY-CASE on proposals that establish or amend director qualifications.
Votes should be based on how reasonable the criteria are and to what degree they
may preclude dissident nominees from joining the board.

Vote AGAINST shareholder proposals requiring two candidates per board seat.

FILLING VACANCIES/REMOVAL OF DIRECTORS
Vote AGAINST proposals that provide that directors may be removed only for
cause.

Vote FOR proposals to restore shareholders' ability to remove directors with or
without cause.

Vote AGAINST proposals that provide that only continuing directors may elect
replacements to fill board vacancies.

Vote FOR proposals that permit shareholders to elect directors to fill board
vacancies.

INDEPENDENT CHAIR (SEPARATE CHAIR/CEO)
Generally vote FOR shareholder proposals requiring the position of chair be
filled by an independent director unless there are compelling reasons to
recommend against the proposal, such as a counterbalancing governance structure.
This should include all of the following:
     o    Designated lead director, elected by and from the independent board
          members with clearly delineated and comprehensive duties. (The role
          may alternatively reside with a presiding director, vice chairman, or
          rotating lead director; however the director must serve a minimum of
          one year in order to qualify as a lead director.) At a minimum these
          should include:
          -    Presides at all meetings of the board at which the chairman is
               not present, including executive sessions of the independent
               directors,
          -    Serves as liaison between the chairman and the independent
               directors,
          -    Approves information sent to the board,
          -    Approves meeting agendas for the board,
          -    Approves meetings schedules to assure that there is sufficient
               time for discussion of all agenda items,


                                                                              10
<PAGE>

          -    Has the authority to call meetings of the independent directors,
          -    If requested by major shareholders, ensures that he is available
               for consultation and direct communication;
     o    Two-thirds independent board;
     o    All-independent key committees;
     o    Established governance guidelines;
     o    The company does not under-perform its peers.

MAJORITY OF INDEPENDENT DIRECTORS/ESTABLISHMENT OF COMMITTEES
Vote FOR shareholder proposals asking that a majority or more of directors be
independent unless the board composition already meets the proposed threshold by
ISS's definition of independence.

Vote FOR shareholder proposals asking that board audit, compensation, and/or
nominating committees be composed exclusively of independent directors if they
currently do not meet that standard.

MAJORITY VOTE SHAREHOLDER PROPOSALS
Generally vote FOR reasonably crafted shareholders proposals calling for
directors to be elected with an affirmative majority of votes cast and/or the
elimination of the plurality standard for electing directors (including binding
resolutions requesting that the board amend the company's bylaws), provided the
proposal includes a carve-out for a plurality voting standard when there are
more director nominees than board seats (e.g. contested elections).

Consider voting AGAINST the shareholder proposal if the company has adopted
formal corporate governance principles that present a meaningful alternative to
the majority voting standard and provide an adequate response to both new
nominees as well as incumbent nominees who fail to receive a majority of votes
cast.

Policies should address the specific circumstances at each company. At a
minimum, a company's policy should articulate the following elements to
adequately address each director nominee who fails to receive an affirmative of
majority of votes cast in an election:

     o    Established guidelines disclosed annually in the proxy statement
          concerning the process to follow for nominees who receive majority
          withhold votes;
     o    The policy needs to outline a clear and reasonable timetable for all
          decision-making regarding the nominee's status;
     o    The policy needs to specify that the process of determining the
          nominee's status will be managed by independent directors and must
          exclude the nominee in question;
     o    An outline of a range of remedies that can be considered concerning
          the nominee needs to be in the policy (for example, acceptance of the
          resignation, maintaining the director but curing the underlying causes
          of the withheld votes, etc.);
     o    The final decision on the nominee's status should be promptly
          disclosed via an SEC filing. The policy needs to include the timeframe
          in which the decision will be disclosed and a full explanation of how
          the decision was reached.

In addition, the company should articulate to shareholders why this alternative
to a full majority threshold voting standard is the best structure at this time
for demonstrating accountability to shareholders. Also evaluate the company's
history of accountability to shareholders in its governance structure and in its
actions. In particular, a classified board structure or a history of ignoring
majority supported shareholder proposals will be considered at a company which
receives a shareholder proposal requesting the elimination of plurality voting
in favor of majority threshold for electing directors.


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<PAGE>

OFFICE OF THE BOARD
Generally vote FOR shareholders proposals requesting that the board establish an
Office of the Board of Directors in order to facilitate direct communications
between shareholders and non-management directors, unless the company has all of
the following:
     o    Established a communication structure that goes beyond the exchange
          requirements to facilitate the exchange of information between
          shareholders and members of the board;
     o    Effectively disclosed information with respect to this structure to
          its shareholders;
     o    Company has not ignored majority supported shareholder proposals or a
          majority WITHHOLD on a director nominee; and
     o    The company has an independent chairman or a lead/presiding director,
          according to ISS' definition. This individual must be made available
          for periodic consultation and direct communication with major
          shareholders.

OPEN ACCESS
Generally vote FOR reasonably crafted shareholder proposals providing
shareholders with the ability to nominate director candidates to be included on
management's proxy card, provided the proposal substantially mirrors the SEC's
proposed two-trigger formulation (see the proposed "Security Holder Director
Nominations" rule (HTTP://WWW.SEC.GOV/RULES/PROPOSED/34-48626.HTM) or ISS'
comment letter to the SEC dated 6/13/2003, available on ISS website under
Governance Center- ISS Position Papers).

STOCK OWNERSHIP REQUIREMENTS
Generally vote AGAINST shareholder proposals that mandate a minimum amount of
stock that directors must own in order to qualify as a director or to remain on
the board. While stock ownership on the part of directors is desired, the
company should determine the appropriate ownership requirement.

Vote CASE-BY-CASE on shareholder proposals asking that the company adopt a
holding or retention period for its executives (for holding stock after the
vesting or exercise of equity awards), taking into account any stock ownership
requirements or holding period/retention ratio already in place and the actual
ownership level of executives.

TERM LIMITS
Vote AGAINST shareholder or management proposals to limit the tenure of outside
directors through term limits. However, scrutinize boards where the average
tenure of all directors exceeds 15 years for independence from management and
for sufficient turnover to ensure that new perspectives are being added to the
board.


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<PAGE>

3. PROXY CONTESTS

VOTING FOR DIRECTOR NOMINEES IN CONTESTED ELECTIONS
Vote CASE-BY-CASE on the election of directors in contested elections,
considering the following factors:
     o    Long-term financial performance of the target company relative to its
          industry;
     o    Management's track record;
     o    Background to the proxy contest;
     o    Qualifications of director nominees (both slates);
     o    Strategic plan of dissident slate and quality of critique against
          management;
     o    Likelihood that the proposed goals and objectives can be achieved
          (both slates);
     o    Stock ownership positions.

REIMBURSING PROXY SOLICITATION EXPENSES
Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When
voting in conjunction with support of a dissident slate, vote FOR the
reimbursement of all appropriate proxy solicitation expenses associated with the
election.

CONFIDENTIAL VOTING
Vote FOR shareholder proposals requesting that corporations adopt confidential
voting, use independent vote tabulators, and use independent inspectors of
election, as long as the proposal includes a provision for proxy contests as
follows: In the case of a contested election, management should be permitted to
request that the dissident group honor its confidential voting policy. If the
dissidents agree, the policy remains in place. If the dissidents will not agree,
the confidential voting policy is waived.

Vote FOR management proposals to adopt confidential voting.


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<PAGE>

4. ANTITAKEOVER DEFENSES AND VOTING RELATED ISSUES

ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS/NOMINATIONS
Votes on advance notice proposals are determined on a CASE-BY-CASE basis, giving
support to those proposals which allow shareholders to submit proposals as close
to the meeting date as reasonably possible and within the broadest window
possible.

AMEND BYLAWS WITHOUT SHAREHOLDER CONSENT
Vote AGAINST proposals giving the board exclusive authority to amend the bylaws.
Vote FOR proposals giving the board the ability to amend the bylaws in addition
to shareholders.

POISON PILLS
Vote FOR shareholder proposals requesting that the company submit its poison
pill to a shareholder vote or redeem it UNLESS the company has: (1) A
shareholder approved poison pill in place; or (2) The company has adopted a
policy concerning the adoption of a pill in the future specifying that the board
will only adopt a shareholder rights plan if either:
     o    Shareholders have approved the adoption of the plan; or
     o    The board, in its exercise of its fiduciary responsibilities,
          determines that it is in the best interest of shareholders under the
          circumstances to adopt a pill without the delay in adoption that would
          result from seeking stockholder approval (i.e. the "fiduciary out"
          provision). A poison pill adopted under this fiduciary out will be put
          to a shareholder ratification vote within twelve months of adoption or
          expire. If the pill is not approved by a majority of the votes cast on
          this issue, the plan will immediately terminate.

Vote FOR shareholder proposals calling for poison pills to be put to a vote
within a time period of less than one year after adoption. If the company has no
non-shareholder approved poison pill in place and has adopted a policy with the
provisions outlined above, vote AGAINST the proposal. If these conditions are
not met, vote FOR the proposal, but with the caveat that a vote within twelve
months would be considered sufficient.

Vote CASE-by-CASE on management proposals on poison pill ratification, focusing
on the features of the shareholder rights plan. Rights plans should contain the
following attributes:
     o    No lower than a 20% trigger, flip-in or flip-over;
     o    A term of no more than three years;
     o    No dead-hand, slow-hand, no-hand or similar feature that limits the
          ability of a future board to redeem the pill;
     o    Shareholder redemption feature (qualifying offer clause); if the board
          refuses to redeem the pill 90 days after a qualifying offer is
          announced, ten percent of the shares may call a special meeting or
          seek a written consent to vote on rescinding the pill.

SHAREHOLDER ABILITY TO ACT BY WRITTEN CONSENT
Vote AGAINST proposals to restrict or prohibit shareholder ability to take
action by written consent. Vote FOR proposals to allow or make easier
shareholder action by written consent.

SHAREHOLDER ABILITY TO CALL SPECIAL MEETINGS
Vote AGAINST proposals to restrict or prohibit shareholder ability to call
special meetings. Vote FOR proposals that remove restrictions on the right of
shareholders to act independently of management.

SUPERMAJORITY VOTE REQUIREMENTS
Vote AGAINST proposals to require a supermajority shareholder vote. Vote FOR
proposals to lower supermajority vote requirements.


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<PAGE>

5. MERGERS AND CORPORATE RESTRUCTURINGS

OVERALL APPROACH

For mergers and acquisitions, review and evaluate the merits and drawbacks of
the proposed transaction, balancing various and sometimes countervailing factors
including:

     o    VALUATION - Is the value to be received by the target shareholders (or
          paid by the acquirer) reasonable? While the fairness opinion may
          provide an initial starting point for assessing valuation
          reasonableness, emphasis is placed on the offer premium, market
          reaction and strategic rationale.

     o    MARKET REACTION - How has the market responded to the proposed deal? A
          negative market reaction should cause closer scrutiny of a deal.

     o    STRATEGIC RATIONALE - Does the deal make sense strategically? From
          where is the value derived? Cost and revenue synergies should not be
          overly aggressive or optimistic, but reasonably achievable. Management
          should also have a favorable track record of successful integration of
          historical acquisitions.

     o    NEGOTIATIONS AND PROCESS - Were the terms of the transaction
          negotiated at arm's-length? Was the process fair and equitable? A fair
          process helps to ensure the best price for shareholders. Significant
          negotiation "wins" can also signify the deal makers' competency. The
          comprehensiveness of the sales process (e.g., full auction, partial
          auction, no auction) can also affect shareholder value.

     o    CONFLICTS OF INTEREST - Are insiders benefiting from the transaction
          disproportionately and inappropriately as compared to non-insider
          shareholders? As the result of potential conflicts, the directors and
          officers of the company may be more likely to vote to approve a merger
          than if they did not hold these interests. Consider whether these
          interests may have influenced these directors and officers to support
          or recommend the merger. The CIC figure presented in the "ISS
          Transaction Summary" section of this report is an aggregate figure
          that can in certain cases be a misleading indicator of the true value
          transfer from shareholders to insiders. Where such figure appears to
          be excessive, analyze the underlying assumptions to determine whether
          a potential conflict exists.

     o    GOVERNANCE - Will the combined company have a better or worse
          governance profile than the current governance profiles of the
          respective parties to the transaction? If the governance profile is to
          change for the worse, the burden is on the company to prove that other
          issues (such as valuation) outweigh any deterioration in governance.

APPRAISAL RIGHTS
Vote FOR proposals to restore, or provide shareholders with, rights of
appraisal.

ASSET PURCHASES
Vote CASE-BY-CASE on asset purchase proposals, considering the following
factors:
     o    Purchase price;
     o    Fairness opinion;
     o    Financial and strategic benefits;
     o    How the deal was negotiated;
     o    Conflicts of interest;
     o    Other alternatives for the business;
     o    Non-completion risk.


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<PAGE>

ASSET SALES
Vote CASE-BY-CASE on asset sales, considering the following factors:
     o    Impact on the balance sheet/working capital;
     o    Potential elimination of diseconomies;
     o    Anticipated financial and operating benefits;
     o    Anticipated use of funds;
     o    Value received for the asset;
     o    Fairness opinion;
     o    How the deal was negotiated;
     o    Conflicts of interest.

BUNDLED PROPOSALS
Vote CASE-BY-CASE on bundled or "conditional" proxy proposals. In the case of
items that are conditioned upon each other, examine the benefits and costs of
the packaged items. In instances when the joint effect of the conditioned items
is not in shareholders' best interests, vote AGAINST the proposals. If the
combined effect is positive, support such proposals.

CONVERSION OF SECURITIES
Vote CASE-BY-CASE on proposals regarding conversion of securities. When
evaluating these proposals the investor should review the dilution to existing
shareholders, the conversion price relative to market value, financial issues,
control issues, termination penalties, and conflicts of interest.

Vote FOR the conversion if it is expected that the company will be subject to
onerous penalties or will be forced to file for bankruptcy if the transaction is
not approved.

CORPORATE REORGANIZATION/DEBT RESTRUCTURING/PREPACKAGED BANKRUPTCY PLANS/REVERSE
LEVERAGED BUYOUTS/WRAP PLANS
Vote CASE-BY-CASE on proposals to increase common and/or preferred shares and to
issue shares as part of a debt restructuring plan, taking into consideration the
following:
     o    Dilution to existing shareholders' position;
     o    Terms of the offer;
     o    Financial issues;
     o    Management's efforts to pursue other alternatives;
     o    Control issues;
     o    Conflicts of interest.

Vote FOR the debt restructuring if it is expected that the company will file for
bankruptcy if the transaction is not approved.

FORMATION OF HOLDING COMPANY
Vote CASE-BY-CASE on proposals regarding the formation of a holding company,
taking into consideration the following:
     o    The reasons for the change;
     o    Any financial or tax benefits;
     o    Regulatory benefits;
     o    Increases in capital structure;
     o    Changes to the articles of incorporation or bylaws of the company.
     Absent compelling financial reasons to recommend the transaction, vote
     AGAINST the formation of a holding company if the transaction would include
     either of the following:


                                                                              16
<PAGE>

     o    Increases in common or preferred stock in excess of the allowable
          maximum (see discussion under "Capital Structure");
     o    Adverse changes in shareholder rights.

GOING PRIVATE TRANSACTIONS (LBOS, MINORITY SQUEEZEOUTS,  AND GOING DARK)
Vote CASE-BY-CASE on going private transactions, taking into account the
following: offer price/premium, fairness opinion, how the deal was negotiated,
conflicts of interest, other alternatives/offers considered, and non-completion
risk.

Vote CASE-BY-CASE on "going dark" transactions, determining whether the
transaction enhances shareholder value by taking into consideration:
     o    Whether the company has attained benefits from being publicly-traded
          (examination of trading volume, liquidity, and market research of the
          stock);
     o    Cash-out value;
     o    Whether the interests of continuing and cashed-out shareholders are
          balanced; and
     o    The market reaction to public announcement of transaction.

JOINT VENTURES
Vote CASE-BY-CASE on proposals to form joint ventures, taking into account the
following:
     o    Percentage of assets/business contributed;
     o    Percentage ownership;
     o    Financial and strategic benefits;
     o    Governance structure;
     o    Conflicts of interest;
     o    Other alternatives;
     o    Noncompletion risk.

LIQUIDATIONS
Vote CASE-BY-CASE on liquidations, taking into account the following:
     o    Management's efforts to pursue other alternatives;
     o    Appraisal value of assets; and
     o    The compensation plan for executives managing the liquidation.

Vote FOR the liquidation if the company will file for bankruptcy if the proposal
is not approved.

MERGERS AND ACQUISITIONS/ ISSUANCE OF SHARES TO FACILITATE MERGER OR ACQUISITION
Vote CASE-BY-CASE on mergers and acquisitions, determining whether the
transaction enhances shareholder value by giving consideration to items listed
under "Mergers and Corporate Restructurings: Overall Approach."

PRIVATE PLACEMENTS/WARRANTS/CONVERTIBLE DEBENTURES
Vote CASE-BY-CASE on proposals regarding private placements, taking into
consideration:
     o    Dilution to existing shareholders' position;
     o    Terms of the offer;
     o    Financial issues;
     o    Management's efforts to pursue other alternatives;
     o    Control issues;
     o    Conflicts of interest.


                                                                              17
<PAGE>

Vote FOR the private placement if it is expected that the company will file for
bankruptcy if the transaction is not approved.

SPINOFFS
Vote CASE-BY-CASE on spin-offs, considering:
     o    Tax and regulatory advantages;
     o    Planned use of the sale proceeds;
     o    Valuation of spinoff;
     o    Fairness opinion;
     o    Benefits to the parent company;
     o    Conflicts of interest;
     o    Managerial incentives;
     o    Corporate governance changes;
     o    Changes in the capital structure.

VALUE MAXIMIZATION PROPOSALS
Vote CASE-BY-CASE on shareholder proposals seeking to maximize shareholder value
by hiring a financial advisor to explore strategic alternatives, selling the
company or liquidating the company and distributing the proceeds to
shareholders. These proposals should be evaluated based on the following
factors:
     o    Prolonged poor performance with no turnaround in sight;
     o    Signs of entrenched board and management;
     o    Strategic plan in place for improving value;
     o    Likelihood of receiving reasonable value in a sale or dissolution; and
     o    Whether company is actively exploring its strategic options, including
          retaining a financial advisor.


                                                                              18
<PAGE>

6. STATE OF INCORPORATION

CONTROL SHARE ACQUISITION PROVISIONS
Control share acquisition statutes function by denying shares their voting
rights when they contribute to ownership in excess of certain thresholds. Voting
rights for those shares exceeding ownership limits may only be restored by
approval of either a majority or supermajority of disinterested shares. Thus,
control share acquisition statutes effectively require a hostile bidder to put
its offer to a shareholder vote or risk voting disenfranchisement if the bidder
continues buying up a large block of shares.

Vote FOR proposals to opt out of control share acquisition statutes unless doing
so would enable the completion of a takeover that would be detrimental to
shareholders.

Vote AGAINST proposals to amend the charter to include control share acquisition
provisions.

Vote FOR proposals to restore voting rights to the control shares.

CONTROL SHARE CASH-OUT PROVISIONS
Control share cash-out statutes give dissident shareholders the right to
"cash-out" of their position in a company at the expense of the shareholder who
has taken a control position. In other words, when an investor crosses a preset
threshold level, remaining shareholders are given the right to sell their shares
to the acquirer, who must buy them at the highest acquiring price.

Vote FOR proposals to opt out of control share cash-out statutes.

DISGORGEMENT PROVISIONS
Disgorgement provisions require an acquirer or potential acquirer of more than a
certain percentage of a company's stock to disgorge, or pay back, to the company
any profits realized from the sale of that company's stock purchased 24 months
before achieving control status. All sales of company stock by the acquirer
occurring within a certain period of time (between 18 months and 24 months)
prior to the investor's gaining control status are subject to these
recapture-of-profits provisions.

Vote FOR proposals to opt out of state disgorgement provisions.

FAIR PRICE PROVISIONS
Vote CASE-BY-CASE on proposals to adopt fair price provisions (provisions that
stipulate that an acquirer must pay the same price to acquire all shares as it
paid to acquire the control shares), evaluating factors such as the vote
required to approve the proposed acquisition, the vote required to repeal the
fair price provision, and the mechanism for determining the fair price.

Generally, vote AGAINST fair price provisions with shareholder vote requirements
greater than a majority of disinterested shares.

FREEZE-OUT PROVISIONS
Vote FOR proposals to opt out of state freeze-out provisions. Freeze-out
provisions force an investor who surpasses a certain ownership threshold in a
company to wait a specified period of time before gaining control of the
company.

GREENMAIL
Greenmail payments are targeted share repurchases by management of company stock
from individuals or groups seeking control of the company. Since only the
hostile party receives payment, usually at a substantial premium over the market
value of its shares, the practice discriminates against all other shareholders.


                                                                              19
<PAGE>

Vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or
otherwise restrict a company's ability to make greenmail payments.

Vote CASE-BY-CASE on anti-greenmail proposals when they are bundled with other
charter or bylaw amendments.

REINCORPORATION PROPOSALS
Vote CASE-BY-CASE on proposals to change a company's state of incorporation,
taking into consideration both financial and corporate governance concerns,
including the reasons for reincorporating, a comparison of the governance
provisions, comparative economic benefits, and a comparison of the
jurisdictional laws.

Vote FOR re-incorporation when the economic factors outweigh any neutral or
negative governance changes.

STAKEHOLDER PROVISIONS
Vote AGAINST proposals that ask the board to consider non-shareholder
constituencies or other non-financial effects when evaluating a merger or
business combination.

STATE ANTITAKEOVER STATUTES
Vote CASE-BY-CASE on proposals to opt in or out of state takeover statutes
(including control share acquisition statutes, control share cash-out statutes,
freezeout provisions, fair price provisions, stakeholder laws, poison pill
endorsements, severance pay and labor contract provisions, anti-greenmail
provisions, and disgorgement provisions).


                                                                              20
<PAGE>

7. CAPITAL STRUCTURE

ADJUSTMENTS TO PAR VALUE OF COMMON STOCK
Vote FOR management proposals to reduce the par value of common stock.

COMMON STOCK AUTHORIZATION
Vote CASE-BY-CASE on proposals to increase the number of shares of common stock
authorized for issuance using a model developed by ISS.

Vote FOR proposals to approve increases beyond the allowable increase when a
company's shares are in danger of being delisted or if a company's ability to
continue to operate as a going concern is uncertain.

In addition, for capital requests less than or equal to 300 percent of the
current authorized shares that marginally fail the calculated allowable cap
(i.e., exceed the allowable cap by no more than 5 percent), on a CASE-BY-CASE
basis, vote FOR the increase based on the company's performance and whether the
company's ongoing use of shares has shown prudence. Factors should include, at a
minimum, the following:
     o    Rationale;
     o    Good performance with respect to peers and index on a five-year total
          shareholder return basis;
     o    Absence of non-shareholder approved poison pill;
     o    Reasonable equity compensation burn rate;
     o    No non-shareholder approved pay plans; and
     o    Absence of egregious equity compensation practices.

DUAL-CLASS STOCK
Vote AGAINST proposals to create a new class of common stock with superior
voting rights.

Vote AGAINST proposals at companies with dual-class capital structures to
increase the number of authorized shares of the class of stock that has superior
voting rights.

Vote FOR proposals to create a new class of nonvoting or sub-voting common stock
if:
     o    It is intended for financing purposes with minimal or no dilution to
          current shareholders;
     o    It is not designed to preserve the voting power of an insider or
          significant shareholder.

ISSUE STOCK FOR USE WITH RIGHTS PLAN
Vote AGAINST proposals that increase authorized common stock for the explicit
purpose of implementing a non-shareholder approved shareholder rights plan
(poison pill).

PREEMPTIVE RIGHTS
Vote CASE-BY-CASE on shareholder proposals that seek preemptive rights, taking
into consideration: the size of a company, the characteristics of its
shareholder base, and the liquidity of the stock.

PREFERRED STOCK
Vote AGAINST proposals authorizing the creation of new classes of preferred
stock with unspecified voting, conversion, dividend distribution, and other
rights ("blank check" preferred stock).


                                                                              21
<PAGE>

Vote FOR proposals to create "declawed" blank check preferred stock (stock that
cannot be used as a takeover defense).

Vote FOR proposals to authorize preferred stock in cases where the company
specifies the voting, dividend, conversion, and other rights of such stock and
the terms of the preferred stock appear reasonable.

Vote AGAINST proposals to increase the number of blank check preferred stock
authorized for issuance when no shares have been issued or reserved for a
specific purpose.

Vote CASE-BY-CASE on proposals to increase the number of blank check preferred
shares after analyzing the number of preferred shares available for issue given
a company's industry and performance in terms of shareholder returns.

RECAPITALIZATION
Vote CASE-BY-CASE on recapitalizations (reclassifications of securities), taking
into account the following:
     o    More simplified capital structure;
     o    Enhanced liquidity;
     o    Fairness of conversion terms;
     o    Impact on voting power and dividends;
     o    Reasons for the reclassification;
     o    Conflicts of interest; and
     o    Other alternatives considered.

REVERSE STOCK SPLITS
Vote FOR management proposals to implement a reverse stock split when the number
of authorized shares will be proportionately reduced.

Vote FOR management proposals to implement a reverse stock split to avoid
delisting.

Vote CASE-BY-CASE on proposals to implement a reverse stock split that do not
proportionately reduce the number of shares authorized for issue based on the
allowable increased calculated using the Capital Structure model.

SHARE REPURCHASE PROGRAMS
Vote FOR management proposals to institute open-market share repurchase plans in
which all shareholders may participate on equal terms.

STOCK DISTRIBUTIONS: SPLITS AND DIVIDENDS
Vote FOR management proposals to increase the common share authorization for a
stock split or share dividend, provided that the increase in authorized shares
would not result in an excessive number of shares available for issuance as
determined using a model developed by ISS.

TRACKING STOCK
Vote CASE-BY-CASE on the creation of tracking stock, weighing the strategic
value of the transaction against such factors as:
     o    Adverse governance changes;
     o    Excessive increases in authorized capital stock;
     o    Unfair method of distribution;
     o    Diminution of voting rights;
     o    Adverse conversion features;
     o    Negative impact on stock option plans; and
     o    Alternatives such as spin-off.


                                                                              22
<PAGE>

8. EXECUTIVE AND DIRECTOR COMPENSATION

EQUITY COMPENSATION PLANS

Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity
plan if any of the following factors apply:
     o    The total cost of the company's equity plans is unreasonable;
     o    The plan expressly permits the repricing of stock options without
          prior shareholder approval;
     o    There is a disconnect between CEO pay and the company's performance;
     o    The company's three year burn rate exceeds the greater of 2% and the
          mean plus 1 standard deviation of its industry group; or
     o    The plan is a vehicle for poor pay practices.

Each of these factors is further described below:

COST OF EQUITY PLANS
Generally, vote AGAINST equity plans if the cost is unreasonable. For
non-employee director plans, vote FOR the plan if certain factors are met (see
Director Compensation section).

The cost of the equity plans is expressed as Shareholder Value Transfer (SVT),
which is measured using a binomial option pricing model that assesses the amount
of shareholders' equity flowing out of the company to employees and directors.
SVT is expressed as both a dollar amount and as a percentage of market value,
and includes the new shares proposed, shares available under existing plans, and
shares granted but unexercised. All award types are valued. For omnibus plans,
unless limitations are placed on the most expensive types of awards (for
example, full value awards), the assumption is made that all awards to be
granted will be the most expensive types. See discussion of specific types of
awards.

The Shareholder Value Transfer is reasonable if it falls below the
company-specific allowable cap. The allowable cap is determined as follows: The
top quartile performers in each industry group (using the Global Industry
Classification Standard GICS) are identified. Benchmark SVT levels for each
industry are established based on these top performers' historic SVT. Regression
analyses are run on each industry group to identify the variables most strongly
correlated to SVT. The benchmark industry SVT level is then adjusted upwards or
downwards for the specific company by plugging the company-specific performance
measures, size and cash compensation into the industry cap equations to arrive
at the company's allowable cap.

REPRICING PROVISIONS
Vote AGAINST plans that expressly permit the repricing of stock options without
prior shareholder approval, even if the cost of the plan is reasonable.

Vote AGAINST plans if the company has a history of repricing options without
shareholder approval, and the applicable listing standards would not preclude
them from doing so.

PAY-FOR PERFORMANCE DISCONNECT Generally vote AGAINST plans in which:
     o    there is a disconnect between the CEO's pay and company performance
          (an increase in pay and a decrease
          in performance);
     o    the main source of the pay increase (over half) is equity-based, and
     o    the CEO is a participant of the equity proposal.


                                                                              23
<PAGE>

Performance decreases are based on negative one- and three-year total
shareholder returns. CEO pay increases are based on the CEO's total direct
compensation (salary, cash bonus, present value of stock options, face value of
restricted stock, face value of long-term incentive plan payouts, and all other
compensation) increasing over the previous year.

WITHHOLD votes from the Compensation Committee members when the company has a
pay for performance disconnect.

On a CASE-BY-CASE basis, vote for equity plans and FOR compensation committee
members with a pay-for-performance disconnect if compensation committee members
can present strong and compelling evidence of improved committee performance.
This evidence must go beyond the usual compensation committee report disclosure.
This additional evidence necessary includes all of the following:

     o    The compensation committee has reviewed all components of the CEO's
          compensation, including the following:
          -    Base salary, bonus, long-term incentives;
          -    Accumulative realized and unrealized stock option and restricted
               stock gains;
          -    Dollar value of perquisites and other personal benefits to the
               CEO and the total cost to the company;
          -    Earnings and accumulated payment obligations under the company's
               nonqualified deferred compensation program;
          -    Actual projected payment obligations under the company's
               supplemental executive retirement plan (SERPs).

A tally sheet setting forth all the above components was prepared and reviewed
affixing dollar amounts under the various payout scenarios. (A complete
breakdown of pay components also can be found in Disclosure of CEO Compensation
- - Tally Sheet.)

     o    A tally sheet with all the above components should be disclosed for
          the following termination scenarios:
          -    Payment if termination occurs within 12 months: $_____;
          -    Payment if "not for cause" termination occurs within 12 months:
               $_____;
          -    Payment if "change of control" termination occurs within 12
               months: $_____.

     o    The compensation committee is committed to providing additional
          information on the named executives' annual cash bonus program and/or
          long-term incentive cash plan for the current fiscal year. The
          compensation committee will provide full disclosure of the qualitative
          and quantitative performance criteria and hurdle rates used to
          determine the payouts of the cash program. From this disclosure,
          shareholders will know the minimum level of performance required for
          any cash bonus to be delivered, as well as the maximum cash bonus
          payable for superior performance.

The repetition of the compensation committee report does not meet ISS'
requirement of compelling and strong evidence of improved disclosure. The level
of transparency and disclosure is at the highest level where shareholders can
understand the mechanics of the annual cash bonus and/or long-term incentive
cash plan based on the additional disclosure.

     o    The compensation committee is committed to granting a substantial
          portion of performance-based equity awards to the named executive
          officers. A substantial portion of performance-based awards would be
          at least 50 percent of the shares awarded to each of the named
          executive officers. Performance-based equity awards are earned or paid
          out based on the achievement of company performance targets. The
          company will disclose the details of the performance criteria (e.g.,
          return on equity) and the hurdle rates (e.g., 15 percent) associated


                                                                              24
<PAGE>

          with the performance targets. From this disclosure, shareholders will
          know the minimum level of performance required for any equity grants
          to be made. The performance-based equity awards do not refer to
          non-qualified stock options(1) or performance-accelerated grants.(2)
          Instead, performance-based equity awards are performance-contingent
          grants where the individual will not receive the equity grant by not
          meeting the target performance and vice versa.

The level of transparency and disclosure is at the highest level where
shareholders can understand the mechanics of the performance-based equity awards
based on the additional disclosure.

     o    The compensation committee has the sole authority to hire and fire
          outside compensation consultants. The role of the outside compensation
          consultant is to assist the compensation committee to analyze
          executive pay packages or contracts and understand the company's
          financial measures.

THREE-YEAR BURN RATE/BURN RATE COMMITMENT

Generally vote AGAINST plans if the company's most recent three-year burn rate
exceeds one standard deviation in excess of the industry mean (per the following
Burn Rate Table) and is over two percent of common shares outstanding. The
three-year burn rate policy does not apply to non-employee director plans unless
outside directors receive a significant portion of shares each year.

However, vote FOR equity plans if the company fails this burn rate test but the
company commits in a public filing to a three-year average burn rate equal to
its GICS group burn rate mean plus one standard deviation, assuming all other
conditions for voting FOR the plan have been met.
If a company fails to fulfill its burn rate commitment, vote to WITHHOLD from
the compensation committee.

- ----------
(1) Non-qualified stock options are not performance-based awards unless the
grant or the vesting of the stock options is tied to the achievement of a
pre-determined and disclosed performance measure. A rising stock market will
generally increase share prices of all companies, despite of the company's
underlying performance.
(2) Performance-accelerated grants are awards that vest
earlier based on the achievement of a specified measure. However, these grants
will ultimately vest over time even without the attainment of the goal(s).


                                                                              25
<PAGE>

 2006 PROXY SEASON BURN RATE TABLE

<TABLE>
<CAPTION>
                                               RUSSELL 3000                        NON-RUSSELL 3000
                                               ----------------------------------- ----------------------------------
   GIC     DESCRIPTION                           MEAN     STANDARD   MEAN+STDEV     MEAN     STANDARD   MEAN+STDEV
                                                         DEVIATION                          DEVUATION
- ---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>        <C>         <C>          <C>       <C>         <C>
   1010    Energy                                1.53%      0.96%       2.50%        2.03%     2.53%       4.56%
- ---------------------------------------------------------------------------------- ----------------------------------
   1510    Materials                             1.37%      0.74%       2.11%        2.15%     2.01%       4.16%
- ---------------------------------------------------------------------------------- ----------------------------------
   2010    Capital Goods                         1.84%      1.09%       2.93%        2.74%     2.63%       5.37%
- ---------------------------------------------------------------------------------- ----------------------------------
   2020    Commercial Services & Supplies        2.73%      1.60%       4.33%        3.43%     4.18%       7.61%
- ---------------------------------------------------------------------------------- ----------------------------------
   2030    Transportation                        1.76%      1.71%       3.47%        2.18%     2.12%       4.30%
- ---------------------------------------------------------------------------------- ----------------------------------
   2510    Automobiles & Components              1.97%      1.27%       3.24%        2.23%     2.29%       4.51%
- ---------------------------------------------------------------------------------- ----------------------------------
   2520    Consumer Durables & Apparel           2.04%      1.22%       3.26%        2.86%     2.48%       5.35%
- ---------------------------------------------------------------------------------- ----------------------------------
   2530    Hotels Restaurants & Leisure          2.22%      1.09%       3.31%        2.71%     2.46%       5.17%
- ---------------------------------------------------------------------------------- ----------------------------------
   2540    Media                                 2.14%      1.24%       3.38%        3.26%     2.52%       5.77%
- ---------------------------------------------------------------------------------- ----------------------------------
   2550    Retailing                             2.54%      1.59%       4.12%        4.01%     4.03%       8.03%
- ---------------------------------------------------------------------------------- ----------------------------------
   3010,   Food & Staples Retailing              1.82%      1.31%       3.13%        2.20%     2.79%       4.99%
3020, 3030
- ---------------------------------------------------------------------------------- ----------------------------------
   3510    Health Care Equipment & Services      3.20%      1.71%       4.91%        4.33%     3.20%       7.53%
- ---------------------------------------------------------------------------------- ----------------------------------
   3520    Pharmaceuticals & Biotechnology       3.70%      1.87%       5.57%        5.41%     4.74%      10.15%
- ---------------------------------------------------------------------------------- ----------------------------------
   4010    Banks                                 1.46%      1.00%       2.46%        1.38%     1.42%       2.79%
- ---------------------------------------------------------------------------------- ----------------------------------
   4020    Diversified Financials                3.00%      2.28%       5.28%        4.46%     4.01%       8.47%
- ---------------------------------------------------------------------------------- ----------------------------------
   4030    Insurance                             1.52%      1.04%       2.56%        2.25%     2.85%       5.10%
- ---------------------------------------------------------------------------------- ----------------------------------
   4040    Real Estate                           1.30%      1.01%       2.31%        1.12%     1.67%       2.79%
- ---------------------------------------------------------------------------------- ----------------------------------
   4510    Software & Services                   5.02%      2.98%       8.00%        6.92%     6.05%      12.97%
- ---------------------------------------------------------------------------------- ----------------------------------
   4520    Technology Hardware & Equipment       3.64%      2.48%       6.11%        4.73%     4.02%       8.75%
- ---------------------------------------------------------------------------------- ----------------------------------
   4530    Semiconductors & Semiconductor        4.81%      2.86%       7.67%        5.01%     3.06%       8.07%
           Equip.
- ---------------------------------------------------------------------------------- ----------------------------------
   5010    Telecommunication Services            2.31%      1.61%       3.92%        3.70%     3.41%       7.11%
- ---------------------------------------------------------------------------------- ----------------------------------
   5510    Utilities                             0.94%      0.62%       1.56%        2.11%     4.13%       6.24%
- ---------------------------------------------------------------------------------- ----------------------------------
</TABLE>

For companies that grant both full value awards and stock options to their
employees, apply a premium on full value awards for the past three fiscal years
as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
CHARACTERISTICS                  ANNUAL STOCK PRICE VOLATILITY     PREMIUM
- -----------------------------------------------------------------------------------------------------------
<S>                              <C>                               <C>
High annual volatility           53% and higher                    1 full-value award for 1.5 option shares
- -----------------------------------------------------------------------------------------------------------
Moderate annual volatility       25% - 52%                         1 full-value award for 2.0 option shares
- -----------------------------------------------------------------------------------------------------------
Low annual volatility            Less than 25%                     1 full-value award for 4.0 option shares
- -----------------------------------------------------------------------------------------------------------
</TABLE>

POOR PAY PRACTICES
Vote AGAINST equity plans if the plan is a vehicle for poor compensation
practices.

WITHOLD from compensation committee members if the company has poor compensation
practices.

Poor compensation practices include, but are not limited to, the following:
     o    Egregious employment contracts including excessive severance
          provisions;
     o    Excessive perks that dominate compensation;
     o    Huge bonus payouts without justifiable performance linkage;
     o    Performance metrics that are changed during the performance period;
     o    Egregious SERP (Supplemental Executive Retirement Plans) payouts;
     o    New CEO with overly generous hiring package;


                                                                              26
<PAGE>

     o    Internal pay disparity;
     o    Other excessive compensation payouts or poor pay practices at the
          company.

SPECIFIC TREATMENT OF CERTAIN AWARD TYPES IN EQUITY PLAN EVALUATIONS:
DIVIDEND EQUIVALENT RIGHTS

Equity plans that have Dividend Equivalent Rights (DERs) associated with them
will have a higher calculated award value than those without DERs under the
binomial model, based on the value of these dividend streams. The higher value
will be applied to new shares, shares available under existing plans, and shares
awarded but not exercised per the plan specifications. DERS transfer more
shareholder equity to employees and non-employee directors and this cost should
be captured.

LIBERAL SHARE RECYCLING  PROVISIONS
Under net share counting provisions, shares tendered by an option holder to pay
for the exercise of an option, shares withheld for taxes or shares repurchased
by the company on the open market can be recycled back into the equity plan for
awarding again. All awards with such provisions should be valued as full-value
awards. Stock-settled stock appreciation rights (SSARs) will also be considered
as full-value awards if a company counts only the net shares issued to employees
towards their plan reserve.

TRANSFERABLE STOCK OPTION AWARDS
For transferable stock option award types within a new equity plan, calculate
the cost of the awards by setting their forfeiture rate to zero when comparing
to the allowable cap. In addition, in order to vote FOR plans with such awards,
the structure and mechanics of the on-going transferable stock option program
must be disclosed to shareholders; and amendments to existing plans that allow
for introduction of transferability of stock options should make clear that only
options granted post-amendment shall be transferable.

OTHER COMPENSATION PROPOSALS AND POLICIES
401(K) EMPLOYEE BENEFIT PLANS
Vote FOR proposals to implement a 401(k) savings plan for employees.

DIRECTOR COMPENSATION
Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the
cost of the plans against the company's allowable cap.

On occasion, director stock plans that set aside a relatively small number of
shares when combined with employee or executive stock compensation plans exceed
the allowable cap. Vote for the plan if ALL of the following qualitative factors
in the board's compensation are met and disclosed in the proxy statement:
     o    Director stock ownership guidelines with a minimum of three times the
          annual cash retainer.
     o    Vesting schedule or mandatory holding/deferral period:
          -    A minimum vesting of three years for stock options or restricted
               stock; or
          -    Deferred stock payable at the end of a three-year deferral
               period.
     o    Mix between cash and equity:
          -    A balanced mix of cash and equity, for example 40% cash/60%
               equity or 50% cash/50% equity; or


                                                                              27
<PAGE>

          -    If the mix is heavier on the equity component, the vesting
               schedule or deferral period should be more stringent, with the
               lesser of five years or the term of directorship.
     o    No retirement/benefits and perquisites provided to non-employee
          directors; and
     o    Detailed disclosure provided on cash and equity compensation delivered
          to each non-employee director for the most recent fiscal year in a
          table. The column headers for the table may include the following:
          name of each non-employee director, annual retainer, board meeting
          fees, committee retainer, committee-meeting fees, and equity grants.

DIRECTOR RETIREMENT PLANS
Vote AGAINST retirement plans for non-employee directors.

Vote FOR shareholder proposals to eliminate retirement plans for non-employee
directors.

DISCLOSURE OF CEO COMPENSATION-TALLY SHEET
Encourage companies to provide better and more transparent disclosure related to
CEO pay. Consider withhold votes in the future from the compensation committee
and voting against equity plans if compensation disclosure is not improved and a
tally sheet is not provided.

In addition to the current SEC requirements, the following table sets forth the
current minimum standard on CEO pay disclosure according to ISS's guidelines:

<TABLE>
<CAPTION>

- -----------------------------------------------------------------------------------------------------------
             COMPONENT                     AMOUNT EARNED/GRANTED                   DESCRIPTION
- -----------------------------------------------------------------------------------------------------------
<S>                                  <C>                                <C>
Base Salary                          Current figure                     Explanation of any increase in
                                                                        base salary
- -----------------------------------------------------------------------------------------------------------
Annual Incentive                     Target:                            Explanation of specific
                                     Actual earned:                     performance measures and actual
                                                                        deliverables.

                                                                        State amount tied to actual
                                                                        performance.

                                                                        State any discretionary bonus.
- -----------------------------------------------------------------------------------------------------------
Stock Options                        Number granted:                    Rationale for determining the
                                     Exercise price:                    number of stock options issued to
                                     Vesting:                           CEO.
                                     Grant value:

                                                                        Accumulated dividend equivalents
                                                                        (if any).
- -----------------------------------------------------------------------------------------------------------
Restricted Stock                     Number granted:                    Performance based or time based.
                                     Vesting:
                                     Grant value:                       Rationale for determining the
                                                                        number of restricted stock issued
                                                                        to CEO.

                                                                        Accumulated dividends on vested
                                                                        and unvested portion.
- -----------------------------------------------------------------------------------------------------------
Performance Shares                   Minimum:                           Explanation of specific
                                     Target:                            performance measures and actual
                                     Maximum:                           deliverables.
                                     Actual earned:
                                     Grant value:                       Any dividends on unearned
                                                                        performance shares.
- -----------------------------------------------------------------------------------------------------------
</TABLE>


                                                                              28
<PAGE>

<TABLE>
<S>                                  <C>                                <C>
- -----------------------------------------------------------------------------------------------------------
Deferred compensation                Executive portion:                 Provide structure and terms of
                                     Company match (if any):            program.

                                     Accumulated executive portion:     Explanation of interest,
                                     Accumulated company match (if      formulas, minimum guarantees or
                                     any):                              multipliers on deferred
                                                                        compensation.

                                                                        Any holding periods on the
                                                                        company match portion.

                                                                        Funding mechanism
- -----------------------------------------------------------------------------------------------------------
Supplemental retirement benefit      Actual projected payment           Provide structure and terms of
                                     obligations                        program.

                                                                        Explanation of formula, additional
                                                                        credits for years not worked,
                                                                        multipliers or interest on SERPs.

                                                                        Funding mechanism.
- -----------------------------------------------------------------------------------------------------------
Executive perquisites                Breakdown of the market value of   The types of perquisites
                                     various perquisites                provided. Examples: company
                                                                        aircraft, company cars, etc.
- -----------------------------------------------------------------------------------------------------------
Gross-ups (if any)                   Breakdown of gross-ups for any
                                     pay component
- -----------------------------------------------------------------------------------------------------------
Severance associated with            Estimated payout amounts for       Single trigger or double trigger.
change-in-control                    cash, equity and benefits
- -----------------------------------------------------------------------------------------------------------
Severance (Termination scenario      Estimated payout amounts for
under "for cause" and "not for       cash, equity and benefits under
cause")                              different scenarios
- -----------------------------------------------------------------------------------------------------------
Post retirement package              Estimated value of consulting
                                     agreement and continuation of
                                     benefits
- -----------------------------------------------------------------------------------------------------------
ESTIMATED TOTAL PACKAGE              $
- -----------------------------------------------------------------------------------------------------------
</TABLE>

See the remedy for Pay for Performance disconnect for a more qualitative
description of certain pay components.

EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS)
Vote FOR proposals to implement an ESOP or increase authorized shares for
existing ESOPs, unless the number of shares allocated to the ESOP is excessive
(more than five percent of outstanding shares).

EMPLOYEE STOCK PURCHASE PLANS-- QUALIFIED PLANS
Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR employee
stock purchase plans where all of the following apply: o Purchase price is at
least 85 percent of fair market value; o Offering period is 27 months or less;
and o The number of shares allocated to the plan is ten percent or less of the
outstanding shares.

Vote AGAINST qualified employee stock purchase plans where any of the following
apply:
     o    Purchase price is less than 85 percent of fair market value; or
     o    Offering period is greater than 27 months; or
     o    The number of shares allocated to the plan is more than ten percent of
          the outstanding shares.


                                                                              29
<PAGE>

EMPLOYEE STOCK PURCHASE PLANS-- NON-QUALIFIED PLANS
Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR
nonqualified employee stock purchase plans with all the following features:
     o    Broad-based participation (i.e., all employees of the company with the
          exclusion of individuals with 5 percent or more of beneficial
          ownership of the company);
     o    Limits on employee contribution, which may be a fixed dollar amount or
          expressed as a percent of base salary;
     o    Company matching contribution up to 25 percent of employee's
          contribution, which is effectively a discount of 20 percent from
          market value;
     o    No discount on the stock price on the date of purchase since there is
          a company matching contribution.

Vote AGAINST nonqualified employee stock purchase plans when any of the plan
features do not meet the above criteria. If the company matching contribution
exceeds 25 percent of employee's contribution, evaluate the cost of the plan
against its allowable cap.

INCENTIVE BONUS PLANS AND TAX DEDUCTIBILITY PROPOSALS (OBRA-RELATED
COMPENSATION PROPOSALS)
Vote FOR proposals that simply amend shareholder-approved compensation plans to
include administrative features or place a cap on the annual grants any one
participant may receive to comply with the provisions of Section 162(m).

Vote FOR proposals to add performance goals to existing compensation plans to
comply with the provisions of Section 162(m) unless they are clearly
inappropriate.

Vote CASE-BY-CASE on amendments to existing plans to increase shares reserved
and to qualify for favorable tax treatment under the provisions of Section
162(m) as long as the plan does not exceed the allowable cap and the plan does
not violate any of the supplemental policies.

Generally vote FOR cash or cash and stock bonus plans that are submitted to
shareholders for the purpose of exempting compensation from taxes under the
provisions of Section 162(m) if no increase in shares is requested.

OPTION EXCHANGE PROGRAMS/REPRICING OPTIONS
Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice
options taking into consideration:
     o    Historic trading patterns;
     o    Rationale for the repricing;
     o    Value-for-value exchange;
     o    Treatment of surrendered options;
     o    Option vesting;
     o    Term of the option;
     o    Exercise price;
     o    Participation.


                                                                              30
<PAGE>

If the surrendered options are added back to the equity plans for re-issuance,
then also take into consideration the company's three-year average burn rate.

Vote FOR shareholder proposals to put option repricings to a shareholder vote.

STOCK PLANS IN LIEU OF CASH
Vote CASE-by-CASE on plans which provide participants with the option of taking
all or a portion of their cash compensation in the form of stock.

Vote FOR non-employee director only equity plans which provide a
dollar-for-dollar cash for stock exchange.

Vote CASE-by-CASE on plans which do not provide a dollar-for-dollar cash for
stock exchange. In cases where the exchange is not dollar-for-dollar, the
request for new or additional shares for such equity program will be considered
using the binomial option pricing model. In an effort to capture the total cost
of total compensation, ISS will not make any adjustments to carve out the
in-lieu-of cash compensation.

TRANSFER PROGRAMS OF STOCK OPTIONS
One-time Transfers: WITHHOLD votes from compensation committee members if they
fail to submit one-time transfers for to shareholders for approval.

Vote CASE-BY-CASE on one-time transfers. Vote FOR if:
     o    Executive officers and non-employee directors are excluded from
          participating;
     o    Stock options are purchased by third-party financial institutions at a
          discount to their fair value using option pricing models such as
          Black-Scholes or a Binomial Option Valuation or other appropriate
          financial models;
     o    There is a two-year minimum holding period for sale proceeds (cash or
          stock) for all participants.

Additionally, management should provide a clear explanation of why options are
being transferred and whether the events leading up to the decline in stock
price were beyond management's control. A review of the company's historic stock
price volatility should indicate if the options are likely to be back
"in-the-money" over the near term.

SHAREHOLDER PROPOSALS ON COMPENSATION
DISCLOSURE/SETTING LEVELS OR TYPES OF COMPENSATION FOR EXECUTIVES AND DIRECTORS

Generally, vote FOR shareholder proposals seeking additional disclosure of
executive and director pay information, provided the information requested is
relevant to shareholders' needs, would not put the company at a competitive
disadvantage relative to its industry, and is not unduly burdensome to the
company.

Vote AGAINST shareholder proposals seeking to set absolute levels on
compensation or otherwise dictate the amount or form of compensation.

Vote AGAINST shareholder proposals requiring director fees be paid in stock
only.

Vote CASE-BY-CASE on all other shareholder proposals regarding executive and
director pay, taking into account company performance, pay level versus peers,
pay level versus industry, and long term corporate outlook.


                                                                              31
<PAGE>

OPTION EXPENSING
Generally vote FOR shareholder proposals asking the company to expense stock
options, unless the company has already publicly committed to expensing options
by a specific date.

OPTION REPRICING
Vote FOR shareholder proposals to put option repricings to a shareholder vote.

PENSION PLAN INCOME ACCOUNTING
Generally vote FOR shareholder proposals to exclude pension plan income in the
calculation of earnings used in determining executive bonuses/compensation.

PERFORMANCE-BASED AWARDS
Generally vote FOR shareholder proposals advocating the use of performance-based
awards like indexed, premium-priced, and performance-vested options or
performance-based shares, unless:
     o    The proposal is overly restrictive (e.g., it mandates that awards to
          all employees must be performance-based or all awards to top
          executives must be a particular type, such as indexed options);
     o    The company demonstrates that it is using a substantial portion of
          performance-based awards for its top executives, where substantial
          portion would constitute 50 percent of the shares awarded to those
          executives for that fiscal year.

SEVERANCE AGREEMENTS FOR EXECUTIVES/GOLDEN PARACHUTES
Vote FOR shareholder proposals to require golden parachutes or executive
severance agreements to be submitted for shareholder ratification, unless the
proposal requires shareholder approval prior to entering into employment
contracts.

Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes.
An acceptable parachute should include, but is not limited to, the following:
     o    The triggering mechanism should be beyond the control of management;
     o    The amount should not exceed three times base amount (defined as the
          average annual taxable W-2 compensation during the five years prior to
          the year in which the change of control occurs;
     o    Change-in-control payments should be double-triggered, i.e., (1) after
          a change in control has taken place, and (2) termination of the
          executive as a result of the change in control. Change in control is
          defined as a change in the company ownership structure.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS (SERPS)
Generally vote FOR shareholder proposals requesting to put extraordinary
benefits contained in SERP agreements to a shareholder vote unless the company's
executive pension plans do not contain excessive benefits beyond what is offered
under employee-wide plans.


                                                                              32
<PAGE>

9. CORPORATE RESPONSIBILITY

CONSUMER ISSUES AND PUBLIC SAFETY
ANIMAL RIGHTS
Generally vote AGAINST proposals to phase out the use of animals in product
testing unless:
     o    The company is conducting animal testing programs that are unnecessary
          or not required by regulation;
     o    The company is conducting animal testing when suitable alternatives
          are accepted and used at peer firms;
     o    The company has been the subject of recent, significant controversy
          related to its testing programs.

Generally vote FOR proposals seeking a report on the company's animal welfare
standards unless:
     o    The company has already published a set of animal welfare standards
          and monitors compliance;
     o    The company's standards are comparable to or better than those of peer
          firms; and
     o    There are no serious controversies surrounding the company's treatment
          of animals.

DRUG PRICING
Generally vote AGAINST proposals requesting that companies implement specific
price restraints on pharmaceutical products unless the company fails to adhere
to legislative guidelines or industry norms in its product pricing.

Vote CASE-BY-CASE on proposals requesting that the company evaluate their
product pricing considering:
     o    The existing level of disclosure on pricing policies;
     o    Deviation from established industry pricing norms;
     o    The company's existing initiatives to provide its products to needy
          consumers;
     o    Whether the proposal focuses on specific products or geographic
          regions.

DRUG REIMPORTATION
Generally vote FOR proposals requesting that companies report on the financial
and legal impact of their policies regarding prescription drug reimportation
unless such information is already publicly disclosed.

Generally vote AGAINST proposals requesting that companies adopt specific
policies to encourage or constrain prescription drug reimportation.

GENETICALLY MODIFIED FOODS
Vote AGAINST proposals asking companies to voluntarily label genetically
engineered (GE) ingredients in their products or alternatively to provide
interim labeling and eventually eliminate GE ingredients due to the costs and
feasibility of labeling and/or phasing out the use of GE ingredients.

Vote CASE-BY-CASE on proposals asking for a report on the feasibility of
labeling products containing GE ingredients taking into account:
     o    The relevance of the proposal in terms of the company's business and
          the proportion of it affected by the resolution;


                                                                              33
<PAGE>

     o    The quality of the company's disclosure on GE product labeling and
          related voluntary initiatives and how this disclosure compares with
          peer company disclosure;
     o    Company's current disclosure on the feasibility of GE product
          labeling, including information on the related costs;
     o    Any voluntary labeling initiatives undertaken or considered by the
          company.

Vote CASE-BY-CASE on proposals asking for the preparation of a report on the
financial, legal, and environmental impact of continued use of GE
ingredients/seeds. Evaluate the following:
     o    The relevance of the proposal in terms of the company's business and
          the proportion of it affected by the resolution;
     o    The quality of the company's disclosure on risks related to GE product
          use and how this disclosure compares with peer company disclosure;
     o    The percentage of revenue derived from international operations,
          particularly in Europe, where GE products are more regulated and
          consumer backlash is more pronounced.

Vote AGAINST proposals seeking a report on the health and environmental effects
of genetically modified organisms (GMOs). Health studies of this sort are better
undertaken by regulators and the scientific community.

Vote AGAINST proposals to completely phase out GE ingredients from the company's
products or proposals asking for reports outlining the steps necessary to
eliminate GE ingredients from the company's products. Such resolutions
presuppose that there are proven health risks to GE ingredients (an issue better
left to federal regulators) that outweigh the economic benefits derived from
biotechnology.

HANDGUNS
Generally vote AGAINST requests for reports on a company's policies aimed at
curtailing gun violence in the United States unless the report is confined to
product safety information. Criminal misuse of firearms is beyond company
control and instead falls within the purview of law enforcement agencies.

HIV/AIDS
Vote CASE-BY-CASE on requests for reports outlining the impact of the health
pandemic (HIV/AIDS, malaria and tuberculosis) on the company's Sub-Saharan
operations and how the company is responding to it, taking into account:
     o    The nature and size of the company's operations in Sub-Saharan Africa
          and the number of local employees;
     o    The company's existing healthcare policies, including benefits and
          healthcare access for local workers;
     o    Company donations to healthcare providers operating in the region.

Vote AGAINST proposals asking companies to establish, implement, and report on a
standard of response to the HIV/AIDS, TB, and malaria health pandemic in Africa
and other developing countries, unless the company has significant operations in
these markets and has failed to adopt policies and/or procedures to address
these issues comparable to those of industry peers.

PREDATORY LENDING
Vote CASE-BY CASE on requests for reports on the company's procedures for
preventing predatory lending, including the establishment of a board committee
for oversight, taking into account:
     o    Whether the company has adequately disclosed mechanisms in place to
          prevent abusive lending practices;


                                                                              34
<PAGE>

     o    Whether the company has adequately disclosed the financial risks of
          its subprime business;
     o    Whether the company has been subject to violations of lending laws or
          serious lending controversies;
     o    Peer companies' policies to prevent abusive lending practices.

TOBACCO
Most tobacco-related proposals should be evaluated on a CASE-BY-CASE basis,
taking into account the following factors:

Second-hand smoke:
     o    Whether the company complies with all local ordinances and
          regulations;
     o    The degree that voluntary restrictions beyond those mandated by law
          might hurt the company's competitiveness;
     o    The risk of any health-related liabilities.

Advertising to youth:
     o    Whether the company complies with federal, state, and local laws on
          the marketing of tobacco or if it has been fined for violations;
     o    Whether the company has gone as far as peers in restricting
          advertising;
     o    Whether the company entered into the Master Settlement Agreement,
          which restricts marketing of tobacco to youth;
     o    Whether restrictions on marketing to youth extend to foreign
          countries.

Cease production of tobacco-related products or avoid selling products to
tobacco companies: o The percentage of the company's business affected; o The
economic loss of eliminating the business versus any potential tobacco-related
liabilities.

Spin-off tobacco-related businesses:
     o    The percentage of the company's business affected;
     o    The feasibility of a spin-off;
     o    Potential future liabilities related to the company's tobacco
          business.

Stronger product warnings:
Vote AGAINST proposals seeking stronger product warnings. Such decisions are
better left to public health authorities.

Investment in tobacco stocks:
Vote AGAINST proposals prohibiting investment in tobacco equities. Such
decisions are better left to portfolio managers.

TOXIC CHEMICALS
Generally vote FOR resolutions requesting that a company discloses its policies
related to toxic chemicals.

Vote CASE-BY-CASE on resolutions requesting that companies evaluate and disclose
the potential financial and legal risks associated with utilizing certain
chemicals, considering:
     o    Current regulations in the markets in which the company operates;
     o    Recent significant controversy, litigation, or fines stemming from
          toxic chemicals or ingredients at the company; and
     o    The current level of disclosure on this topic.


                                                                              35
<PAGE>

Generally vote AGAINST resolutions requiring that a company reformulate its
products within a certain timeframe unless such actions are required by law in
specific markets.

ENVIRONMENT AND ENERGY
ARCTIC NATIONAL WILDLIFE REFUGE
Generally vote AGAINST request for reports outlining potential environmental
damage from drilling in the Arctic National Wildlife Refuge (ANWR) unless: o New
legislation is adopted allowing development and drilling in the ANWR region; o
The company intends to pursue operations in the ANWR; and o The company does not
currently disclose an environmental risk report for their operations in the
ANWR.

CERES PRINCIPLES
Vote CASE-BY-CASE on proposals to adopt the CERES Principles, taking into
account:
     o    The company's current environmental disclosure beyond legal
          requirements, including environmental health and safety (EHS) audits
          and reports that may duplicate CERES;
     o    The company's environmental performance record, including violations
          of federal and state regulations, level of toxic emissions, and
          accidental spills;
     o    Environmentally conscious practices of peer companies, including
          endorsement of CERES;
     o    Costs of membership and implementation.

CONCENTRATED AREA FEEDING OPERATIONS (CAFOS)
Vote FOR resolutions requesting that companies report to shareholders on the
risks and liabilities associated with CAFOs unless:
     o    The company has publicly disclosed guidelines for its corporate and
          contract farming operations, including compliance monitoring; or
     o    The company does not directly source from CAFOs.

ENVIRONMENTAL-ECONOMIC RISK REPORT
Vote CASE-BY-CASE on proposals requesting an economic risk assessment of
environmental performance considering:
     o    The feasibility of financially quantifying environmental risk factors;
     o    The company's compliance with applicable legislation and/or
          regulations regarding environmental performance;
     o    The costs associated with implementing improved standards;
     o    The potential costs associated with remediation resulting from poor
          environmental performance; and
     o    The current level of disclosure on environmental policies and
          initiatives.

ENVIRONMENTAL REPORTS
Generally vote FOR requests for reports disclosing the company's environmental
policies unless it already has well-documented environmental management systems
that are available to the public.

GLOBAL WARMING
Generally vote FOR proposals requesting a report on greenhouse gas emissions
from company operations and/or products unless this information is already
publicly disclosed or such factors are not integral to the company's line of
business.

Generally vote AGAINST proposals that call for reduction in greenhouse gas
emissions by specified amounts or within a restrictive time frame unless the
company lags industry standards and has been the subject of recent, significant
fines or litigation resulting from greenhouse gas emissions.


                                                                              36
<PAGE>

KYOTO PROTOCOL COMPLIANCE
Generally vote FOR resolutions requesting that companies outline their
preparations to comply with standards established by Kyoto Protocol signatory
markets unless:
     o    The company does not maintain operations in Kyoto signatory markets;
     o    The company already evaluates and substantially discloses such
          information; or,
     o    Greenhouse gas emissions do not significantly impact the company's
          core businesses.

LAND USE
Generally vote AGAINST resolutions that request the disclosure of detailed
information on a company's policies related to land use or development unless
the company has been the subject of recent, significant fines or litigation
stemming from its land use.

NUCLEAR SAFETY
Generally vote AGAINST resolutions requesting that companies report on risks
associated with their nuclear reactor designs and/or the production and interim
storage of irradiated fuel rods unless:
     o    The company does not have publicly disclosed guidelines describing its
          policies and procedures for addressing risks associated with its
          operations;
     o    The company is non-compliant with Nuclear Regulatory Commission (NRC)
          requirements; or
     o    The company stands out amongst its peers or competitors as having
          significant problems with safety or
         environmental performance related to its nuclear operations.

OPERATIONS IN PROTECTED AREAS
Generally vote FOR requests for reports outlining potential environmental damage
from operations in protected regions, including wildlife refuges unless:
     o    The company does not currently have operations or plans to develop
          operations in these protected regions; or,
     o    The company provides disclosure on its operations and environmental
          policies in these regions comparable to industry peers.

RECYCLING
Vote CASE-BY-CASE on proposals to adopt a comprehensive recycling strategy,
taking into account:
     o    The nature of the company's business and the percentage affected;
     o    The extent that peer companies are recycling; o The timetable
          prescribed by the proposal;
     o    The costs and methods of implementation;
     o    Whether the company has a poor environmental track record, such as
          violations of federal and state regulations.

RENEWABLE ENERGY
In general, vote FOR requests for reports on the feasibility of developing
renewable energy sources unless the report is duplicative of existing disclosure
or irrelevant to the company's line of business.


                                                                              37
<PAGE>

Generally vote AGAINST proposals requesting that the company invest in renewable
energy sources. Such decisions are best left to management's evaluation of the
feasibility and financial impact that such programs may have on the company.

SUSTAINABILITY REPORT
Generally vote FOR proposals requesting the company to report on policies and
initiatives related to social, economic, and environmental sustainability,
unless:
     o    The company already discloses similar information through existing
          reports or policies such as an Environment, Health, and Safety (EHS)
          report; a comprehensive Code of Corporate Conduct; and/or a Diversity
          Report; or
     o    The company has formally committed to the implementation of a
          reporting program based on Global Reporting Initiative (GRI)
          guidelines or a similar standard within a specified time frame.

GENERAL CORPORATE ISSUES
CHARITABLE/POLITICAL CONTRIBUTIONS
Generally vote AGAINST proposals asking the company to affirm political
nonpartisanship in the workplace so long as:
     o    The company is in compliance with laws governing corporate political
          activities; and
     o    The company has procedures in place to ensure that employee
          contributions to company-sponsored political action committees (PACs)
          are strictly voluntary and not coercive.

Vote AGAINST proposals to publish in newspapers and public media the company's
political contributions as such publications could present significant cost to
the company without providing commensurate value to shareholders.

Vote CASE-BY-CASE on proposals to improve the disclosure of a company's
political contributions considering:
     o    Recent significant controversy or litigation related to the company's
          political contributions or governmental affairs; and
     o    The public availability of a policy on political contributions.

Vote AGAINST proposals barring the company from making political contributions.
Businesses are affected by legislation at the federal, state, and local level
and barring contributions can put the company at a competitive disadvantage.

Vote AGAINST proposals restricting the company from making charitable
contributions. Charitable contributions are generally useful for assisting
worthwhile causes and for creating goodwill in the community. In the absence of
bad faith, self-dealing, or gross negligence, management should determine which
contributions are in the best interests of the company.

Vote AGAINST proposals asking for a list of company executives, directors,
consultants, legal counsels, lobbyists, or investment bankers that have prior
government service and whether such service had a bearing on the business of the
company. Such a list would be burdensome to prepare without providing any
meaningful information to shareholders.

LINK EXECUTIVE COMPENSATION TO SOCIAL PERFORMANCE
Vote CASE-BY-CASE on proposals to review ways of linking executive compensation
to social factors, such as corporate downsizings, customer or employee
satisfaction, community involvement, human rights, environmental performance,
predatory lending, and executive/employee pay disparities. Such resolutions
should be evaluated in the context of:


                                                                              38
<PAGE>

     o    The relevance of the issue to be linked to pay;
     o    The degree that social performance is already included in the
          company's pay structure and disclosed;
     o    The degree that social performance is used by peer companies in
          setting pay;
     o    Violations or complaints filed against the company relating to the
          particular social performance measure;
     o    Artificial limits sought by the proposal, such as freezing or capping
          executive pay
     o    Independence of the compensation committee;
     o    Current company pay levels.

OUTSOURCING/OFFSHORING
Vote CASE-BY-CASE on proposals calling for companies to report on the risks
associated with outsourcing, considering:
     o    Risks associated with certain international markets;
     o    The utility of such a report to shareholders;
     o    The existence of a publicly available code of corporate conduct that
          applies to international operations.

LABOR STANDARDS AND HUMAN RIGHTS
CHINA PRINCIPLES
Vote AGAINST proposals to implement the China Principles unless:
     o    There are serious controversies surrounding the company's China
          operations; and
     o    The company does not have a code of conduct with standards similar to
          those promulgated by the International Labor Organization (ILO).

COUNTRY-SPECIFIC HUMAN RIGHTS REPORTS
Vote CASE-BY-CASE on requests for reports detailing the company's operations in
a particular country and steps to protect human rights, based on:
     o    The nature and amount of company business in that country;
     o    The company's workplace code of conduct;
     o    Proprietary and confidential information involved;
     o    Company compliance with U.S. regulations on investing in the country;
     o    Level of peer company involvement in the country.

INTERNATIONAL CODES OF CONDUCT/VENDOR STANDARDS
Vote CASE-BY-CASE on proposals to implement certain human rights standards at
company facilities or those of its suppliers and to commit to outside,
independent monitoring. In evaluating these proposals, the following should be
considered:
     o    The company's current workplace code of conduct or adherence to other
          global standards and the degree they meet the standards promulgated by
          the proponent;
     o    Agreements with foreign suppliers to meet certain workplace standards;
     o    Whether company and vendor facilities are monitored and how;
     o    Company participation in fair labor organizations;
     o    Type of business;
     o    Proportion of business conducted overseas;
     o    Countries of operation with known human rights abuses;
     o    Whether the company has been recently involved in significant labor
          and human rights controversies or violations;
     o    Peer company standards and practices;
     o    Union presence in company's international factories.


                                                                              39
<PAGE>

Generally vote FOR reports outlining vendor standards compliance unless any of
the following apply:
     o    The company does not operate in countries with significant human
          rights violations;
     o    The company has no recent human rights controversies or violations; or
     o    The company already publicly discloses information on its vendor
          standards compliance.

MACBRIDE PRINCIPLES
Vote CASE-BY-CASE on proposals to endorse or increase activity on the MacBride
Principles, taking into account:
     o    Company compliance with or violations of the Fair Employment Act of
          1989;
     o    Company antidiscrimination policies that already exceed the legal
          requirements;
     o    The cost and feasibility of adopting all nine principles;
     o    The cost of duplicating efforts to follow two sets of standards (Fair
          Employment and the MacBride Principles);
     o    The potential for charges of reverse discrimination;
     o    The potential that any company sales or contracts in the rest of the
          United Kingdom could be negatively impacted;
     o    The level of the company's investment in Northern Ireland;
     o    The number of company employees in Northern Ireland;
     o    The degree that industry peers have adopted the MacBride Principles;
     o    Applicable state and municipal laws that limit contracts with
          companies that have not adopted the MacBride Principles.

MILITARY BUSINESS
FOREIGN MILITARY SALES/OFFSETS
Vote AGAINST reports on foreign military sales or offsets. Such disclosures may
involve sensitive and confidential information. Moreover, companies must comply
with government controls and reporting on foreign military sales.

LANDMINES AND CLUSTER BOMBS
Vote CASE-BY-CASE on proposals asking a company to renounce future involvement
in antipersonnel landmine production, taking into account: o Whether the company
has in the past manufactured landmine components; o Whether the company's peers
have renounced future production.

Vote CASE-BY-CASE on proposals asking a company to renounce future involvement
in cluster bomb production, taking into account:
     o    What weapons classifications the proponent views as cluster bombs;
     o    Whether the company currently or in the past has manufactured cluster
          bombs or their components;
     o    The percentage of revenue derived from cluster bomb manufacture;
     o    Whether the company's peers have renounced future production.

NUCLEAR WEAPONS
Vote AGAINST proposals asking a company to cease production of nuclear weapons
components and delivery systems, including disengaging from current and proposed
contracts. Components and delivery systems serve multiple military and
non-military uses, and withdrawal from these contracts could have a negative
impact on the company's business.


                                                                              40
<PAGE>

OPERATIONS IN NATIONS SPONSORING TERRORISM (E.G., IRAN)
Vote CASE-BY-CASE on requests for a board committee review and report outlining
the company's financial and reputational risks from its operations in a
terrorism-sponsoring state, taking into account current disclosure on:
     o    The nature and purpose of the operations and the amount of business
          involved (direct and indirect revenues and expenses) that could be
          affected by political disruption;
     o    Compliance with U.S. sanctions and laws.

SPACED-BASED WEAPONIZATION
Generally vote FOR reports on a company's involvement in spaced-based
weaponization unless:
     o    The information is already publicly available; or
     o    The disclosures sought could compromise proprietary information.

WORKPLACE DIVERSITY
BOARD DIVERSITY
Generally vote FOR reports on the company's efforts to diversify the board,
unless:
     o    The board composition is reasonably inclusive in relation to companies
          of similar size and business; or
     o    The board already reports on its nominating procedures and diversity
          initiatives.

Generally vote AGAINST proposals that would call for the adoption of specific
committee charter language regarding diversity initiatives unless the company
fails to publicly disclose existing equal opportunity or non-discrimination
policies.

Vote CASE-BY-CASE on proposals asking the company to increase the representation
of women and minorities on the board, taking into account:
     o    The degree of board diversity;
     o    Comparison with peer companies;
     o    Established process for improving board diversity;
     o    Existence of independent nominating committee;
     o    Use of outside search firm;
     o    History of EEO violations.

EQUAL EMPLOYMENT OPPORTUNITY (EEO)
Generally vote FOR reports outlining the company's affirmative action
initiatives unless all of the following apply:
     o    The company has well-documented equal opportunity programs;
     o    The company already publicly reports on its company-wide affirmative
          initiatives and provides data on its workforce diversity; and
     o    The company has no recent EEO-related violations or litigation.

Vote AGAINST proposals seeking information on the diversity efforts of suppliers
and service providers, which can pose a significant cost and administration
burden on the company.

GLASS CEILING
Generally vote FOR reports outlining the company's progress towards the Glass
Ceiling Commission's business recommendations, unless:
     o    The composition of senior management and the board is fairly
          inclusive;
     o    The company has well-documented programs addressing diversity
          initiatives and leadership development;


                                                                              41
<PAGE>

     o    The company already issues public reports on its company-wide
          affirmative initiatives and provides data on its workforce diversity;
          and
     o    The company has had no recent, significant EEO-related violations or
          litigation.

SEXUAL ORIENTATION
Vote FOR proposals seeking to amend a company's EEO statement in order to
prohibit discrimination based on sexual orientation, unless the change would
result in excessive costs for the company.

Vote AGAINST proposals to ext end company benefits to or eliminate benefits from
domestic partners. Benefits decisions should be left to the discretion of the
company.


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<PAGE>

10. MUTUAL FUND PROXIES

ELECTION OF DIRECTORS
Vote CASE-BY-CASE on the election of directors and trustees, following the same
guidelines for uncontested directors for public company shareholder meetings.
However, mutual fund boards do not usually have compensation committees, so do
not withhold for the lack of this committee.

CONVERTING CLOSED-END FUND TO OPEN-END FUND
Vote CASE-BY-CASE on conversion proposals, considering the following factors:
     o    Past performance as a closed-end fund;
     o    Market in which the fund invests;
     o    Measures taken by the board to address the discount; and
     o    Past shareholder activism, board activity, and votes on related
          proposals.

PROXY CONTESTS
Vote CASE-BY-CASE on proxy contests, considering the following factors:
     o    Past performance relative to its peers;
     o    Market in which fund invests;
     o    Measures taken by the board to address the issues;
     o    Past shareholder activism, board activity, and votes on related
          proposals;
     o    Strategy of the incumbents versus the dissidents;
     o    Independence of directors;
     o    Experience and skills of director candidates;
     o    Governance profile of the company;
     o    Evidence of management entrenchment.

INVESTMENT ADVISORY AGREEMENTS
Vote CASE-BY-CASE on investment advisory agreements, considering the following
factors:
     o    Proposed and current fee schedules;
     o    Fund category/investment objective;
     o    Performance benchmarks;
     o    Share price performance as compared with peers;
     o    Resulting fees relative to peers;
     o    Assignments (where the advisor undergoes a change of control).

APPROVING NEW CLASSES OR SERIES OF SHARES
Vote FOR the establishment of new classes or series of shares.

PREFERRED STOCK PROPOSALS
Vote CASE-BY-CASE on the authorization for or increase in preferred shares,
considering the following factors:
     o    Stated specific financing purpose;
     o    Possible dilution for common shares;
     o    Whether the shares can be used for antitakeover purposes.

1940 ACT POLICIES
Vote CASE-BY-CASE on policies under the Investment Advisor Act of 1940,
considering the following factors:
     o    Potential competitiveness;
     o    Regulatory developments;
     o    Current and potential returns; and
     o    Current and potential risk.


                                                                              43
<PAGE>

Generally vote FOR these amendments as long as the proposed changes do not
fundamentally alter the investment focus of the fund and do comply with the
current SEC interpretation.

CHANGING A FUNDAMENTAL RESTRICTION TO A NONFUNDAMENTAL RESTRICTION
Vote CASE-BY-CASE on proposals to change a fundamental restriction to a
non-fundamental restriction, considering the following factors:
     o    The fund's target investments;
     o    The reasons given by the fund for the change; and
     o    The projected impact of the change on the portfolio.

CHANGE FUNDAMENTAL INVESTMENT OBJECTIVE TO NONFUNDAMENTAL
Vote AGAINST proposals to change a fund's fundamental investment objective to
non-fundamental.

NAME CHANGE PROPOSALS
Vote CASE-BY-CASE on name change proposals, considering the following factors:
     o    Political/economic changes in the target market;
     o    Consolidation in the target market; and
     o    Current asset composition.

CHANGE IN FUND'S SUBCLASSIFICATION
Vote CASE-BY-CASE on changes in a fund's sub-classification, considering the
following factors:
     o    Potential competitiveness;
     o    Current and potential returns;
     o    Risk of concentration;
     o    Consolidation in target industry.

DISPOSITION OF ASSETS/TERMINATION/LIQUIDATION
Vote CASE-BY-CASE on proposals to dispose of assets, to terminate or liquidate,
considering the following factors:
     o    Strategies employed to salvage the company;
     o    The fund's past performance;
     o    The terms of the liquidation.

CHANGES TO THE CHARTER DOCUMENT
Vote CASE-BY-CASE on changes to the charter document, considering the following
factors:
     o    The degree of change implied by the proposal;
     o    The efficiencies that could result;
     o    The state of incorporation;
     o    Regulatory standards and implications.

Vote AGAINST any of the following changes:
     o    Removal of shareholder approval requirement to reorganize or terminate
          the trust or any of its series;
     o    Removal of shareholder approval requirement for amendments to the new
          declaration of trust;
     o    Removal of shareholder approval requirement to amend the fund's
          management contract, allowing the contract to be modified by the
          investment manager and the trust management, as permitted by the 1940
          Act;


                                                                              44
<PAGE>

     o    Allow the trustees to impose other fees in addition to sales charges
          on investment in a fund, such as deferred sales charges and redemption
          fees that may be imposed upon redemption of a fund's shares;
     o    Removal of shareholder approval requirement to engage in and terminate
          subadvisory arrangements;
     o    Removal of shareholder approval requirement to change the domicile of
          the fund.

CHANGING THE DOMICILE OF A FUND
Vote CASE-BY-CASE on re-incorporations, considering the following factors:
     o    Regulations of both states;
     o    Required fundamental policies of both states;
     o    The increased flexibility available.

AUTHORIZING THE BOARD TO HIRE AND TERMINATE SUBADVISORS WITHOUT SHAREHOLDER
APPROVAL Vote AGAINST proposals authorizing the board to hire/terminate
subadvisors without shareholder approval.

DISTRIBUTION AGREEMENTS
Vote CASE-BY-CASE on distribution agreement proposals, considering the following
factors:
     o    Fees charged to comparably sized funds with similar objectives;
     o    The proposed distributor's reputation and past performance;
     o    The competitiveness of the fund in the industry;
     o    The terms of the agreement.

MASTER-FEEDER STRUCTURE
Vote FOR the establishment of a master-feeder structure.

MERGERS
Vote CASE-BY-CASE on merger proposals, considering the following factors:
     o    Resulting fee structure;
     o    Performance of both funds;
     o    Continuity of management personnel;
     o    Changes in corporate governance and their impact on shareholder
          rights.

SHAREHOLDER PROPOSALS FOR MUTUAL FUNDS
ESTABLISH DIRECTOR OWNERSHIP REQUIREMENT
Generally vote AGAINST shareholder proposals that mandate a specific minimum
amount of stock that directors must own in order to qualify as a director or to
remain on the board.

REIMBURSE SHAREHOLDER FOR EXPENSES INCURRED
Vote CASE-BY-CASE on shareholder proposals to reimburse proxy solicitation
expenses. When supporting the dissidents, vote FOR the reimbursement of the
proxy solicitation expenses.

TERMINATE THE INVESTMENT ADVISOR
Vote CASE-BY-CASE on proposals to terminate the investment advisor, considering
the following factors:
     o    Performance of the fund's Net Asset Value (NAV);
     o    The fund's history of shareholder relations;
     o    The performance of other funds under the advisor's management.


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