ISS -Social Investment Research Service

Microsoft - Analyst Recommendation
ISS -Social Investment Research Service

	*Abstract:*
	SIRS agrees with the proponent that having the same auditor provide both consulting and auditing services may raise conflict of interest concerns. Accounting firms may have a financial incentive to endorse questionable accounting practices at companies that also pay them big fees for consulting services. For that reason, SIRS supports

this non-binding proposal as a matter of principle and in support of good corporate governance. In the wake of financial reporting problems and alleged audit failures at companies… there is evidence to suggest that the actual incidence and magnitude of non-audit fees is greater than originally thought. When companies purchase a material dollar amount of consulting services and other non-auditing services from their auditors, it can call into question the auditor's independence.

In the specific case of Microsoft… 76.52% of the total fees paid to the auditor during fiscal year 2002 is attributable to non-audit work. We believe that this notably disproportionate fee arrangement could significantly impair the auditor's independence. Especially in light of recent corporate scandals for the company to adopt a policy that will ensure the auditor's complete independence, we believe the company can benefit from this proposal due to the egregious fees paid to its audit for the fiscal year 2002. That way shareholders can rest assure that no conflict of interest may arise that could jeopardize Microsoft's auditor independence.

Vote FOR Proposal No.2.

ISS - Proxy Voting Services

	*Abstract:*
	Microsoft management states that it recognizes "the important role that auditor independence plays in ensuring the integrity of the Company's financial statements

and protecting the interests of investots" and that the Audit Committee "takes its responsibility for assuring the independence of the Company'sauditors seriously." Currently, management's recognition of the importance of independence has resulted in two consecutive years where non-audit fees have outweighed audit fees by a margin of three-to-one. We believe that management should make better efforts to acknowledge the importance of auditor independence, and further believe that adoption of this proposal will go a long way in showing management and the board's commitment to this important principle.

In our view, this resolution is long overdue. We feel that adoption of this proposal sends a clear message on the absolute essential and fundamental need for auditor integrity in today's marketplace.

Vote FOR Proposal No. 2.

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Microsoft - Analyst Recommendation