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<SEC-DOCUMENT>0000909012-08-000431.txt : 20080310
<SEC-HEADER>0000909012-08-000431.hdr.sgml : 20080310
<ACCEPTANCE-DATETIME>20080310164621
ACCESSION NUMBER:		0000909012-08-000431
CONFORMED SUBMISSION TYPE:	N-CSR
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20071231
FILED AS OF DATE:		20080310
DATE AS OF CHANGE:		20080310
EFFECTIVENESS DATE:		20080310

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CORNERSTONE TOTAL RETURN FUND INC
		CENTRAL INDEX KEY:			0000033934
		IRS NUMBER:				132727013
		STATE OF INCORPORATION:			NY
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		N-CSR
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-02363
		FILM NUMBER:		08678234

	BUSINESS ADDRESS:	
		STREET 1:		BEAR STEARNS FUNDS MGMT INC.
		STREET 2:		383 MADISON AVENUE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10179
		BUSINESS PHONE:		2122722093

	MAIL ADDRESS:	
		STREET 1:		BEAR STEARNS FUNDS MGMT INC.
		STREET 2:		383 MADISON AVENUE
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10179

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EIS FUND INC
		DATE OF NAME CHANGE:	20020109

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	EXCELSIOR INCOME SHARES INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-CSR
<SEQUENCE>1
<FILENAME>t304181.txt
<DESCRIPTION>TOTAL RETURN
<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 811-02363

                       CORNERSTONE TOTAL RETURN 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)

                               Kayadti A. Madison
                  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, 2007

Date of reporting period: December 31, 2007

         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 Total Return Fund, Inc. (the "Registrant") to
stockholders for the year ended December 31, 2007 follows.


                                CORNERSTONE TOTAL
                                RETURN FUND, INC.



                                  ANNUAL REPORT
                                DECEMBER 31, 2007
<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 TOTAL RETURN FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2007 (UNAUDITED)
- --------------------------------------------------------------------------------

SECTOR ALLOCATION

                                                                      Percent of
Sector                                                                Net Assets
- --------------------------------------------------------------------------------
Information Technology                                                   16.1
Financials                                                               15.4
Energy                                                                   11.6
Healthcare                                                               10.7
Industrials                                                              10.7
Consumer Staples                                                          9.8
Consumer Discretionary                                                    7.5
Closed-End Funds                                                          7.5
Telecommunication Services                                                3.7
Materials                                                                 3.2
Utilities                                                                 2.9
Other                                                                     0.9

TOP TEN HOLDINGS, BY ISSUER

                                                                      Percent of
    Holding                           Sector                          Net Assets
- --------------------------------------------------------------------------------
1.  Exxon Mobil Corporation           Energy                              6.6
2.  General Electric Company          Industrials                         4.0
3.  Microsoft Corporation             Information Technology              2.9
4.  AT&T Inc.                         Telecommunication Services          2.6
5.  Johnson & Johnson                 Healthcare                          2.3
6.  Adams Express Company             Closed-End Funds                    2.2
7.  Apple Computer, Inc.              Information Technology              2.2
8.  Chevron Corporation               Energy                              2.1
9.  Wal-Mart Stores, Inc.             Consumer Staples                    1.9
10. Dreman/Claymore Dividend          Closed-End Funds                    1.9
    & Income Fund


                                                                               1
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007
- --------------------------------------------------------------------------------

                                                          No. of
Description                                               Shares       Value
- --------------------------------------------------------------------------------
EQUITY SECURITIES - 99.53%
 CLOSED-END FUNDS - 7.48%
  Adams Express Company (a)                               70,400   $    994,048
  Dreman/Claymore Dividend & Income Fund                  53,500        845,300
  Liberty All-Star Growth Fund, Inc.                      39,075        232,887
  Other Closed-End Funds (a)(b)                                       1,326,682
                                                                   ------------
                                                                      3,398,917
                                                                   ------------
 CONSUMER DISCRETIONARY - 7.53%
  Amazon.com, Inc. ^ *                                     2,500        231,600
  Home Depot, Inc. (The)                                  13,500        363,690
  McDonald's Corporation                                   5,100        300,441
  Time Warner Inc.                                        17,000        280,670
  Walt Disney Company (The)                                8,000        258,240
  Other Consumer Discretionary (b)                                    1,984,114
                                                                   ------------
                                                                      3,418,755
                                                                   ------------
 CONSUMER STAPLES - 9.77%
  Altria Group, Inc. ^                                     7,700        581,966
  Coca-Cola Company (The)                                 11,000        675,070
  PepsiCo, Inc.                                            5,000        379,500
  Procter & Gamble Company (The)                          11,472        842,274
  Wal-Mart Stores, Inc.                                   18,500        879,305
  Other Consumer Staples (b)                                          1,077,448
                                                                   ------------
                                                                      4,435,563
                                                                   ------------
 ENERGY - 11.61%
  Chevron Corporation                                     10,068        939,646
  Exxon Mobil Corporation                                 32,000      2,998,081
  Schlumberger Limited                                     5,000        491,850
  Other Energy (b)                                                      844,800
                                                                   ------------
                                                                      5,274,377
                                                                   ------------
 FINANCIALS - 15.41%
  American International Group, Inc.                      12,331        718,897
  Bank of America Corporation                             14,521        599,136
  Citigroup Inc.                                          25,600        753,664
  Franklin Resources, Inc.                                 2,500        286,075
  Goldman Sachs Group, Inc. (The)                          3,000        645,150
  JPMorgan Chase & Co.                                    10,200        445,230
  Prudential Financial, Inc.                               2,500        232,600
  Travelers Companies, Inc. (The)                          5,092        273,950
  Wells Fargo & Company                                   18,000        543,420
  Other Financials (b)                                                2,499,827
                                                                   ------------
                                                                      6,997,949
                                                                   ------------
 HEALTHCARE - 10.70%
  Johnson & Johnson                                       15,500      1,033,850
  Merck & Co. Inc.                                        13,700        796,107
  UnitedHealth Group Incorporated ^                        7,500        436,500
  Other Healthcare (b)                                                2,592,523
                                                                   ------------
                                                                      4,858,980
                                                                   ------------
 INDUSTRIALS - 10.67%
  General Electric Company                                49,000      1,816,431
  Lockheed Martin Corporation                              2,500        263,150
  United Parcel Service, Inc., Class B                     4,000        282,880
  United Technologies Corporation                          4,400        336,776
  Other Industrials (b)                                               2,146,975
                                                                   ------------
                                                                      4,846,212
                                                                   ------------
 INFORMATION TECHNOLOGY - 16.08%
  Apple Computer, Inc. *                                   5,000        990,400
  Cisco Systems, Inc. *                                   22,000        595,540
  Google Inc. *                                            1,000        691,480
  Hewlett-Packard Company                                 10,000        504,800
  Intel Corporation                                       13,000        346,580
  International Business Machines Corporation              3,200        345,920
  Microsoft Corporation                                   37,500      1,335,000
  Oracle Corporation *                                    28,600        645,788
  QUALCOMM Inc.                                            6,800        267,580
  Texas Instruments Incorporated                          11,000        367,400
  Other Information Technology (b)                                    1,209,525
                                                                   ------------
                                                                      7,300,013
                                                                   ------------

See accompanying notes to financial statements.


2
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2007 (CONCLUDED)
- --------------------------------------------------------------------------------

                                                          No. of
Description                                               Shares       Value
- --------------------------------------------------------------------------------
 MATERIALS - 3.25%
  Air Products & Chemicals, Inc.                           2,500   $    246,575
  E. I. du Pont de Nemours and Company                     5,800        255,722
  Freeport-McMoRan Copper & Gold, Inc.                     2,500        256,100
  Monsanto Company                                         3,546        396,053
  Other Materials (b)                                                   322,094
                                                                   ------------
                                                                      1,476,544
                                                                   ------------
 REAL ESTATE INVESTMENT TRUST - 0.48%
  Total Real Estate Investment Trust (b)                                217,150
                                                                   ------------
 TELECOMMUNICATION SERVICES - 3.66%
  AT&T Inc.                                               28,589      1,188,159
  Verizon Communications Inc. ^                            7,500        327,675
  Other Telecommunication Services (b)                                  145,045
                                                                   ------------
                                                                      1,660,879
                                                                   ------------
 UTILITIES - 2.89%
  American Electric Power Company, Inc.                    5,500        256,080
  Dominion Resources, Inc. ^                               5,000        237,250
  Other Utilities (b)                                                   819,157
                                                                   ------------
                                                                      1,312,487
                                                                   ------------
 TOTAL EQUITY SECURITIES
  (cost - $36,665,722)                                               45,197,826
                                                                   ------------

                                                        Principal
                                                          Amount
Description                                               (000's)      Value
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 4.00%
 REPURCHASE AGREEMENTS - 4.00%
  Bear, Stearns & Co. Inc. +
   (Agreements dated 12/31/2007 to
   be repurchased at $1,815,830) (c)                     $ 1,815   $  1,815,457
                                                                   ------------
 TOTAL SHORT-TERM INVESTMENTS
  (cost - $1,815,457)                                                 1,815,457
                                                                   ------------
 TOTAL INVESTMENTS - 103.53%
  (cost - $38,481,179)                                               47,013,283
                                                                   ------------
LIABILITIES IN EXCESS OF
 OTHER ASSETS - (3.53)%                                              (1,602,202)
                                                                   ------------
NET ASSETS - 100.00%                                               $ 45,411,081
                                                                   ============

- ----------
*     Non-income producing security.
^     Security or a portion thereof is out on loan.
+     Includes investments purchased with collateral received for securities on
      loan.
(a)   Affiliated investment. The fund holds 2.19% and 0.26% (based on net
      assets) of Adams Express Company and Petroleum and Resources Corporation,
      respectively. A director of the Fund also serves as a director to such
      companies. During the fiscal year there were no purchases or sales of
      these securities.
(b)   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, 2007.
(c)   At December 31, 2007, the maturity date for all repurchase agreements held
      was January 2, 2008, with interest rates ranging from 1.50% to 4.50% and
      collateralized by $1,871,985 in U.S. Treasury Bond Strips maturing May 15,
      2012.

                                 See accompanying notes to financial statements.


                                                                               3
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2007
- --------------------------------------------------------------------------------

ASSETS

Investments, at value, including collateral for securities
  on loan of $1,571,207:
  Unaffiliated issuers (cost - $37,482,890)(1)                     $ 45,903,255
  Affiliated issuers (cost - $998,289)                                1,110,028
                                                                   ------------
  Total investments (cost - $38,481,179)                             47,013,283
Receivables:
  Dividends                                                              68,591
  Foreign reclaims                                                       19,141
Investments sold                                                          9,552
Interest                                                                  1,377
Prepaid expenses                                                          1,379
                                                                   ------------
Total Assets                                                         47,113,323
                                                                   ------------
LIABILITIES
Payables:
  Upon return of securities loaned                                    1,571,207
  Investments purchased                                                  40,787
  Investment management fees                                             38,812
  Directors' fees                                                        13,293
  Other accrued expenses                                                 37,577
  Due to custodian                                                          566
                                                                   ------------
Total Liabilities                                                     1,702,242
                                                                   ------------
NET ASSETS (applicable to 5,343,138 shares of
  common stock outstanding)                                        $ 45,411,081
                                                                   ============
NET ASSET VALUE PER SHARE ($45,411,081 / 5,343,138)                $       8.50
                                                                   ============
NET ASSETS CONSISTS OF
Capital stock, $0.01 par value; 5,343,138 shares issued and
  outstanding (15,000,000 shares authorized)                       $     53,431
Paid-in capital                                                      52,043,713
Accumulated net realized loss on investments and foreign
  currency related transactions                                     (15,220,731)
Net unrealized appreciation in value of investments and
  translation of foreign currency                                     8,534,668
                                                                   ------------
Net assets applicable to shares outstanding                        $ 45,411,081
                                                                   ============

- ----------
(1)   Includes securities out on loan to brokers with a market value of
      $1,540,013.

See accompanying notes to financial statements.


4
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2007
- --------------------------------------------------------------------------------

INVESTMENT INCOME
Income:
  Dividends (including $85,442 earned from affiliated issuers)     $  1,061,922
  Interest                                                               18,705
  Securities lending                                                     23,190
                                                                   ------------
  Total Investment Income                                             1,103,817
                                                                   ------------
Expenses:
  Investment management fees                                            496,035
  Directors' fees                                                        58,998
  Administration fees                                                    49,631
  Legal and audit fees                                                   39,574
  Printing                                                               32,248
  Accounting fees                                                        31,376
  Transfer agent fees                                                    27,102
  Custodian fees                                                         11,998
  Insurance                                                               6,269
  Stock exchange listing fees                                             6,245
                                                                   ------------
  Total Expenses                                                        759,476
  Less: Management fee waivers                                           (5,723)
  Less: Fees paid indirectly                                            (15,218)
                                                                   ------------
    Net Expenses                                                        738,535
                                                                   ------------
  Net Investment Income                                                 365,282
                                                                   ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND
FOREIGN CURRENCY RELATED TRANSACTIONS
Net realized gain from investments and foreign currency
  related transactions                                                   31,417
Capital gain distributions from regulated investment companies          116,984
Net change in unrealized appreciation in value of investments
  and translation of foreign currency                                 1,514,360
                                                                   ------------
Net realized and unrealized gain on investments and foreign
  currency related transactions                                       1,662,761
                                                                   ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS               $  2,028,043
                                                                   ============

                                 See accompanying notes to financial statements.


                                                                               5
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                         For the Years Ended
                                                                             December 31,
                                                                     ----------------------------
                                                                         2007            2006
                                                                     ------------    ------------
<S>                                                                  <C>             <C>
DECREASE IN NET ASSETS
Operations:
  Net investment income                                              $    365,282    $    428,197
  Net realized gain/(loss) from investments and
    foreign currency related transactions                                  31,417         (50,353)
  Capital gain distributions from regulated investment companies          116,984         103,660
  Net change in unrealized appreciation in value of investments         1,514,360       6,318,611
                                                                     ------------    ------------
    Net increase in net assets resulting from operations                2,028,043       6,800,115
                                                                     ------------    ------------
  Dividends and distributions to shareholders:
    Net investment income                                                (363,469)       (428,197)
    Net realized capital gains                                           (150,214)             --
    Return-of-capital                                                 (10,698,032)    (10,248,116)
                                                                     ------------    ------------
      Total dividends and distributions to shareholders               (11,211,715)    (10,676,313)
                                                                     ------------    ------------
  Capital stock transactions:
    Proceeds from 175,264 and 200,573 shares newly issued
      in reinvestment of dividends and distributions, respectively      2,215,523       2,061,112
                                                                     ------------    ------------
      Total decrease in net assets                                     (6,968,149)     (1,815,086)
                                                                     ------------    ------------
NET ASSETS
Beginning of year                                                      52,379,230      54,194,316
                                                                     ------------    ------------
End of year                                                          $ 45,411,081    $ 52,379,230
                                                                     ============    ============
</TABLE>

See accompanying notes to financial statements.


6
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN 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,
                                                       ------------------------------------------------------------
                                                         2007         2006         2005         2004         2003
                                                         ----         ----         ----         ----         ----
<S>                                                    <C>          <C>          <C>          <C>          <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year                     $  10.14     $  10.91     $  12.78     $  13.89     $  12.89
                                                       --------     --------     --------     --------     --------
Net investment income #                                    0.07         0.09         0.06         0.10         0.08
Net realized and unrealized gain on investments
  and foreign currency related transactions                0.32         1.25         0.18         0.87         2.91
                                                       --------     --------     --------     --------     --------
Net increase in net assets resulting from operations       0.39         1.34         0.24         0.97         2.99
                                                       --------     --------     --------     --------     --------
Dividends and distributions to shareholders:
  Net investment income                                   (0.07)       (0.09)       (0.06)       (0.10)       (0.08)
  Net realized capital gains                              (0.03)          --           --           --           --
  Return-of-capital                                       (2.04)       (2.02)       (2.05)       (2.01)       (1.91)
                                                       --------     --------     --------     --------     --------
  Total dividends and distributions to shareholders       (2.14)       (2.11)       (2.11)       (2.11)       (1.99)
                                                       --------     --------     --------     --------     --------
Capital stock transactions:
Anti-dilutive effect due to shares issued in
  reinvestment of dividends and distributions              0.11           --           --         0.03           --
                                                       --------     --------     --------     --------     --------
Net asset value, end of year                           $   8.50     $  10.14     $  10.91     $  12.78     $  13.89
                                                       ========     ========     ========     ========     ========
Market value, end of year                              $   9.80     $  19.62     $  14.65     $  17.95     $  17.95
                                                       ========     ========     ========     ========     ========
Total investment return (a)                              (40.97)%      64.15%       (2.07)%      15.11%       82.96%
                                                       ========     ========     ========     ========     ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)                  $ 45,411     $ 52,379     $ 54,194     $ 61,365     $ 65,642
Ratio of expenses to average net assets,
  net of fee waivers, if any (b)                           1.49%        1.44%        1.47%        1.41%        1.20%
Ratio of expenses to average net assets,
  excluding fee waivers, if any (c)                        1.53%        1.50%        1.52%        1.45%        1.43%
Ratio of expenses to average net assets,
  net of fee waivers, if any (c)                           1.52%        1.50%        1.50%        1.43%        1.23%
Ratio of net investment income to
  average net assets                                       0.74%        0.82%        0.53%        0.75%        0.65%
Portfolio turnover rate                                   11.00%       11.29%        9.84%       12.15%        3.62%
</TABLE>

- ----------
#     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.

                                 See accompanying notes to financial statements.


                                                                               7
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES

Cornerstone Total Return Fund, Inc. (the "Fund") was incorporated in New York on
March 16, 1973 and commenced investment operations on May 15, 1973. Its
investment objective is to seek capital appreciation with current income as a
secondary objective by investing primarily in U.S. and non-U.S. companies. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.

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, 2007, 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.

On September 20, 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosure about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007, and interim periods within those fiscal
years. The changes to current generally accepted accounting principles from the
application of this Statement relate to the definition of fair value, the
methods used to measure fair value, and the expanded disclosures about fair
value measurements. As of January 1, 2008, the Fund adopted SFAS No. 157. The
Fund has performed an analysis of all existing investments to determine the
significance and character of all inputs to their fair value determination.
Based on this assessment the Fund does not believe any adjustments will be
required for the first quarter 2008.


8
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN 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 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.

In July 2006, the Financial Accounting Standards Board ("FASB") released FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), an
interpretation of FASB Statement No. 109. FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the accounting and disclosure of
tax positions taken or expected to be taken in the course of preparing the
Fund's tax returns to determine whether the tax positions are "more likely than
not" of being sustained by the applicable tax authority. Tax positions not
deemed to meet the more likely than not threshold would be recorded as a tax
benefit or expense in the current year. Adoption of FIN 48 is effective during
the first required financial reporting period for fiscal years beginning after
December 15, 2006. Management adopted FIN 48 on June 29, 2007 and reviewed any
uncertain tax positions for open tax years 2004 through 2007. There was no
material impact to the financial statements or disclosures thereto as a result
of the adoption of this pronouncement.

DISTRIBUTIONS TO SHAREHOLDERS: Effective January 2002, the Fund initiated a
fixed, monthly distribution to shareholders. On November 29, 2006, this
distribution policy was updated to provide for the annual resetting of the
monthly distribution amount per share, beginning in 2007, based on the Fund's
net asset value on the last business day in each October. The terms of the
distribution policy will be reviewed and approved at least annually by the
Fund's Board of Directors and can be modified at their discretion. 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


                                                                               9
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------

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, 2007, Cornerstone voluntarily agreed to waive its management fees from the
Fund to the extent that the Fund's net monthly operating expenses (including
basic legal fees but excluding other legal expenses) exceed a rate of 0.125% of
average net assets. For the year ended December 31, 2007, Cornerstone earned
$496,035 for investment management services, of which it waived $5,723. 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 $15,218 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.

The Fund paid or accrued approximately $23,142 for the year ended December 31,
2007 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, served as Secretary of the Fund.

NOTE C. INVESTMENT IN SECURITIES

For the year ended December 31, 2007, purchases and sales of securities, other
than short-term investments, were $5,443,932 and $13,715,006 respectively.

NOTE D. SHARE REPURCHASE PROGRAM

As has been done in the past to enhance shareholder value, pursuant to Section
23 of the Investment Company Act of 1940, as amended, the Fund may again in the
future purchase shares of its common stock on the open market from time to time,
at such times, and in such amounts as may be deemed advantageous to the Fund.
Nothing herein shall be considered a commitment to purchase such shares. The
Fund had no repurchases during the year ended December 31, 2007. No limit has
been placed on the number of shares to be repurchased by the Fund other than
those imposed by federal securities laws.

To the extent such purchases are made they will be in accordance with federal
securities laws, with shares repurchased held in treasury for future use by the
Fund.

NOTE E. SECURITIES LENDING

To generate additional income, the Fund may lend up to 33 1/3% 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


10
<PAGE>

- --------------------------------------------------------------------------------
CORNERSTONE TOTAL RETURN FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
- --------------------------------------------------------------------------------

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, 2007, was $1,540,013.
During the year ended December 31, 2007, the Fund earned $23,190 in securities
lending income which is included under the caption SECURITIES LENDING in the
Statement of Operations.

NOTE F. 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
               ---------------                  -----------------
             2007           2006               2007           2006
             ----           ----               ----           ----
           $513,683       $428,197         $10,698,032    $10,248,116

At December 31, 2007 the components of the accumulated deficit on a tax basis,
for the Fund were as follows:

Accumulated net realized loss             $(14,881,286)
Other accumulated losses                      (287,816)
Unrealized appreciation                      8,483,039
                                          ------------
Total accumulated deficit                 $ (6,686,063)
                                          ============

Accounting principles generally accepted in the United States of America require
that certain components of net assets relating to permanent differences be
reclassified between financial and tax reporting. These reclassifications have
no effect on net assets or net asset value per share. For the year ended
December 31, 2007, the Fund decreased net investment income by $1,813, decreased
net realized loss by $152,027 and decreased paid-in capital by $150,214. 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, 2007, the Fund incurred Post-October losses in the amount of $287,816.

At December 31, 2007, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $14,881,286, of which $12,449,240 expires in 2008,
$1,170,157 expires in 2009, $425,706 expires in 2011, $358,321 expires in 2012,
$420,772 expires in 2013 and $57,090 expires in 2014.

At December 31, 2007, 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 $38,532,808, $11,097,845,
($2,617,370), $8,480,475, respectively.

NOTE G. SUBSEQUENT EVENTS

Effective January 31, 2008, William A. Clark resigned from the Board of
Directors. Mr. Clark remains as Vice President of the Fund. Effective February
15, 2008, Thomas R. Westle was replaced by Gary A. Bentz as Secretary of the
Fund.


                                                                              11
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors
Cornerstone Total Return Fund, Inc.
New York, New York

We have audited the accompanying statement of assets and liabilities of
Cornerstone Total Return Fund, Inc., including the schedule of investments as of
December 31, 2007, and the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five 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.

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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
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, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers. 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 Total Return Fund, Inc. as of December 31, 2007, 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 five 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 26, 2008


12
<PAGE>

2007 TAX INFORMATION (UNAUDITED)

Cornerstone Total Return 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, 2007) 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. The $11,211,715 in dividend and distributions paid
to shareholders in respect of such year, is represented by $513,683 of ordinary
income, and $10,698,032 of return-of-capital.

As indicated in this notice, significant portions of the Fund's distributions
for 2007 were comprised of a return- of-capital; accordingly these distributions
do NOT represent yield or investment return on the Fund's portfolio.

During the year ended December 31, 2007 the following dividends and
distributions per share were paid by the Fund:

                     SOURCES OF DIVIDENDS AND DISTRIBUTIONS
                               (PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PAYMENT DATES:            1/31/07      2/28/07      3/30/07      4/30/07      5/31/07      6/29/07
                          -------      -------      -------      -------      -------      -------
<S>                       <C>          <C>          <C>          <C>          <C>          <C>
Ordinary Income(1)        $0.0082      $0.0082      $0.0082      $0.0082      $0.0082      $0.0082
Return-of-Capital(2)      $0.1698      $0.1698      $0.1698      $0.1698      $0.1698      $0.1698
Total:                    $0.1780      $0.1780      $0.1780      $0.1780      $0.1780      $0.1780

<CAPTION>
PAYMENT DATES:            7/31/07      8/31/07      9/28/07      10/31/07     11/30/07     12/31/07
                          -------      -------      -------      --------     --------     --------
<S>                       <C>          <C>          <C>          <C>          <C>          <C>
Ordinary Income(1)        $0.0082      $0.0082      $0.0082      $0.0082      $0.0082      $0.0082
Return-of-Capital(2)      $0.1698      $0.1698      $0.1698      $0.1698      $0.1698      $0.1698
Total:                    $0.1780      $0.1780      $0.178       $0.1780      $0.1780      $0.1780
</TABLE>

- ----------
(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)   RETURN-OF-CAPITAL - This is the per share amount of return-of-capital, or
      sometimes called nontaxable, distributions reported in Box 3 - under the
      title "Nondividend distributions" - on Form 1099-DIV. This amount should
      NOTbe reported as taxable income on your current return. Rather, it should
      be treated as a reduction in the original cost basis of your investment in
      the Fund.

The Fund has met the requirements to pass through all (100%) of its ordinary
income dividends as qualified dividends, which are subject to a maximum 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.

Foreign shareholders will generally be subject to U.S. withholding tax on the
amount of the actual ordinary income dividend paid by the Fund. They will
generally not be entitled to foreign tax credit or deduction for the withholding
taxes paid by the Fund.

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>

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

<TABLE>
<CAPTION>
                                                                                                   NUMBER OF
                                                                                                   PORTFOLIOS IN
NAME AND                                                                             POSITION      FUND COMPLEX
ADDRESS*            POSITION(S)         PRINCIPAL OCCUPATION                         WITH FUND     OVERSEEN BY
(BIRTH DATE)        HELD WITH FUND      OVER LAST 5 YEARS                            SINCE         DIRECTORS
- ----------------------------------------------------------------------------------------------------------------
<S>                 <C>                 <C>                                          <C>           <C>
Ralph W.            Chairman of the     President, Cornerstone Advisors, Inc.;       2001          3
Bradshaw**          Board of            Financial Consultant; President and
(Dec. 1950)         Directors and       Director of Cornerstone Strategic
                    President           Value Fund, Inc.; President and Trustee
                                        of Cornerstone Progressive Return Fund.

Thomas H.           Director; Audit,    Independent Financial Adviser; Director      2002          3
Lenagh              Nominating and      of Photonics Products Group; Director of
(Nov. 1924)         Corporate           Cornerstone Strategic Value Fund, Inc.;
                    Governance          Trustee of Cornerstone Progressive
                    Committee           Return Fund; Director of Adams Express
                    Member              Company and Petroleum and Resources
                                        Corporation.

Edwin               Director; Audit,    Distinguished Fellow, The Heritage           2001          3
Meese III           Nominating and      Foundation Washington D.C.;
(Dec. 1931)         Corporate           Distinguished Visiting Fellow at the
                    Governance          Hoover Institution, Stanford University;
                    Committee           Senior Adviser, Revelation L.P.; Director
                    Member              of Cornerstone Strategic Value Fund, Inc.;
                                        Trustee of Cornerstone Progressive
                                        Return Fund.

Scott B. Rogers     Director; Audit,    Chairman, Board of Health Partners,          2001          3
(July 1955)         Nominating and      Inc.; Chief Executive Officer, Asheville
                    Corporate           Buncombe Community Christian
                    Governance          Ministry; and President, ABCCM
                    Committee           Doctor's Medical Clinic; Appointee, NC
                    Member              Governor's Commission on Welfare to
                                        Work; Director of Cornerstone
                                        Strategic Value Fund, Inc.; Trustee of
                                        Cornerstone Progressive Return Fund.
</TABLE>


14
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                   NUMBER OF
                                                                                                   PORTFOLIOS IN
NAME AND                                                                             POSITION      FUND COMPLEX
ADDRESS*            POSITION(S)         PRINCIPAL OCCUPATION                         WITH FUND     OVERSEEN BY
(BIRTH DATE)        HELD WITH FUND      OVER LAST 5 YEARS                            SINCE         DIRECTORS
- ----------------------------------------------------------------------------------------------------------------
<S>                 <C>                 <C>                                          <C>           <C>
Andrew A.           Director;           Attorney and senior member of Strauss        2001          3
Strauss             Chairman of         & Associates, P.A., Attorneys, Asheville
(Nov. 1953)         Nominating and      and Hendersonville, NC; previous
                    Corporate           President of White Knight Healthcare,
                    Governance          Inc. and LMV Leasing, Inc., a wholly
                    Committee and       owned subsidiary of Xerox Credit
                    Audit Committee     Corporation; Director of Cornerstone
                    Member              Strategic Value Fund, Inc.; Trustee of
                                        Cornerstone Progressive Return Fund.

Glenn W.            Director;           Chairman of the Board, Tower                 2001          3
Wilcox, Sr.         Chairman of         Associates, Inc.; Chairman of the Board
(Dec. 1931)         Audit Committee,    and Chief Executive Officer of Wilcox
                    Nominating and      Travel Agency, Inc.; Director of
                    Corporate           Cornerstone Strategic Value Fund, Inc.;
                    Governance          Trustee of Cornerstone Progressive
                    Committee           Return Fund.
                    Member
</TABLE>


                                                                              15
<PAGE>

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

<TABLE>
<CAPTION>
NAME AND                                                                                       POSITION
ADDRESS*               POSITION(S)          PRINCIPAL OCCUPATION                               WITH FUND
(BIRTH DATE)           HELD WITH FUND       OVER LAST 5 YEARS                                  SINCE
- ---------------------------------------------------------------------------------------------------------
<S>                    <C>                  <C>                                                <C>
Gary A. Bentz          Chief Compliance     Chairman and Chief Financial Officer of            2004, 2008
(June 1956)            Officer and          Cornerstone Advisors, Inc.; previous
                       Secretary            Director, Vice President and Treasurer of the
                                            Fund and Cornerstone Strategic Value Fund,
                                            Inc., Financial Consultant, C.P.A., Chief
                                            Compliance Officer and Secretary of
                                            Cornerstone Strategic Value Fund, Inc. and
                                            Cornerstone Progressive Return Fund.

William A. Clark       Vice President       Director and Stockholder of Cornerstone            2004
(Oct. 1945)                                 Advisors, Inc.; Vice President and former
                                            Director of Cornerstone Strategic Value Fund,
                                            Inc.; Vice President and former Trustee of
                                            Cornerstone Progressive Return Fund;
                                            Financial Consultant; former Director of
                                            Investors First Fund, Inc.

Kayadti A. Madison     Treasurer            Associate Director of Bear, Stearns & Co. Inc.     2007
(Feb. 1974)                                 since 2007 and Vice President from 2005 to
                                            2007. Senior fund administrator of Bear
                                            Stearns Funds Management Inc. from 1999 to
                                            2005. Treasurer of Cornerstone Strategic
                                            Value Fund, Inc. and Cornerstone Progressive
                                            Return Fund.
</TABLE>

- ----------
*     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.
**    Designates a director who is an "interested person" of the Fund as defined
      by the Investment Company Act of 1940, as amended. Mr. Bradshaw is an
      interested person of the Fund by virtue of his current position with the
      Investment Advisor of the Fund.


16
<PAGE>

DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)

Cornerstone Total Return Fund, Inc. (the "Fund") operates a Dividend
Reinvestment Plan (the "Plan"), sponsored and administered by American Stock
Transfer & Trust Company (the "Agent"), pursuant to which the Fund's income
dividends or capital gains or other distributions (each, a "Distribution" and
collectively, "Distributions"), net of any applicable U.S. withholding tax, are
reinvested in shares of the Fund.

Shareholders automatically participate in the Fund's Plan, unless and until an
election is made to withdraw from the Plan on behalf of such participating
shareholder. Shareholders who do not wish to have Distributions automatically
reinvested should so notify their broker, or if a registered shareholder, the
Agent in writing at P.O. Box 922, Wall Street Station, New York, New York
10269-0560. Such written notice must be received by the Agent prior to the
record date of the Distribution or the share- holder will receive such
Distribution in shares through the Plan. Under the Plan, the Fund's
Distributions to shareholders are reinvested in full and fractional shares as
described below.

When the Fund declares a Distribution the Agent, on the shareholder's 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) 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").

The method for determining the number of shares to be received when
Distributions are reinvested will vary depending upon whether the net asset
value of the Fund's shares is higher or lower than its market price. If the net
asset value of the Fund's shares is lower than its market price, the number of
Newly Issued Shares received will be determined by dividing the amount of the
Distribution either by the Fund's net asset value per share or by 95% of its
market price, whichever is higher. If the net asset value of the Fund's shares
is higher than its market price, shares acquired by the Agent in Open Market
Purchases will be allocated to the reinvesting share- holders based on the
average cost of such Open Market Purchases.

Whenever the Fund declares a Distribution and the net asset value of the Fund's
shares is higher than its market price, the Agent will apply the amount of such
Distribution payable to Plan participants of the Fund in Fund shares (less such
Plan participant's pro rata share of brokerage commissions incurred with respect
to Open Market Purchases in connection with the reinvestment of such
Distribution) to the purchase on the open market of Fund shares for such Plan
participant's account. Such purchases will be made on or after the payable date
for such Distribution, and in no event more than 30 days after such date except
where temporary curtailment or suspension of purchase is necessary to comply
with applicable provisions of federal securities laws. The Agent may aggregate a
Plan participant's purchases with the purchases of other Plan participants, and
the average price (including brokerage commissions) of all shares purchased by
the Agent shall be the price per share allocable to each Plan participant.

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 suspension or termination of
the Plan at the sole discretion of the Fund's Board of Directors, certificates
for whole shares credited to his or 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 the 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.


                                                                              17
<PAGE>

DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)

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.

Neither the Agent nor the Fund shall have any responsibility or liability beyond
the exercise of ordinary care for any action taken or omitted pursuant to the
Plan, nor shall they have any duties, responsibilities or liabilities except
such as expressly set forth herein. Neither shall they be liable hereunder for
any act done in good faith or for any good faith omissions to act, including,
without limitation, failure to terminate a participants account prior to receipt
of written notice of his or her death or with respect to prices at which shares
are purchased or sold for the participants account and the terms on which such
purchases and sales are made, subject to applicable provisions of the federal
securities laws.

The automatic reinvestment of Distributions will not relieve participants of any
federal, state or local income tax that may be payable (or required to be
withheld) on such Distributions.

The Fund reserves the right to amend or terminate the Plan. There is no direct
service charge to participants with regard to purchases in the Plan.

All correspondence concerning the Plan should be directed to the Agent at P.O.
Box 922, Wall Street Station, New York, New York 10269-0560. Certain
transactions can be performed online at www.amstock.com or by calling the toll
free number 877-864-4833.


18
<PAGE>

PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)

Information regarding how the Cornerstone Total Return 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 by calling (212) 272-3550 or 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 (202)
551-8090.

PRIVACY POLICY NOTICE (UNAUDITED)

The following is a description of Cornerstone Total Return 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)

Cornerstone Total Return Fund, Inc. is a closed-end, diversified investment
company whose shares trade on the American Stock Exchange, LLC. Its investment
objective is to seek capital appreciation with current income as a secondary
objective by investing primarily in U.S. and non-U.S. companies. The Fund is
managed by Cornerstone Advisors, Inc.

SHAREHOLDER INFORMATION (UNAUDITED)

The Fund is listed on the American Stock Exchange, LLC (symbol "CRF"). The
previous week's net asset value per share, market price, and related premium or
discount are published each Monday in THE WALL STREET JOURNAL under the
designation "CornrstnTtRtn Fd" and BARRON'S under the designation "Cornerstone
Total Return". Such information 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 TOTAL RETURN 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 TOTAL RETURN FUND, INC.
<PAGE>

DIRECTORS AND CORPORATE OFFICERS

Ralph W. Bradshaw                         Chairman of the Board of Directors
                                            and 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 and Secretary
William A. Clark                          Vice President
Kayadti A. Madison                        Treasurer

INVESTMENT MANAGER                        STOCK TRANSFER AGENT AND REGISTRAR
Cornerstone Advisors, Inc.                American Stock Transfer & Trust Co.
One West Pack Square                      59 Maiden Lane
Suite 1650                                New York, NY 10038
Asheville, NC 28801
                                          INDEPENDENT REGISTERED PUBLIC
ADMINISTRATOR                               ACCOUNTING FIRM
Bear Stearns Funds Management Inc.        Tait, Weller & Baker LLP
383 Madison Avenue                        1818 Market Street
New York, NY 10179                        Suite 2400
                                          Philadelphia, PA 19103
CUSTODIAN
Custodial Trust Company                   LEGAL COUNSEL
101 Carnegie Center                       Blank Rome LLP
Princeton, NJ 08540                       405 Lexington Avenue
                                          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.

                                     [LOGO]
                                    AMERICAN
                                STOCK EXCHANGE(R)
                                     LISTED
                                     CRF(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)(1), 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.

(f)(3) The Registrant undertakes to provide to any person without charge, upon
request, a copy of its code of ethics. This can be accomplished by calling the
Registrant at (212)272-3550.

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, 2007 and December 31, 2006.

                                                       2007          2006
                                                     -------       -------
Audit Fees                                           $13,600       $13,000
Audit-related Fees                                        --            --
Tax Fees (1)                                         $ 2,700       $ 2,500
All Other Fees                                            --            --
                                                     -------       -------
Total                                                $16,300       $15,500
                                                     =======       =======

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


(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, 2006 and December 31, 2007).

(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 TOTAL RETURN FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2007
================================================================================

                                                            NO. OF
DESCRIPTION                                                 SHARES       VALUE
- --------------------------------------------------------------------------------

<S>                                                      <C>         <C>
EQUITY SECURITIES - 99.53%
  CLOSED-END FUNDS - 7.48%
    Adams Express Company (a)                               70,400    $  994,048
    Alpine Global Premier Properties Fund                    3,000        40,050
    Boulder Total Return Fund, Inc. ^                        7,500       164,175
    Central Europe and Russia Fund, Inc. (The) ^             2,500       145,050
    Denali Fund (The)                                        8,500       147,985
    Dreman/Claymore Dividend & Income Fund                  53,500       845,300
    H&Q Healthcare Investors                                11,400       188,442
    H&Q Life Sciences Investors                              6,000        79,500
    Japan Equity Fund *                                     13,000        96,200
    John Hancock Bank and Thrift Opportunity Fund           15,000        92,850
    Liberty All-Star Growth Fund, Inc.                      39,075       232,887
    Petroleum & Resources Corporation (a)                    3,000       115,980
    Templeton Emerging Markets Fund ^                        3,000        69,600
    Zweig Fund, Inc. ^                                      37,000       186,850
                                                                      ----------
                                                                       3,398,917
                                                                      ----------

  CONSUMER DISCRETIONARY - 7.53%
    Amazon.com, Inc. ^ *                                     2,500       231,600
    Bed Bath & Beyond Inc. *                                 2,500        73,475
    Best Buy Co., Inc.                                       2,500       131,625
    Coach, Inc. *                                            2,500        76,450
    Comcast Corporation, Class A *                           9,012       164,559
    Comcast Corporation, Special Class A *                   4,250        77,010
    DIRECTV Group, Inc. (The) *                              4,000        92,480
    Ford Motor Company *                                    14,000        94,220
    Gap, Inc. (The) ^                                        3,000        63,840
    Goodyear Tire & Rubber Company (The) *                   2,500        70,550
    Home Depot, Inc. (The)                                  13,500       363,690
    Johnson Controls, Inc. ^                                 2,500        90,100
    Marriott International, Inc., Class A ^                  5,000       170,900
    Mattel, Inc. ^                                           4,500        85,680
    McDonald's Corporation                                   5,100       300,441
    News Corporation, Class B ^                              7,500       159,375
    NIKE, Inc., Class B                                      2,500       160,600
    Omnicom Group Inc.                                       3,000       142,590
    Staples, Inc. ^                                          3,150        72,670
    Starbucks Corporation *                                  2,500        51,175
    Tata Motors Limited ^ ADR                                2,500        47,150
    Time Warner Inc.                                        17,000       280,670
    TJX Companies, Inc. (The)                                2,500        71,825
    Viacom Inc., Class B *                                   2,000        87,840
    Walt Disney Company (The)                                8,000       258,240
                                                                      ----------
                                                                       3,418,755
                                                                      ----------

  CONSUMER STAPLES - 9.77%
    Altria Group, Inc. ^                                     7,700       581,966
    Coca-Cola Company (The)                                 11,000       675,070
    Colgate-Palmolive Company                                2,500       194,900
    ConAgra Foods, Inc.                                      2,500        59,475
    CVS Corporation                                          4,175       165,956
    H.J. Heinz Company                                       2,700       126,036
    Kraft Foods Inc, Class A                                 5,328       173,853
    Kroger Co. (The) ^                                       3,600        96,156
    PepsiCo, Inc.                                            5,000       379,500
    Procter & Gamble Company (The)                          11,472       842,274
    Safeway Inc.                                             1,900        64,999
    Sysco Corporation ^                                      2,500        78,025
    Walgreen Co.                                             3,100       118,048
    Wal-Mart Stores, Inc.                                   18,500       879,305
                                                                      ----------
                                                                       4,435,563
                                                                      ----------
  ENERGY - 11.61%
    Chevron Corporation                                     10,068       939,646
    Exxon Mobil Corporation                                 32,000     2,998,081
    Halliburton Company                                      2,500        94,775
    Marathon Oil Corp. ^                                     2,500       152,150
    NiSource Inc.                                            2,500        47,225
    Peabody Energy Corporation                               2,500       154,100
    Schlumberger Limited                                     5,000       491,850
    Spectra Energy Corporation                               2,500        64,550
    Weatherford International Ltd. *                         2,500       171,500
    XTO Energy, Inc. ^                                       3,125       160,500
                                                                      ----------
                                                                       5,274,377
                                                                      ----------
  FINANCIALS - 15.41%
    AFLAC Incorporated                                       1,500        93,945
    American Express Company                                 3,500       182,070
    American International Group, Inc.                      12,331       718,897
    Ameriprise Financial, Inc.                               1,220        67,234
    Aon Corporation                                          2,500       119,225
    Bank of America Corporation                             14,521       599,136
    Bank of New York Mellon Corporation ^                    2,300       112,148
    BB&T Corporation ^                                       2,000        61,340
    Charles Schwab Corporation (The)                         8,200       209,510
    Chubb Corporation (The)                                  2,000       109,160
    Citigroup Inc.                                          25,600       753,664
    Discover Financial Services                              1,850        27,898
    Fannie Mae                                               3,200       127,936
    Fifth Third Bancorp ^                                    2,500        62,825
    Franklin Resources, Inc.                                 2,500       286,075
    Freddie Mac                                              3,300       112,431
    Goldman Sachs Group, Inc. (The)                          3,000       645,150
    JPMorgan Chase & Co.                                    10,200       445,230
    Lehman Brothers Holdings Inc.                            2,500       163,600
    Metlife, Inc.                                            3,000       184,860
    Morgan Stanley                                           3,700       196,507
    Prudential Financial, Inc.                               2,500       232,600
    SLM Corporation ^                                        2,500        50,350
    State Street Corporation ^                               1,600       129,920
    SunTrust Banks, Inc. ^                                   2,500       156,225
    Synovus Corporation                                      2,500        60,200
    Travelers Companies, Inc. (The)                          5,092       273,950
    UnumProvident Corporation ^                              2,500        59,475
    Wachovia Corporation ^                                   5,600       212,968
    Wells Fargo & Company                                   18,000       543,420
                                                                      ----------
                                                                       6,997,949
                                                                      ----------
  HEALTHCARE - 10.70%
    Aetna Inc.                                               4,000       230,920
    Amgen Inc. *                                             2,500       116,100
 <PAGE>

                                                            NO. OF
DESCRIPTION                                                 SHARES       VALUE
- --------------------------------------------------------------------------------
    Baxter International Inc.                                2,500       145,125
    Bristol-Myers Squibb Company ^                           4,000       106,080
    Celgene Corporation ^ *                                  2,500       115,525
    Eli Lilly and Company                                    4,100       218,899
    Gilead Sciences, Inc. *                                  5,000       230,050
    Johnson & Johnson                                       15,500     1,033,850
    Laboratory Corporation of America Holdings *             2,500       188,825
    McKesson Corporation                                     2,500       163,775
    Medco Health Solutions, Inc. ^ *                         1,531       155,243
    Medtronic, Inc. ^                                        4,500       226,215
    Merck & Co. Inc.                                        13,700       796,107
    Schering-Plough Corporation                              8,400       223,776
    St. Jude Medical, Inc. *                                 2,500       101,600
    Stryker Corporation ^                                    2,000       149,440
    UnitedHealth Group Incorporated ^                        7,500       436,500
    Wyeth                                                    5,000       220,950
                                                                      ----------
                                                                       4,858,980
                                                                      ----------

  INDUSTRIALS - 10.67%
    Allied Waste Industries, Inc. *                          2,500        27,550
    AMR Corporation *                                        2,500        35,075
    Boeing Company (The)                                     1,400       122,444
    Caterpillar Inc.                                         2,500       181,400
    CSX Corporation                                          5,000       219,900
    Danaher Corporation ^                                    2,500       219,350
    General Dynamics Corporation                             2,500       222,475
    General Electric Company                                49,000     1,816,431
    Honeywell International Inc.                             3,300       203,181
    Illinois Tool Works Inc.                                 2,500       133,850
    Lockheed Martin Corporation                              2,500       263,150
    Raytheon Company ^                                       2,500       151,750
    Rockwell Automation, Inc.                                2,500       172,400
    Textron Inc.                                             2,500       178,250
    United Parcel Service, Inc., Class B                     4,000       282,880
    United Technologies Corporation                          4,400       336,776
    Waste Management, Inc.                                   2,500        81,675
    Waters Corporation *                                     2,500       197,675
                                                                      ----------
                                                                       4,846,212
                                                                      ----------

  INFORMATION TECHNOLOGY - 16.08%
    Agilent Technologies Inc. *                              2,500        91,850
    Apple Computer, Inc. *                                   5,000       990,400
    Automatic Data Processing, Inc.                          2,500       111,325
    Cisco Systems, Inc. *                                   22,000       595,540
    Corning Incorporated                                     6,000       143,940
    Dell Inc. ^ *                                            4,000        98,040
    eBay Inc. *                                              6,500       215,735
    EMC Corporation *                                        8,000       148,240
    Google Inc. *                                            1,000       691,480
    Hewlett-Packard Company                                 10,000       504,800
    Intel Corporation                                       13,000       346,580
    International Business Machines Corporation              3,200       345,920
    Intuit Inc. *                                            2,500        79,025
    Microsoft Corporation                                   37,500     1,335,000
    NVIDIA Corporation *                                     3,750       127,575
    Oracle Corporation *                                    28,600       645,788
    Paychex, Inc.                                            2,500        90,550
    QUALCOMM Inc.                                            6,800       267,580
 <PAGE>

                                                            NO. OF
DESCRIPTION                                                 SHARES       VALUE
- --------------------------------------------------------------------------------
    Texas Instruments Incorporated                          11,000       367,400
    Xerox Corporation                                        3,000        48,570
    Xilinx, Inc.                                             2,500        54,675
                                                                      ----------
                                                                       7,300,013
                                                                      ----------

  MATERIALS - 3.25%
    Air Products & Chemicals, Inc.                           2,500       246,575
    Alcoa Inc.                                               3,000       109,650
    Dow Chemical Company (The) ^                             3,500       137,970
    E. I. du Pont de Nemours and Company                     5,800       255,722
    Freeport-McMoRan Copper & Gold, Inc.                     2,500       256,100
    International Paper Company                              2,300        74,474
    Monsanto Company                                         3,546       396,053
                                                                      ----------
                                                                       1,476,544
                                                                      ----------

  REAL ESTATE INVESTMENT TRUST - 0.48%
    Simon Property Group, Inc.                               2,500       217,150
                                                                      ----------

  TELECOMMUNICATION SERVICES - 3.66%
    AT&T Inc.                                               28,589     1,188,159
    Nokia ADR                                                2,500        95,975
    Qwest Communications International Inc. *                7,000        49,070
    Verizon Communications Inc. ^                            7,500       327,675
                                                                      ----------
                                                                       1,660,879
                                                                      ----------

  UTILITIES - 2.89%
    Alleghany Energy Inc. ^                                  2,500       159,025
    American Electric Power Company, Inc.                    5,500       256,080
    Dominion Resources, Inc. ^                               5,000       237,250
    Duke Energy Corporation                                  6,600       133,122
    Dynegy Inc. *                                            5,000        35,700
    FirstEnergy Corp. ^                                      2,500       180,850
    Southern Company (The)                                   2,500        96,875
    Williams Companies, Inc. (The)                           2,500        89,450
    Xcel Energy, Inc.                                        5,500       124,135
                                                                      ----------
                                                                       1,312,487
                                                                      ----------

TOTAL EQUITY SECURITIES
  (cost - $36,665,722)                                                45,197,826
                                                                      ----------

                                                      PRINCIPAL
                                                       AMOUNT
                                                       (000'S)
                                                     -----------


SHORT-TERM INVESTMENTS - 4.00%
  REPURCHASE AGREEMENTS - 4.00%
    Bear, Stearns & Co. Inc. + ++
    (Agreements dated 12/31/2007 to
    be repurchased at $1,249,342,
    4.50%, 1/2/2008, collateralized
    by $1,287,262 in U.S. Treasury Bond
    Strips)                                           $      1,249     1,249,030

    Bear, Stearns & Co. Inc. + ++
    (Agreements dated 12/31/2007 to be
    repurchased at $322,218, 2.25%,
    1/2/2008, collateralized by $331,634
    in U.S. Treasury Bond Strips)                              322       322,177

    Bear, Stearns & Co. Inc.
    (Agreements dated 12/31/2007 to be
    repurchased at $244,270, 1.50%,
    1/2/2008, collateralized by $253,089
    in U.S. Treasury Bond Strips)                              244       244,250
                                                                      ----------

TOTAL SHORT-TERM INVESTMENTS
  (cost - $1,815,457)                                                  1,815,457
                                                                      ----------
 <PAGE>

                                                            NO. OF
DESCRIPTION                                                 SHARES       VALUE
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.53%
  (cost - $38,481,179)                                                47,013,283
                                                                    ------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (3.53)%                       (1,602,202)
                                                                    ------------
NET ASSETS - 100.00%                                                $ 45,411,081
                                                                    ============

<FN>
- --------
(a) Affiliated investment. The Fund holds 2.19% and 0.26% (based on net assets)
of Adams Express Company and Petroleum & Resources Corporation, respectively. A
director of the Fund also serves as a director to such companies.
During the fiscal year there were no purchases or sales of these securities.

ADR American Depositary Receipt
*   Non-income producing security.
^   Security or a portion thereof is out on loan.
+   Stated interest rate, before rebate earned by borrower of securities on
    loan.
++  Represents investment purchased with collateral received for securities on
    loan.
</FN>
</TABLE>

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
CORNERSTONE TOTAL RETURN FUND, INC.
NEW YORK, NEW YORK

We have audited the accompanying statement of assets and liabilities of
Cornerstone Total Return Fund, Inc., including the schedule of investments as
of December 31, 2007, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five 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.

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. The Fund
is not required to have, nor were we 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, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2007, by correspondence with the custodian
and brokers. 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 Total Return Fund, Inc. as of December 31, 2007, 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 five 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, 2007 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 26, 2008


<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. Mr. Bradshaw has acted as the portfolio manager
since 2001. Mr. Clark has acted as the portfolio manager since 2003. Ralph W.
Bradshaw's occupation for the last five years is President of Cornerstone
Advisors, Inc. and a Financial Consultant. William A. Clark's occupation for the
last five years is Director and Stockholder of Cornerstone Advisors, Inc. and
Vice President and former Director/Trustee of Cornerstone Strategic Value Fund,
Inc. and Cornerstone Progressive Return Fund.

(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 two other registered closed-end funds (Cornerstone
Strategic Value Fund, Inc. and Cornerstone Progressive Return Fund). As of
December 31, 2007, the total assets of Cornerstone Strategic Value Fund, Inc.
was $123.7 million. As of December 31, 2007, the total assets of Cornerstone
Progressive Return Fund, Inc. was $137.6 million.

(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, 2007, 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 in the range
of $10,001-$50,000.

(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 second fiscal quarter 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, 2008

         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 Total Return Fund, Inc.

By: /S/ RALPH W. BRADSHAW
- -------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer

Date: March 10, 2008

By: /S/ KAYADTI A. MADISON
- ----------------------
Name: Kayadti A. Madison
Title: Principal Financial Officer

Date: March 10, 2008
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.CERT
<SEQUENCE>2
<FILENAME>exh991.txt
<TEXT>



                                                                      EX-99.CERT
                                 CERTIFICATIONS

I, Ralph W. Bradshaw, certify that:
1. I have reviewed this report on Form N-CSR of Cornerstone Total Return
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, 2008

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


<PAGE>


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

I, Kayadti A. Madison, certify that:
1. I have reviewed this report on Form N-CSR of Cornerstone Total Return
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, 2008
/s/ Kayadti A. Madison
- ------------------------
Kayadti A. Madison
Treasurer (Principal Financial Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.906CERT
<SEQUENCE>3
<FILENAME>exh9061.txt
<TEXT>

                                                                   EX-99.906CERT


                           SECTION 906 CERTIFICATIONS

Ralph W. Bradshaw, Principal Executive Officer, and Kayadti A. Madison,
Principal Financial Officer, of Cornerstone Total Return 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,
2007 (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/ KAYADTI A. MADISON
- ---------------------                            ------------------
Ralph W. Bradshaw                                Kayadti A. Madison
Chairman and President                           (Principal Financial Officer)
(Principal Executive Officer)                    March 10, 2008
March 10, 2008

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.VOTEREG
<SEQUENCE>4
<FILENAME>exh99votereg.txt
<TEXT>
                                      LOGO

                               RiskMetrics Group

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

                    2008 U.S. Proxy Voting Guidelines Summary

                             ISS Governance Services

                                December 17, 2007

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



















Copyright (C) 2007 by RiskMetrics Group.

All rights reserved. No part of this publication may be reproduced or
transmitted in any form or by any means, electronic or mechanical, including
photocopy, recording, or any information storage and retrieval system, without
permission in writing from the publisher. Requests for permission to make copies
of any part of this work should be sent to: RiskMetrics Group Marketing
Department, One Chase Manhattan Plaza, 44th Floor, New York, NY 10005.
RiskMetrics Group is a trademark used herein under license.

Risk Management  |  RiskMetrics Labs  |  ISS Governance Services
                                                |  Financial Research & Analysis

                              www.riskmetrics.com

<PAGE>

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RiskMetrics Group                                            www.riskmetrics.com
- --------------------------------------------------------------------------------


                             ISS Goverance Services
                    2008 U.S. Proxy Voting Guidelines Summary

                 Effective for Meetings on or after Feb 1, 2008
                              Updated Dec 17, 2007

The following is a condensed version of the proxy voting recommendations
contained in the ISS Governance Services ("ISS") Proxy Voting Manual.

Table of Contents

1. OPERATIONAL ITEMS ......................................................    6
Adjourn Meeting ...........................................................    6
Amend Quorum Requirements .................................................    6
Amend Minor Bylaws ........................................................    6
Auditor Indemnification and Limitation of Liability .......................    6
Auditor Ratification ......................................................    6
Change Company Name .......................................................    7
Change Date, Time, or Location of Annual Meeting ..........................    7
Transact Other Business ...................................................    7

2. BOARD OF DIRECTORS: ....................................................    8
Voting on Director Nominees in Uncontested Elections ......................    8
2008 Classification of Directors ..........................................   10
Age Limits ................................................................   11
Board Size ................................................................   11
Classification/Declassification of the Board ..............................   12
Cumulative Voting .........................................................   12
Director and Officer Indemnification and Liability Protection .............   12
Establish/Amend Nominee Qualifications ....................................   12
Filling Vacancies/Removal of Directors ....................................   13
Independent Chair (Separate Chair/CEO) ....................................   13
Majority of Independent Directors/Establishment of Committees .............   14
Majority Vote Shareholder Proposals .......................................   14
Office of the Board .......................................................   14
Open Access ...............................................................   14
Performance Test for Directors ............................................   15
Stock Ownership Requirements ..............................................   16
Term Limits ...............................................................   16

3. PROXY CONTESTS .........................................................   17
Voting for Director Nominees in Contested Elections .......................   17
Reimbursing Proxy Solicitation Expenses ...................................   17
Confidential Voting .......................................................   17

4. ANTITAKEOVER DEFENSES AND VOTING RELATED ISSUES ........................   18
Advance Notice Requirements for Shareholder Proposals/Nominations .........   18
Amend Bylaws without Shareholder Consent ..................................   18
Poison Pills ..............................................................   18
Shareholder Ability to Act by Written Consent .............................   18
Shareholder Ability to Call Special Meetings ..............................   19

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2008 US Proxy Voting Guidelines Summary                                      -2-
<PAGE>


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Supermajority Vote Requirements ...........................................   19

5. MERGERS AND CORPORATE RESTRUCTURINGS ...................................   20
Overall Approach ..........................................................   20
Appraisal Rights ..........................................................   20
Asset Purchases ...........................................................   20
Asset Sales ...............................................................   20
Bundled Proposals .........................................................   21
Conversion of Securities ..................................................   21
Corporate Reorganization/Debt Restructuring/Prepackaged
  Bankruptcy Plans/Reverse Leveraged
Buyouts/Wrap Plans ........................................................   21
Formation of Holding Company ..............................................   21
Going Private Transactions (LBOs, Minority Squeezeouts,
  and Going Dark) .........................................................   22
Joint Ventures ............................................................   22
Liquidations ..............................................................   22
Mergers and Acquisitions/ Issuance of Shares to
  Facilitate Merger or Acquisition ........................................   22
Private Placements/Warrants/Convertible Debentures ........................   23
Spinoffs ..................................................................   23
Value Maximization Proposals ..............................................   23

6. STATE OF INCORPORATION .................................................   24
Control Share Acquisition Provisions ......................................   24
Control Share Cash-Out Provisions .........................................   24
Disgorgement Provisions ...................................................   24
Fair Price Provisions .....................................................   24
Freeze-Out Provisions .....................................................   25
Greenmail .................................................................   25
Reincorporation Proposals .................................................   25
Stakeholder Provisions ....................................................   25
State Antitakeover Statutes ...............................................   25

7. CAPITAL STRUCTURE ......................................................   26
Adjustments to Par Value of Common Stock ..................................   26
Common Stock Authorization ................................................   26
Dual-Class Stock ..........................................................   26
Issue Stock for Use with Rights Plan ......................................   26
Preemptive Rights .........................................................   26
Preferred Stock ...........................................................   27
Recapitalization ..........................................................   27
Reverse Stock Splits ......................................................   27
Share Repurchase Programs .................................................   28
Stock Distributions: Splits and Dividends .................................   28
Tracking Stock ............................................................   28

8. EXECUTIVE AND DIRECTOR COMPENSATION ....................................   29
Equity Compensation Plans .................................................   29
Cost of Equity Plans ......................................................   29
Repricing Provisions ......................................................   29
Pay-for-Performance Disconnect ............................................   30
Three-Year Burn Rate/Burn Rate Commitment .................................   31
Poor Pay Practices ........................................................   33
Specific Treatment of Certain Award Types in Equity Plan Evaluations: .....   34
Dividend Equivalent Rights ................................................   34

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2008 US Proxy Voting Guidelines Summary                                      -3-
<PAGE>


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Liberal Share Recycling Provisions ........................................   34
Option Overhang Cost ......................................................   34
Other Compensation Proposals and Policies .................................   35
401(k) Employee Benefit Plans .............................................   35
Advisory Vote on Executive Compensation (Say-on-Pay)
  Management Proposals ....................................................   35
Director Compensation .....................................................   36
Director Retirement Plans .................................................   36
Employee Stock Ownership Plans (ESOPs) ....................................   36
Employee Stock Purchase Plans-- Qualified Plans ...........................   37
Employee Stock Purchase Plans-- Non-Qualified Plans .......................   37
Incentive Bonus Plans and Tax Deductibility Proposals
  (OBRA-Related Compensation Proposals) ...................................   37
Options Backdating ........................................................   38
Option Exchange Programs/Repricing Options ................................   38
Stock Plans in Lieu of Cash ...............................................   39
Transfer Programs of Stock Options ........................................   39
Shareholder Proposals on Compensation .....................................   40
Advisory Vote on Executive Compensation (Say-on-Pay) ......................   40
Compensation Consultants- Disclosure of Board or
  Company's Utilization ...................................................   40
Disclosure/Setting Levels or Types of Compensation for
  Executives and Directors ................................................   40
Pay for Superior Performance ..............................................   40
Performance-Based Awards ..................................................   41
Pension Plan Income Accounting ............................................   41
Pre-Arranged Trading Plans (10b5-1 Plans) .................................   41
Recoup Bonuses ............................................................   42
Severance Agreements for Executives/Golden Parachutes .....................   42
Share Buyback Holding Periods .............................................   42
Stock Ownership or Holding Period Guidelines ..............................   42
Supplemental Executive Retirement Plans (SERPs) ...........................   43
Tax Gross-Up Proposals ....................................................   43

9. CORPORATE SOCIAL RESPONSIBILITY (CSR) ISSUES ...........................   44
Animal Welfare ............................................................   44
Animal Testing ............................................................   44
Animal Welfare Policies ...................................................   44
Controlled Atmosphere Killing (CAK) .......................................   44
Consumer Issues ...........................................................   44
Genetically Modified Ingredients ..........................................   44
Consumer Lending ..........................................................   45
Pharmaceutical Pricing ....................................................   45
Pharmaceutical Product Reimportation ......................................   45
Product Safety and Toxic Materials ........................................   46
Tobacco ...................................................................   46
Diversity .................................................................   47
Board Diversity ...........................................................   47
Equality of Opportunity and Glass Ceiling .................................   47
Sexual Orientation and Domestic Partner Benefits ..........................   48
Climate Change and the Environment ........................................   48
Climate Change ............................................................   48
Concentrated Area Feeding Operations (CAFO) ...............................   48
Energy Efficiency .........................................................   48
Facility Safety (Nuclear and Chemical Plant Safety) .......................   49




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2008 US Proxy Voting Guidelines Summary                                      -4-
<PAGE>


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General Environmental Reporting ...........................................   49
Greenhouse Gas Emissions ..................................................   49
Operations in Protected Areas .............................................   49
Recycling .................................................................   49
Renewable Energy ..........................................................   49
General Corporate Issues ..................................................   50
Charitable Contributions ..................................................   50
CSR Compensation-Related Proposals ........................................   50
HIV/AIDS ..................................................................   50
Lobbying Expenditures/Initiatives .........................................   51
Political Contributions and Trade Associations Spending ...................   51
International Issues, Labor Issues, and Human Rights ......................   51
China Principles ..........................................................   51
Codes of Conduct ..........................................................   52
Community Impact Assessments ..............................................   52
Foreign Military Sales/Offsets ............................................   52
Internet Privacy and Censorship ...........................................   52
MacBride Principles .......................................................   53
Nuclear and Depleted Uranium Weapons ......................................   53
Operations in High Risk Markets ...........................................   53
Outsourcing/Offshoring ....................................................   53
Vendor Standards ..........................................................   53
Sustainability ............................................................   54
Sustainability Reporting ..................................................   54

10. MUTUAL FUND PROXIES ...................................................   55
Election of Directors .....................................................   55
Converting Closed-end Fund to Open-end Fund ...............................   55
Proxy Contests ............................................................   55
Investment Advisory Agreements ............................................   55
Approving New Classes or Series of Shares .................................   55
Preferred Stock Proposals .................................................   55
1940 Act Policies .........................................................   56
Changing a Fundamental Restriction to a Nonfundamental Restriction ........   56
Change Fundamental Investment Objective to Nonfundamental .................   56
Name Change Proposals .....................................................   56
Change in Fund's Subclassification ........................................   56
Disposition of Assets/Termination/Liquidation .............................   56
Changes to the Charter Document ...........................................   56
Changing the Domicile of a Fund ...........................................   57
Authorizing the Board to Hire and Terminate Subadvisors
  Without Shareholder Approval ............................................   57
Distribution Agreements ...................................................   57
Master-Feeder Structure ...................................................   57
Mergers ...................................................................   57
Shareholder Proposals for Mutual Funds ....................................   57
Establish Director Ownership Requirement ..................................   57
Reimburse Shareholder for Expenses Incurred ...............................   58
Terminate the Investment Advisor ..........................................   58


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2008 US Proxy Voting Guidelines Summary                                      -5-
<PAGE>


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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).

Auditor Indemnification and Limitation of Liability

Consider the issue of auditor indemnification and limitation of liability on a
CASE-BY-CASE basis. Factors to be assessed include, but are not limited to:

     o    The terms of the auditor agreement- the degree to which these
          agreements impact shareholders' rights;

     o    Motivation and rationale for establishing the agreements;

     o    Quality of disclosure; and

     o    Historical practices in the audit area.

WTHHOLD or vote AGAINST members of an audit committee in situations where there
is persuasive evidence that the audit committee entered into an inappropriate
indemnification agreement with its auditor that limits the ability of the
company, or its shareholders, to pursue legitimate legal recourse against the
audit firm.

Auditor Ratification

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;
     o    Poor accounting practices are identified that rise to a serious level
          of concern, such as: fraud; misapplication of GAAP; and material
          weaknesses identified in Section 404 disclosures; 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

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2008 US Proxy Voting Guidelines Summary                                      -6-
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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.

In circumstances where "Other" fees include fees related to significant one-time
capital structure events: initial public offerings, bankruptcy emergence, and
spin-offs; and the company makes public disclosure of the amount and nature of
those fees which are an exception to the standard "non-audit fee" category, then
such fees may be excluded from the non-audit fees considered in determining the
ratio of non-audit to audit/audit-related fees/tax compliance and preparation
for purposes of determining whether non-audit fees are excessive.

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:

     o    The tenure of the audit firm;
     o    The length of rotation specified in the proposal;
     o    Any significant audit-related issues at the company;
     o    The number of Audit Committee meetings held each year;
     o    The number of financial experts serving on the committee; and
     o    Whether the company has a periodic renewal process where the auditor
          is evaluated for both audit quality and competitive price.

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, and/or location of the
annual meeting unless the proposed change is unreasonable. Vote AGAINST
shareholder proposals to change the date, time, and/or location of the annual
meeting unless the current scheduling or location is unreasonable.

Transact Other Business

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

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2008 US Proxy Voting Guidelines Summary                                      -7-
<PAGE>


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2. Board of Directors:

Voting on Director Nominees in Uncontested Elections

Vote on director nominees should be determined on a CASE-BY-CASE basis.

Vote AGAINST or WITHHOLD(1) 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.

Vote AGAINST or WITHHOLD from all nominees of the board of directors, (except
from new nominees, who should be considered on a CASE-BY-CASE basis) if:

     o    The company's proxy indicates that not all directors attended 75% of
          the aggregate of their board and committee meetings, but fails to
          provide the required disclosure of the names of the directors
          involved. If this information cannot be obtained, vote
          against/withhold from all incumbent directors;
     o    The company's poison pill has a dead-hand or modified dead-hand
          feature. Vote against/withhold every year until this feature is
          removed;
     o    The board adopts or renews a poison pill without shareholder approval,
          does not commit to putting it to shareholder vote within 12 months of
          adoption (or in the case of an newly public company, does not commit
          to put the pill to a shareholder vote within 12 months following the
          IPO), or reneges on a commitment to put the pill to a vote, and has
          not yet received a withhold/against recommendation 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 (a
          management proposal with other than a FOR recommendation by management
          will not be considered as sufficient action taken);
     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 (a management proposal with other than a FOR
          recommendation by management will not be considered as sufficient
          action taken);
     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/against votes of the shares cast and the company has
          failed to address the underlying issue(s) that caused the high
          withhold/against vote;
     o    The company is a Russell 3000 company that underperformed its industry
          group (GICS group) under the criteria discussed in the section
          "Performance Test for Directors";
     o    The board is classified, and a continuing director responsible for a
          problematic governance issue at the board/committee level that would
          warrant a withhold/against vote recommendation is not up for election-
          any or all appropriate nominees (except new) may be held accountable.


- --------
(1) In general, companies with a plurality vote standard use "Withhold" as the
valid contrary vote option in director elections; companies with a majority vote
standard use "Against". However, it will vary by company and the proxy must be
checked to determine the valid contrary vote option for the particular company.

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Vote AGAINST or 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 company lacks a formal nominating committee, even if board attests
          that the independent directors fulfill the functions of such a
          committee;
     o    The full board is less than majority independent.

Vote AGAINST or WITHHOLD from the members of the Audit Committee if:

     o    The non - audit fees paid to the auditor are excessive (see discussion
          under Auditor Ratification);
     o    Poor accounting practices are identified which rise to a level of
          serious concern, such as: fraud; misapplication of GAAP; and material
          weaknesses identified in Section 404 disclosures; or
     o    There is persuasive evidence that the audit committee entered into an
          inappropriate indemnification agreement with its auditor that limits
          the ability of the company, or its shareholders, to pursue legitimate
          legal recourse against the audit firm.

Vote AGAINST or WITHHOLD from the members of the Compensation Committee if:

     o    There is a negative correlation between the chief executive's pay and
          company performance (see discussion under Equity Compensation Plans);
     o    The company reprices underwater options for stock, cash or other
          consideration without prior shareholder approval, even if allowed in
          their equity plan;
     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 backdated options (see "Options Backdating" policy);
     o    The company has poor compensation practices (see "Poor Pay Practices"
          policy). Poor pay practices may warrant withholding votes from the CEO
          and potentially the entire board as well.

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

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  2008 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(3);
     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;(4)
     o    Former executive(2) of the company, an affiliate or an acquired firm
          within the past five years;
     o    Executive(2) 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(2), former executive, general or limited partner of a joint
          venture or partnership with the company;
     o    Relative(5) of a current Section 16 officer of company or its
          affiliates;
     o    Relative(5) of a current employee of company or its affiliates where
          additional factors raise concern (which may include, but are not
          limited to, the following: a director related to numerous employees;
          the company or its affiliates employ relatives of numerous board
          members; or a non-Section 16 officer in a key strategic role);
     o    Relative(5) of former Section 16 officer, of company or its affiliate
          within the last five years;
     o    Currently provides (or a relative(5) provides) professional
          services(6) to the company, to an affiliate of the company or an
          individual officer of the company or one of its affiliates in excess
          of $10,000 per year;
     o    Employed by (or a relative(5) is employed by) a significant customer
          or supplier(7);
     o    Has (or a relative(5) has) any transactional relationship with the
          company or its affiliates excluding investments in the company through
          a private placement; (7)
     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(5) has) an interlocking relationship as defined by
          the SEC involving members of the board of directors or its
          Compensation and Stock Option Committee; (8)
     o    Founder (9) of the company but not currently an employee;
     o    Is (or a relative(5) is) a trustee, director or employee of a
          charitable or non-profit organization that receives grants or
          endowments(7) from the company or its affiliates(1).

Independent Outside Director (IO)

     o    No material(10) 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

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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).
A non-employee director serving as an officer due to statutory requirements
(e.g. corporate secretary) will be classified as an Affiliated Outsider. If the
company provides additional disclosure that the director is not receiving
additional compensation for serving in that capacity, then the director will be
classified as an Independent Outsider.

(3) Includes any former CEO of the company prior to the company's initial public
offering (IPO).

(4) 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.

(5) "Relative" follows the SEC's new definition of "immediate family members"
which covers spouses, parents, children, step-parents, step-children, siblings,
in-laws, and any person (other than a tenant or employee) sharing the household
of any director, nominee for director, executive officer, or significant
shareholder of the company.

(6) Professional services can be characterized as advisory in nature and
generally include the following: investment banking / financial advisory
services; commercial banking (beyond deposit services); investment services;
insurance services; accounting/audit services; consulting services; marketing
services; and legal services. The case of participation in a banking syndicate
by a non-lead bank should be considered a transaction (and hence subject to the
associated materiality test) rather than a professional relationship.

(7) If the company makes or receives annual payments exceeding the greater of
$200,000 or 5 percent of the recipient's gross revenues. (The recipient is the
party receiving the financial proceeds from the transaction).

(8) 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).

(9) 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.

(10) 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.

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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.

Generally vote FOR proposals to restore or provide for cumulative voting unless:

     o    The company has proxy access or a similar structure(2) to allow
          shareholders to nominate directors to the company's ballot; and
     o    The company has adopted a majority vote standard, with a carve-out for
          plurality voting in situations where there are more nominees than
          seats, and a director resignation policy to address failed elections.

Vote FOR proposals for cumulative voting at controlled companies (insider voting
power > 50%).

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 liability for acts, such as negligence, that are more serious
violations of fiduciary obligation than mere carelessness.

Vote AGAINST proposals that would expand the scope of indemnification to provide
for mandatory indemnification of company officials in connection with acts that
previously the company was permitted to provide indemnification for at the
discretion of the company's board (i.e., "permissive indemnification") but that
previously the company was not required to indemnify.

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    If 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

(2) Similar structure" would be a structure that allows shareholders to nominate
candidates who the company will include on the management ballot IN ADDITION TO
management's nominees, and their bios are included in management's proxy.

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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 that the chairman's position
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 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.) The duties should
          include, but are not limited to, the following:

          o    presides at all meetings of the board at which the chairman is
               not present, including executive sessions of the independent
               directors;
          o    serves as liaison between the chairman and the independent
               directors;
          o    approves information sent to the board;
          o    approves meeting agendas for the board;
          o    approves meeting schedules to assure that there is sufficient
               time for discussion of all agenda items;
          o    has the authority to call meetings of the independent directors;
          o    if requested by major shareholders, ensures that he is available
               for consultation and direct communication;

     o    The company publicly discloses a comparison of the duties of its
          independent lead director and its chairman;
     o    The company publicly discloses a sufficient explanation of why it
          chooses not to give the position of chairman to the independent lead
          director, and instead combine the chairman and CEO positions;
     o    Two-thirds independent board;
     o    All independent key committees;
     o    Established governance guidelines;
     o    The company should not have underperformed both its peers and index on
          the basis of both one-year and three-year total shareholder returns*,
          unless there has been a change in the Chairman/CEO position within
          that time; and
     o    The company does not have any problematic governance issues.

Vote FOR the proposal if the company does not provide disclosure with respect to
any or all of the bullet points above. If disclosure is provided, evaluate on a
CASE-BY-CASE basis.

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* The industry peer group used for this evaluation is the average of the 12
companies in the same 6-digit GICS group that are closest in revenue to the
company. To fail, the company must under-perform its index and industry group on
all 4 measures (1 and 3 year on industry peers and index).

Majority of Independent Directors/Establishment of Committees

Vote FOR shareholder proposals asking that a majority or more of directors be
independent unless the board composition already meets the proposed threshold by
ISS' definition of independent outsider. (See Classification of Directors.)

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 precatory and binding resolutions requesting that the board
change the company's bylaws to stipulate that directors need to be elected with
an affirmative majority of votes cast, provided it does not conflict with the
state law where the company is incorporated. Binding resolutions need to allow
for a carve-out for a plurality vote standard when there are more nominees than
board seats. Companies are strongly encouraged to also adopt a post-election
policy (also know as a director resignation policy) that will provide guidelines
so that the company will promptly address the situation of a holdover director.

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 vote 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

Vote shareholder proposals asking for open or proxy access on a CASE-BY-CASE
basis, taking into account: The ownership threshold proposed in the resolution;
The proponent's rationale for the proposal at the targeted company in terms of
board and director conduct.

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Performance Test for Directors

On a CASE-BY-CASE basis, Vote AGAINST or WITHHOLD from directors of Russell 3000
companies that underperformed relative to their industry peers. The criterion
used to evaluate such underperformance is a combination of four performance
measures: One measurement is a market-based performance metric and three
measurements are tied to the company's operational performance. The market
performance metric in the methodology is five-year Total Shareholder Return
(TSR) on a relative basis within each four-digit GICS group. The three
operational performance metrics are sales growth, EBITDA growth (or operating
income growth for companies in the financial sector), and pre-tax operating
Return on Invested Capital (ROIC) (or Return on Average Assets (ROAA) for
companies in the financial sector) on a relative basis within each four-digit
GICS group. All four metrics will be time-weighted as follows: 40 percent on the
trailing 12 month period and 60 percent on the 48 month period prior to the
trailing 12 months. This methodology emphasizes the company's historical
performance over a five-year period yet also accounts for near-term changes in a
company's performance. The table below summarizes the framework:

Metrics                     Basis of Evaluation     Weighting      2nd Weighting
- --------------------------------------------------------------------------------
Operational                                                             50%
Performance
- --------------------------------------------------------------------------------
5-year Average              Management              33.3%
pre-tax operating           efficiency in
ROIC or ROAA*               deploying assets
- --------------------------------------------------------------------------------
5-year Sales                Top-Line                33.3%
Growth
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5-year EBITDA               Core-earnings           33.3%
Growth or
Operating Income
Growth*
- --------------------------------------------------------------------------------
Sub Total                                           100%
- --------------------------------------------------------------------------------
Stock                                                                50%
Performance
- --------------------------------------------------------------------------------
5-year TSR                  Market
- --------------------------------------------------------------------------------
Total                                                                100%
- --------------------------------------------------------------------------------
*Metric applies to companies in the financial sector

Adopt a two-phase approach. In Year 1, the worst performers (bottom 5 percent)
within each of the 24 GICS groups receive are noted. In Year 2, consider a vote
AGAINST or WITHHOLD votes from director nominees if a company continues to be in
the bottom five percent within its GICS group for that respective year and shows
no improvement in its most recent trailing 12 months operating and market
performance relative to its peers in its GICS group. Take into account various
factors including:

     o    Year-to-date performance;
     o    Situational circumstances;
     o    Change in management/board;
     o    Overall governance practices.

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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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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.

Generally vote FOR shareholder proposals calling for the reimbursement of
reasonable costs incurred in connection with nominating one or more candidates
in a contested election where the following apply:

     o    The election of fewer than 50% of the directors to be elected is
          contested in the election;
     o    One or more of the dissident's candidates is elected;
     o    Shareholders are not permitted to cumulate their votes for directors;
          and
     o    The election occurred, and the expenses were incurred, after the
          adoption of this bylaw.

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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4. Antitakeover Defenses and Voting Related Issues

Advance Notice Requirements for Shareholder Proposals/Nominations

Vote CASE-BY-CASE on advance notice proposals, supporting 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 12 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 12 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, 10 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.

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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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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.

Asset Sales

Vote CASE-BY-CASE on asset sales, considering the following factors:

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     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;


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     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:

     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:

     o    Offer price/premium;
     o    Fairness opinion;
     o    How the deal was negotiated;
     o    Conflicts of interest;
     o    Other alternatives/offers considered; and
     o    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


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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.

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

Whether company is actively exploring its strategic options, including retaining
a financial advisor.

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2008 US Proxy Voting Guidelines Summary                                     -23-
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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.

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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.

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:

     o    The reasons for reincorporating;
     o    A comparison of the governance provisions;
     o    Comparative economic benefits; and
     o    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,
freeze-out provisions, fair price provisions, stakeholder laws, poison pill
endorsements, severance pay and labor contract provisions, anti-greenmail
provisions, and disgorgement provisions).

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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

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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).

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.

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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.




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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 one standard deviation of its industry group; or
     o    The plan is a vehicle for poor pay practices. Each of these factors is
          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 underwater stock
options without prior shareholder approval, even if the cost of the plan is
reasonable. Also, vote AGAINST OR WITHHOLD from members of the Compensation
Committee who approved and/or implemented an option exchange program by
repricing and buying out underwater options for stock, cash or other
consideration or canceling underwater options and regranting options with a
lower exercise price without prior shareholder approval, even if such repricings
are allowed in their equity plan.

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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.

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, value of non-equity incentive payouts, present
value of stock options, face value of restricted stock, target value of
performance-based awards, change in pension value and nonqualified deferred
compensation earnings, and all other compensation) increasing over the previous
year.

Vote AGAINST or 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).

     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

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          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
          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(3) or performance-accelerated grants.(4)
          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 2 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.

The annual burn rate is calculated as follows:

Annual Burn rate = (# of options granted + # of full value shares awarded *
Multiplier) / Weighted Average common shares outstanding)


- -----------------
(3) 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.
(4) 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).

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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 (or 2%, whichever is
greater), assuming all other conditions for voting FOR the plan have been met.
If a company fails to fulfill its burn rate commitment, vote AGAINST or WITHHOLD
from the compensation committee.

<TABLE>
<CAPTION>


                                                 2008 Burn Rate Table

                                                       Russell 3000                             Non-Russell 3000
                                                                  Standard                                Standard
GICS              Description                          Mean       Deviation    Mean+STDEV       Mean      Deviation   Mean+STDEV
- ---------------------------------------------------------------------------------------------------------------------------------
<C>               <S>                                  <C>        <C>          <C>              <C>       <C>         <C>
1010              Energy                               1.71%      1.39%        3.09%            2.12%     2.31%       4.43%
1510              Materials                            1.16%      0.77%        1.93%            2.23%     2.26%       4.49%
2010              Capital Goods                        1.51%      1.04%        2.55%            2.36%     2.03%       4.39%
2020              Commercial Services & Supplies       2.35%      1.70%        4.05%            2.20%     2.03%       4.23%
2030              Transportation                       1.59%      1.22%        2.80%            2.02%     2.08%       4.10%
2510              Automobiles & Components             1.89%      1.10%        2.99%            1.73%     2.05%       3.78%
2520              Consumer Durables & Apparel          2.02%      1.31%        3.33%            2.10%     1.94%       4.04%
2530              Hotels Restaurants & Leisure         2.15%      1.18%        3.33%            2.32%     1.93%       4.25%
2540              Media                                1.92%      1.35%        3.27%            3.33%     2.60%       5.93%
2550              Retailing                            1.86%      1.04%        2.90%            3.15%     2.65%       5.80%
3010,
3020, 3030        Food & Staples Retailing             1.69%      1.23%        2.92%            1.82%     2.03%       3.85%
3510              Health Care Equipment & Services     2.90%      1.67%        4.57%            3.75%     2.65%       6.40%
3520              Pharmaceuticals & Biotechnology      3.30%      1.66%        4.96%            4.92%     3.77%       8.69%
4010              Banks                                1.27%      0.88%        2.15%            1.07%     1.12%       2.19%
4020              Diversified Financials               2.45%      2.07%        4.52%            4.41%     5.31%       9.71%
4030              Insurance                            1.21%      0.93%        2.14%            2.07%     2.28%       4.35%
4040              Real Estate                          1.04%      0.81%        1.85%            0.80%     1.21%       2.02%
4510              Software & Services                  3.81%      2.30%        6.11%            5.46%     3.81%       9.27%
4520              Technology Hardware & Equipment      3.07%      1.74%        4.80%            3.43%     2.40%       5.83%
                  Semiconductors & Semiconductor
4530              Equipment                            3.78%      1.81%        5.59%            4.51%     2.30%       6.81%
5010              Telecommunication Services           1.57%      1.23%        2.80%            2.69%     2.41%       5.10%
5510              Utilities                            0.72%      0.50%        1.22%            0.59%     0.66%       1.25%
- ---------------------------------------------------------------------------------------------------------------------------------
</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.
The guideline for applying the premium is as follows:

Annual Stock Price Volatility                     Multiplier
- --------------------------------------------------------------------------------
54.6% and higher                                  1 full-value award will count
                                                    as 1.5 option shares
36.1% or higher and less than 54.6%               1 full-value award will count
                                                    as 2.0 option shares
24.9% or higher and less than 36.1%               1 full-value award will count
                                                    as 2.5 option shares
16.5% or higher and less than 24.9%               1 full-value award will count
                                                    as 3.0 option shares
7.9% or higher and less than 16.5%                1 full-value award will count
                                                    as 3.5 option shares
Less than 7.9%                                    1 full-value award will count
                                                    as 4.0 option shares

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Poor Pay Practices

Vote AGAINST or WITHHOLD from compensation committee members, CEO, and
potentially the entire board, if the company has poor compensation practices.
Vote AGAINST equity plans if the plan is a vehicle for poor compensation
practices.

The following practices, while not exhaustive, are examples of poor
compensation practices that may warrant voting against or withholding votes:

     o    Egregious employment contracts:
          >    Contracts containing multi-year guarantees for salary increases,
               bonuses, and equity compensation;

     o    Excessive perks:
          >    Overly generous cost and/or reimbursement of taxes for personal
               use of corporate aircraft, personal security systems maintenance
               and/or installation, car allowances, and/or other excessive
               arrangements relative to base salary;

     o    Abnormally large bonus payouts without justifiable performance linkage
          or proper disclosure:
          >    Performance metrics that are changed, canceled, or replaced
               during the performance period without adequate explanation of the
               action and the link to performance;

     o    Egregious pension/SERP (supplemental executive retirement plan)
          payouts:
          >    Inclusion of additional years of service not worked that result
               in significant payouts
          >    Inclusion of performance-based equity awards in the pension
               calculation;

     o    New CEO with overly generous new hire package:
          >    Excessive "make whole" provisions;
          >    Any of the poor pay practices listed in this policy;

     o    Excessive severance and/or change-in-control provisions:
          >    Inclusion of excessive change-in-control or severance payments,
               especially those with a multiple in excess of 3X cash pay;
          >    Severance paid for a "performance termination," (i.e., due to the
               executive's failure to perform job functions at the appropriate
               level);
          >    Change-in-control payouts without loss of job or substantial
               diminution of job duties (single-triggered);
          >    Perquisites for former executives such as car allowances,
               personal use of corporate aircraft, or other inappropriate
               arrangements;

     o    Poor disclosure practices:
          >    Unclear explanation of how the CEO is involved in the pay setting
               process;
          >    Retrospective performance targets and methodology not discussed;
          >    Methodology for benchmarking practices and/or peer group not
               disclosed and explained;

     o    Internal Pay Disparity:
          >    Excessive differential between CEO total pay and that of next
               highest-paid named executive officer (NEO);
     o    Options backdating (covered in a separate policy);
     o    Other excessive compensation payouts or poor pay practices at the
          company.

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Specific Treatment of Certain Award Types in Equity Plan Evaluations:

Dividend Equivalent Rights

Options 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.

Option Overhang Cost

Companies with sustained positive stock performance and high overhang cost (the
overhang alone exceeds the allowable cap) attributable to in-the-money options
outstanding in excess of six years may warrant a carve-out of these options from
the overhang as long as the dilution attributable to the new share request is
reasonable and the company exhibits sound compensation practices. Consider, on a
CASE-BY-CASE basis, a carve-out of a portion of cost attributable to overhang,
considering the following criteria:

     o    Performance: Companies with sustained positive stock performance will
          merit greater scrutiny. Five-year total shareholder return (TSR),
          year-over-year performance, and peer performance could play a
          significant role in this determination.

     o    Overhang Disclosure: Assess whether optionees have held in-the-money
          options for a prolonged period (thus reflecting their confidence in
          the prospects of the company). Note that this assessment would require
          additional disclosure regarding a company's overhang. Specifically,
          the following disclosure would be required:

          o    The number of in-the-money options outstanding in excess of six
               or more years with a corresponding weighted average exercise
               price and weighted average contractual remaining term;
          o    The number of all options outstanding less than six years and
               underwater options outstanding in excess of six years with a
               corresponding weighted average exercise price and weighted
               average contractual remaining term;
          o    The general vesting provisions of option grants; and
          o    The distribution of outstanding option grants with respect to the
               named executive officers;

     o    Dilution: Calculate the expected duration of the new share request in
          addition to all shares currently available for grant under the equity
          compensation program, based on the company's three-year average burn
          rate (or a burn-rate commitment that the company makes for future
          years). The expected duration will be calculated by multiplying the
          company's unadjusted (options and full-value awards accounted on a
          one-for-one basis) three-year average burn rate by the most recent
          fiscal year's weighted average shares outstanding (as used in the
          company's calculation of basic EPS) and divide the

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          sum of the new share request and all available shares under the
          company's equity compensation program by the product. For example, an
          expected duration in excess of five years could be considered
          problematic; and
     o    Compensation Practices: An evaluation of overall practices could
          include: (1) stock option repricing provisions, (2) high concentration
          ratios (of grants to top executives), or (3) additional practices
          outlined in the Poor Pay Practices policy.

Other Compensation Proposals and Policies

401(k) Employee Benefit Plans

Vote FOR proposals to implement a 401(k) savings plan for employees.

Advisory Vote on Executive Compensation (Say-on-Pay) Management Proposals

Vote CASE-BY-CASE on management proposals for an advisory vote on executive
compensation. Vote AGAINST these resolutions in cases where boards have failed
to demonstrate good stewardship of investors' interests regarding executive
compensation practices. The following principles and factors should be
considered:

1. The following five global principles apply to all markets:

     o    Maintain appropriate pay-for-performance alignment with emphasis on
          long-term shareholder value: This principle encompasses overall
          executive pay practices, which must be designed to attract, retain,
          and appropriately motivate the key employees who drive shareholder
          value creation over the long term. It will take into consideration,
          among other factors: the linkage between pay and performance; the mix
          between fixed and variable pay; performance goals; and equity-based
          plan costs;

     o    Avoid arrangements that risk "pay for failure": This principle
          addresses the use and appropriateness of long or indefinite contracts,
          excessive severance packages, and guaranteed compensation;

     o    Maintain an independent and effective compensation committee: This
          principle promotes oversight of executive pay programs by directors
          with appropriate skills, knowledge, experience, and a sound process
          for compensation decision-making (e.g., including access to
          independent expertise and advice when needed);

     o    Provide shareholders with clear, comprehensive compensation
          disclosures: This principle underscores the importance of informative
          and timely disclosures that enable shareholders to evaluate executive
          pay practices fully and fairly;

     o    Avoid inappropriate pay to non-executive directors: This principle
          recognizes the interests of shareholders in ensuring that compensation
          to outside directors does not compromise their independence and
          ability to make appropriate judgments in overseeing managers' pay and
          performance. At the market level, it may incorporate a variety of
          generally accepted best practices.

2. For U.S. companies, vote CASE-BY-CASE considering the following factors in
the context of each company's specific circumstances and the board's disclosed
rationale for its practices:

Relative Considerations:

Assessment of performance metrics relative to business strategy, as discussed
and explained in the CD & A;

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     o    Evaluation of peer groups used to set target pay or award
          opportunities;
     o    Alignment of company performance and executive pay trends over time
          (e.g., performance down: pay down);
     o    Assessment of disparity between total pay of the CEO and other Named
          Executive Officers (NEOs).

Design Considerations:

     o    Balance of fixed versus performance-driven pay;
     o    Assessment of excessive practices with respect to perks, severance
          packages, supplemental executive pension plans, and burn rates.

Communication Considerations:

     o    Evaluation of information and board rationale provided in CD&A about
          how compensation is determined (e.g., why certain elements and pay
          targets are used, and specific incentive plan goals, especially
          retrospective goals);
     o    Assessment of board's responsiveness to investor input and engagement
          on compensation issues (e.g., in responding to majority-supported
          shareholder proposals on executive pay topics).
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 will 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
          -    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.

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).

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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.

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) of the Internal Revenue Code.

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.
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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.

Options Backdating

In cases where a company has practiced options backdating, vote AGAINST or
WITHHOLD on a CASE-BY-CASE basis from the members of the compensation committee,
depending on the severity of the practices and the subsequent corrective actions
on the part of the board. Vote AGAINST or WITHHOLD from the compensation
committee members who oversaw the questionable options grant practices or from
current compensation committee members who fail to respond to the issue
proactively, depending on several factors, including, but not limited to:

     o    Reason and motive for the options backdating issue, such as
          inadvertent vs. deliberate grant date changes;
     o    Length of time of options backdating;
     o    Size of restatement due to options backdating;
     o    Corrective actions taken by the board or compensation committee, such
          as canceling or repricing backdated options, or recoupment of option
          gains on backdated grants;
     o    Adoption of a grant policy that prohibits backdating, and creation of
          a fixed grant schedule or window period for equity grants going
          forward.

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--the stock price should not be so volatile
          that the options are likely to be back "in-the-money" over the near
          term;
     o    Rationale for the re-pricing--was the stock price decline beyond
          management's control?
     o    Is this a value-for-value exchange?
     o    Are surrendered stock options added back to the plan reserve?
     o    Option vesting--does the new option vest immediately or is there a
          black-out period?
     o    Term of the option--the term should remain the same as that of the
          replaced option;
     o    Exercise price--should be set at fair market or a premium to market;
     o    Participants--executive officers and directors should be excluded.

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. In
addition to the above considerations, evaluate the intent, rationale, and timing
of the repricing proposal. The proposal should clearly articulate why the board
is choosing to conduct an exchange program at this point in time. Repricing
underwater options after a recent precipitous drop in the company's stock price
demonstrates poor timing. Repricing after a recent decline in stock price
triggers additional scrutiny and a potential AGAINST vote on the proposal. At a
minimum, the decline should not have happened within the past year. Also,
consider the terms of the surrendered options, such as the grant date, exercise
price and vesting schedule. Grant dates of surrendered options should be far
enough back (two to three years) so as not to

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suggest that repricings are being done to take advantage of short-term downward
price movements. Similarly, the exercise price of surrendered options should be
above the 52-week high for the stock price.

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

Stock Plans in Lieu of Cash

Vote CASE-by-CASE on plans that 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 that 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: Vote AGAINST or WITHHOLD from compensation committee members
if they fail to submit one-time transfers 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.

Ongoing TSO program: Vote against equity plan proposals if the details of
ongoing TSO programs are not provided to shareholders. Since TSOs will be one of
the award types under a stock plan, the ongoing TSO program, structure and
mechanics must be disclosed to shareholders. The specific criteria to be
considered in evaluating these proposals include, but not limited, to the
following:

     o    Eligibility;
     o    Vesting;
     o    Bid-price;
     o    Term of options;

Transfer value to third-party financial institution, employees and the company.

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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.

Shareholder Proposals on Compensation

Advisory Vote on Executive Compensation (Say-on-Pay) Generally, vote FOR
shareholder proposals that call for non-binding shareholder ratification of the
compensation of the Named Executive Officers and the accompanying narrative
disclosure of material factors provided to understand the Summary Compensation
Table.

Compensation Consultants- Disclosure of Board or Company's Utilization

Generally vote FOR shareholder proposals seeking disclosure regarding the
Company, Board, or Compensation Committee's use of compensation consultants,
such as company name, business relationship(s) and fees paid.

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.

Pay for Superior Performance

Generally vote FOR shareholder proposals based on a case-by-case analysis that
requests the board establish a pay-for-superior performance standard in the
company's executive compensation plan for senior executives. The proposal has
the following principles:

     o    Sets compensation targets for the Plan's annual and long-term
          incentive pay components at or below the peer group median;
     o    Delivers a majority of the Plan's target long-term compensation
          through performance-vested, not simply time-vested, equity awards;
     o    Provides the strategic rationale and relative weightings of the
          financial and non-financial performance metrics or criteria used in
          the annual and performance-vested long-term incentive components of
          the plan;
     o    Establishes performance targets for each plan financial metric
          relative to the performance of the company's peer companies;

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     o    Limits payment under the annual and performance-vested long-term
          incentive components of the plan to when the company's performance on
          its selected financial performance metrics exceeds peer group median
          performance.

Consider the following factors in evaluating this proposal:

     o    What aspects of the company's annual and long-term equity incentive
          programs are performance driven?
     o    If the annual and long-term equity incentive programs are performance
          driven, are the performance criteria and hurdle rates disclosed to
          shareholders or are they benchmarked against a disclosed peer group?
     o    Can shareholders assess the correlation between pay and performance
          based on the current disclosure?
     o    What type of industry and stage of business cycle does the company
          belong to?

Performance-Based Awards

Vote CASE-BY-CASE on shareholder proposal requesting that a significant amount
of future long-term incentive compensation awarded to senior executives shall be
performance-based and requesting that the board adopt and disclose challenging
performance metrics to shareholders, based on the following analytical steps:

     o    First, vote FOR shareholder proposals advocating the use of
          performance-based equity awards, such as performance contingent
          options or restricted stock, indexed options or premium-priced
          options, unless the proposal is overly restrictive or if the company
          has demonstrated that it is using a "substantial" portion of
          performance-based awards for its top executives. Standard stock
          options and performance-accelerated awards do not meet the criteria to
          be considered as performance-based awards. Further, premium-priced
          options should have a premium of at least 25 percent and higher to be
          considered performance-based awards.

     o    Second, assess the rigor of the company's performance-based equity
          program. If the bar set for the performance-based program is too low
          based on the company's historical or peer group comparison, generally
          vote FOR the proposal. Furthermore, if target performance results in
          an above target payout, vote FOR the shareholder proposal due to
          program's poor design. If the company does not disclose the
          performance metric of the performance-based equity program, vote FOR
          the shareholder proposal regardless of the outcome of the first step
          to the test.

In general, vote FOR the shareholder proposal if the company does not meet both
of the above two steps.

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.

Pre-Arranged Trading Plans (10b5-1 Plans)

Generally vote FOR shareholder proposals calling for certain principles
regarding the use of prearranged trading plans (10b5-1 plans) for executives.
These principles include:

     o    Adoption, amendment, or termination of a 10b5-1 Plan must be disclosed
          within two business days in a Form 8-K;
     o    Amendment or early termination of a 10b5-1 Plan is allowed only under
          extraordinary circumstances, as determined by the board;


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     o    Ninety days must elapse between adoption or amendment of a 10b5-1 Plan
          and initial trading under the plan;
     o    Reports on Form 4 must identify transactions made pursuant to a 10b5-1
          Plan;
     o    An executive may not trade in company stock outside the 10b5-1 Plan.
     o    Trades under a 10b5-1 Plan must be handled by a broker who does not
          handle other securities transactions for the executive.

Recoup Bonuses

Vote on a CASE-BY-CASE on proposals to recoup unearned incentive bonuses or
other incentive payments made to senior executives if it is later determined
that fraud, misconduct, or negligence significantly contributed to a restatement
of financial results that led to the awarding of unearned incentive
compensation, taking into consideration:

     o    If the company has adopted a formal recoupment bonus policy; or
     o    If the company has chronic restatement history or material financial
          problems.

Severance Agreements for Executives/Golden Parachutes

Vote FOR shareholder proposals requiring that golden parachutes or executive
severance agreements 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.

Share Buyback Holding Periods

Generally vote AGAINST shareholder proposals prohibiting executives from selling
shares of company stock during periods in which the company has announced that
it may or will be repurchasing shares of its stock. Vote FOR the proposal when
there is a pattern of abuse by executives exercising options or selling shares
during periods of share buybacks.

Stock Ownership or Holding Period Guidelines

Generally vote AGAINST shareholder proposals that mandate a minimum amount of
stock that directors must own in order to qualify as a director or to remain on
the board. While ISS favors stock ownership on the part of directors, the
company should determine the appropriate ownership requirement. Vote
CASE-BY-CASE on shareholder proposals asking companies to adopt holding period
or retention ratios for their executives, taking into account:

     o    Whether the company has any holding period, retention ratio, or
          officer ownership requirements in place. These should consist of:

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          o    Rigorous stock ownership guidelines, or
          o    A short-term holding period requirement (six months to one year)
               coupled with a significant long-term ownership requirement, or
          o    A meaningful retention ratio,
     o    Actual officer stock ownership and the degree to which it meets or
          exceeds the proponent's suggested holding period/retention ratio or
          the company's own stock ownership or retention requirements.

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.

Generally vote FOR shareholder proposals requesting to limit the executive
benefits provided under the company's supplemental executive retirement plan
(SERP) by limiting covered compensation to a senior executive's annual salary
and excluding of all incentive or bonus pay from the plan's definition of
covered compensation used to establish such benefits.

Tax Gross-Up Proposals

Generally vote FOR proposals calling for companies to adopt a policy of not
providing tax gross-up payments to executives, except in situations where
gross-ups are provided pursuant to a plan, policy, or arrangement applicable to
management employees of the company, such as a relocation or expatriate tax
equalization policy.

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9. Corporate Social Responsibility (CSR) Issues

Animal Welfare

Animal Testing

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.

Animal Welfare Policies

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 recent, significant fines or litigation related to the
          company's treatment of animals.

Controlled Atmosphere Killing (CAK)

Generally vote AGAINST proposals requesting the implementation of CAK methods at
company and/or supplier operations unless such methods are required by
legislation or generally accepted as the industry standard.

Vote CASE-BY-CASE on proposals requesting a report on the feasibility of
implementing CAK methods, considering the availability of existing research
conducted by the company or industry groups on this topic and any fines or
litigation related to current animal processing procedures at the company.

Consumer Issues

Genetically Modified Ingredients

Generally, vote AGAINST proposals asking restaurants and food retail 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 food supply and genetic research 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;

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     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.

Generally 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.

Generally 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.

Consumer Lending

Vote CASE-BY CASE on requests for reports on the company's lending guidelines
and procedures, 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;
     o    Whether the company has adequately disclosed the financial risks of
          the lending products in question;
     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.

Pharmaceutical 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.

Pharmaceutical Product 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.

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Product Safety and Toxic Materials

Generally vote FOR proposals requesting the company to report on its policies,
initiatives/procedures, and oversight mechanisms related to toxic materials
and/or product safety in its supply chain, unless:

     o    The company already discloses similar information through existing
          reports or policies such as a Supplier Code of Conduct and/or a
          sustainability report;
     o    The company has formally committed to the implementation of a toxic
          materials and/or product safety and supply chain reporting and
          monitoring program based on industry norms or similar standards within
          a specified time frame; and
     o    The company has not been recently involved in relevant significant
          controversies or violations.

Vote CASE-BY-CASE on resolutions requesting that companies develop a feasibility
assessment to phase-out of certain toxic chemicals and/or 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.

Generally vote AGAINST resolutions requiring that a company reformulate its
products.

Tobacco

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

Investment in tobacco-related stocks or businesses:

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

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.

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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.

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.

Equality of Opportunity and Glass Ceiling

Generally vote FOR reports outlining the company's equal opportunity initiatives
unless all of the following apply:

     o    The company has well-documented equal opportunity programs;
     o    The company already publicly reports on its diversity initiatives
          and/or provides data on its workforce diversity; and
     o    The company has no recent EEO-related violations or litigation.

Generally vote FOR requests 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;
     o    The company already publicly reports on its company-wide
          affirmative-action initiatives and provides data on its workforce
          diversity; and

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     o    The company has had no recent, significant EEO-related violations or
          litigation.

Vote CASE-BY-CASE on proposals requesting disclosure of a company's EEO1 data or
the composition of the company's workforce considering:

     o    Existing disclosure on the company's diversity initiatives and
          policies;
     o    Any recent, significant violations or litigation related to
          discrimination at the company.

Generally 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.

Sexual Orientation and Domestic Partner Benefits

Generally, 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. Generally vote AGAINST
proposals to extend company benefits to, or eliminate benefits from domestic
partners. Benefits decisions should be left to the discretion of the company.

Climate Change and the Environment

Climate Change

In general, vote FOR resolutions requesting that a company disclose information
on the impact of climate change on the company's operations unless:

     o    The company already provides current, publicly-available information
          on the perceived impact that climate change may have on the company as
          well as associated policies and procedures to address such risks
          and/or opportunities;
     o    The company's level of disclosure is comparable to or better than
          information provided by industry peers; and
     o    There are no significant fines, penalties, or litigation associated
          with the company's environmental performance.

Concentrated Area Feeding Operations (CAFO)

Generally 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.

Energy Efficiency

Vote CASE-BY-CASE on proposals requesting a company report on its energy
efficiency policies, considering:

     o    The current level of disclosure related to energy efficiency policies,
          initiatives, and performance measures;
     o    The company's level of participation in voluntary energy efficiency
          programs and initiatives;
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     o    The company's compliance with applicable legislation and/or
          regulations regarding energy efficiency; and
     o    The company's energy efficiency policies and initiatives relative to
          industry peers.

Facility Safety (Nuclear and Chemical Plant Safety)

Vote CASE-BY-CASE on resolutions requesting that companies report on risks
associated with their operations and/or facilities, considering:

     o    The company's compliance with applicable regulations and guidelines;
     o    The level of existing disclosure related to security and safety
          policies, procedures, and compliance monitoring; and,
     o    The existence of recent, significant violations, fines, or controversy
          related to the safety and security of the company's operations and/or
          facilities.

General Environmental Reporting

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.

Greenhouse Gas Emissions

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.

Operations in Protected Areas

Generally vote FOR requests for reports outlining potential environmental damage
from operations in protected regions unless:

     o    Operations in the specified regions are not permitted by current laws
          or regulations; 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 applicable regulations.

Renewable Energy

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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.

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.

General Corporate Issues

Charitable Contributions

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.

CSR Compensation-Related Proposals

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:

     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.

Generally vote AGAINST proposals calling for an analysis of the pay disparity
between corporate executives and other employees as such comparisons may be
arbitrary in nature and/or provide information of limited value to shareholders.

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; and
     o    Company donations to healthcare providers operating in the region.

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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.

Lobbying Expenditures/Initiatives

Vote CASE-BY-CASE on proposals requesting information on a company's lobbying
initiatives, considering any significant controversy or litigation surrounding a
company's public policy activities, the current level of disclosure on lobbying
strategy, and the impact that the policy issue may have on the company's
business operations.

Political Contributions and Trade Associations Spending

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 and trade association spending considering:

     o    Recent significant controversy or litigation related to the company's
          political contributions or governmental affairs; and
     o    The public availability of a company policy on political contributions
          and trade association spending including information on the types of
          organizations supported, the business rationale for supporting these
          organizations, and the oversight and compliance procedures related to
          such expenditures of corporate assets.

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 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.

International Issues, Labor Issues, 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

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     o    The company does not have a code of conduct with standards similar to
          those promulgated by the International Labor Organization (ILO).

Codes of Conduct

Vote CASE-BY-CASE on proposals to implement certain human rights standards and
policies at company facilities. In evaluating these proposals, the following
should be considered:

     o    The degree to which existing human rights policies and practices are
          disclosed;
     o    Whether or not existing policies are consistent with internationally
          recognized labor standards;
     o    Whether company facilities are monitored and how;
     o    Company participation in fair labor organizations or other
          internationally recognized human rights initiatives;
     o    The company's primary business model and methods of operation;
     o    Proportion of business conducted in markets known to have higher risk
          of workplace labor right abuse;
     o    Whether the company has been recently involved in significant labor
          and human rights controversies or violations;
     o    Peer company standards and practices; and
     o    Union presence in company's international factories.

Community Impact Assessments

Vote CASE-BY-CASE on requests for reports outlining the potential community
impact of company operations in specific regions considering:

     o    Current disclosure of applicable risk assessment report(s) and risk
          management procedures;
     o    The impact of regulatory non-compliance, litigation, remediation, or
          reputational loss that may be associated with failure to manage the
          company's operations in question, including the management of relevant
          community and stakeholder relations;
     o    The nature, purpose, and scope of the company's operations in the
          specific region(s); and,
     o    The degree to which company policies and procedures are consistent
          with industry norms.

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.

Internet Privacy and Censorship

Vote CASE-BY-CASE on resolutions requesting the disclosure and implementation of
Internet privacy and censorship policies and procedures considering:

     o    The level of disclosure of policies and procedures relating to
          privacy, freedom of speech, Internet censorship, and government
          monitoring of the Internet;
     o    Engagement in dialogue with governments and/or relevant groups with
          respect to the Internet and the free flow of information;
     o    The scope of business involvement and of investment in markets that
          maintain government censorship or monitoring of the Internet;
     o    The market-specific laws or regulations applicable to Internet
          censorship or monitoring that may be imposed on the company; and,
     o    The level of controversy or litigation related to the company's
          international human rights policies and procedures.


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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;
          and
     o    Applicable state and municipal laws that limit contracts with
          companies that have not adopted the MacBride Principles.

Nuclear and Depleted Uranium Weapons

Vote AGAINST proposals asking a company to cease production or report on the
risks associated with the use of depleted uranium munitions or nuclear weapons
components and delivery systems, including disengaging from current and proposed
contracts. Such contracts are monitored by government agencies, serve multiple
military and non-military uses, and withdrawal from these contracts could have a
negative impact on the company's business.

Operations in High Risk Markets

Vote CASE-BY-CASE on requests for review and a report outlining the company's
potential financial and reputation risks associated with operations in
"high-risk" markets, such as a terrorism-sponsoring state or otherwise, taking
into account:

     o    The nature, purpose, and scope of the operations and business involved
          that could be affected by social or political disruption;
     o    Current disclosure of applicable risk assessment(s) and risk
          management procedures;
     o    Compliance with U.S. sanctions and laws;
     o    Consideration of other international policies, standards, and laws;
          and
     o    Whether the company has been recently involved in significant
          controversies or violations in "high-risk" markets.

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.

Vendor Standards

Generally vote FOR reports outlining vendor standards compliance unless any of
the following apply:

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     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 policies and compliance mechanisms.

Sustainability

Sustainability Reporting

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.











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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.

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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.

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;

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     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;
     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

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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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</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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