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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-05150
CORNERSTONE STRATEGIC VALUE FUND, INC.
(Exact name of registrant as specified in charter)
305 Madison Avenue, New York, New York 10165
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(Address of principal executive offices) (Zip code)
Gary A. Bentz
305 Madison Avenue, New York, New York 10165
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(Name and address of agent for service)
Registrant's telephone number, including area code: (513) 326-3597
Date of fiscal year end: December 31, 2008
Date of reporting period: December 31, 2008
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.
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ITEM 1. REPORTS TO STOCKHOLDERS.
The report of Cornerstone Strategic Value Fund, Inc. (the "Registrant")
to stockholders for the year ended December 31, 2008 follows.
CORNERSTONE STRATEGIC
VALUE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2008
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 14
Results of Special Meeting of Stockholders 15
Tax Information 16
Additional Information Regarding the Fund's Directors
and Corporate Officers 17
Description of Dividend Reinvestment Plan 20
Proxy Voting and Portfolio Holdings Information 22
Privacy Policy Notice 22
Summary of General Information 23
Shareholder Information 23
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2008 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Healthcare 14.2
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Information Technology 13.8
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Consumer Staples 12.7
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Energy 12.2
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Financials 11.6
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Industrials 9.6
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Closed-End Funds 7.4
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Consumer Discretionary 7.3
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Utilities 4.1
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Telecommunication Services 3.5
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Materials 2.5
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Other 1.1
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 5.2
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2. Procter & Gamble Company (The) Consumer Staples 2.7
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3. Wal-Mart Stores, Inc. Consumer Staples 2.6
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4. JPMorgan Chase & Co. Financials 2.5
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5. Liberty All-Star Equity Fund Closed-End Funds 2.5
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6. AT&T Inc. Telecommunication Services 2.3
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7. Johnson & Johnson Healthcare 2.3
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8. Walt Disney Company (The) Consumer Discretionary 2.3
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9. Microsoft Corporation Information Technology 2.1
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10. Wells Fargo & Company Financials 2.1
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2008
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.11%
CLOSED-END FUNDS - 7.37%
Adams Express Company (a) 49,500 $ 397,485
Advent/Claymore Enhanced
Growth & Income Fund 61,070 495,278
Liberty All-Star Equity Fund 417,530 1,461,355
Liberty All-Star Growth
Fund, Inc. 266,201 692,122
Zweig Fund, Inc. 401,750 1,157,040
Other Closed-End Funds (b) 182,799
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4,386,079
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CONSUMER DISCRETIONARY - 7.31%
McDonald's Corporation 9,900 615,681
Walt Disney Company (The) 59,200 1,343,248
Other Consumer
Discretionary ^(b) 2,389,613
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4,348,542
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CONSUMER STAPLES - 12.67%
Coca-Cola Company (The) 20,000 905,400
Colgate-Palmolive Company 8,900 610,006
Kroger Co. (The) 13,800 364,458
PepsiCo, Inc. 7,100 388,867
Procter & Gamble
Company (The) 26,297 1,625,680
Wal-Mart Stores, Inc. 27,100 1,519,226
Other Consumer Staples (b) 2,124,823
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7,538,460
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ENERGY - 12.17%
Chevron Corporation 17,032 1,259,857
ConocoPhillips 10,474 542,553
Exxon Mobil Corporation 39,000 3,113,370
Occidental Petroleum
Corporation 10,500 629,895
Other Energy ^(b) 1,697,886
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7,243,561
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FINANCIALS - 11.58%
JPMorgan Chase & Co. 47,632 1,501,837
PNC Financial Services
Group, Inc. 7,600 372,400
T. Rowe Price Group Inc. 11,000 389,840
No. of
Description Shares Value
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FINANCIALS (CONTINUED)
Travelers Companies,
Inc. (The) 12,476 $ 563,915
Wells Fargo & Company 42,900 1,264,692
Other Financials (b) 2,796,397
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6,889,081
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HEALTHCARE - 14.25%
Abbott Laboratories 11,200 597,744
Amgen Inc. * 9,900 571,725
Becton, Dickinson and
Company 7,900 540,281
Bristol-Myers Squibb
Company 30,500 709,125
Gilead Sciences, Inc. * 7,000 357,980
Johnson & Johnson 22,900 1,370,107
Medtronic, Inc. 14,500 455,590
Merck & Co. Inc. 17,500 532,000
Pfizer Inc. 23,560 417,248
UnitedHealth Group
Incorporated 19,500 518,700
Wyeth 11,200 420,112
Other Healthcare (b) 1,992,612
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8,483,224
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INDUSTRIALS - 9.62%
Burlington Northern Santa
Fe Corporation 5,400 408,834
General Electric Company 56,900 921,780
United Technologies
Corporation 7,500 402,000
Other Industrials ^(b) 3,990,771
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5,723,385
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INFORMATION TECHNOLOGY - 13.84%
Apple, Inc. * 8,500 725,475
Cisco Systems, Inc. * 47,900 780,770
EMC Corporation * 47,148 493,640
Google Inc. * 3,000 922,950
Hewlett-Packard Company 16,900 613,301
Intel Corporation 60,500 886,930
International Business
Machines Corporation 10,600 892,096
Microsoft Corporation 65,200 1,267,488
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See accompanying notes to financial statements.
2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2008 (CONTINUED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY (CONTINUED)
Oracle Corporation * 26,272 $ 465,803
QUALCOMM Inc. 10,000 358,300
Other Information
Technology (b) 831,401
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8,238,154
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MATERIALS - 2.49%
Monsanto Company 5,660 398,181
Other Materials (b) 1,082,820
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1,481,001
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REAL ESTATE INVESTMENT TRUST - 0.18%
Total Real Estate
Investment Trust (b) 2,000 106,260
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TELECOMMUNICATION SERVICES - 3.48%
AT&T Inc. 48,539 1,383,362
Verizon Communications Inc. 20,300 688,170
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2,071,532
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UTILITIES - 4.15%
Dominion Resources, Inc. 11,200 401,408
Other Utilities (b) 2,068,768
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2,470,176
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TOTAL EQUITY SECURITIES
(cost - $65,972,643) 58,979,455
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SHORT-TERM INVESTMENTS - 2.54%
MONEY MARKET SECURITY - 0.82%
JPMorgan U.S. Government
Money Market Fund 488,865 488,865
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Principal
Amount
Description (000s) Value
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REPURCHASE AGREEMENT - 1.72%
J.P. Morgan Securities Inc. +++
(Agreement dated 12/31/2008 to
be repurchased at $1,022,750, 0.04%,
1/2/2009, collateralized by
$1,057,368 in United States
Treasury Notes) $ 1,023 $ 1,022,748
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TOTAL SHORT-TERM INVESTMENTS
(cost - $1,511,613) 1,511,613
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TOTAL INVESTMENTS - 101.65%
(cost - $67,484,256) 60,491,068
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.65)% (981,505)
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NET ASSETS - 100.00% $ 59,509,563
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^ Security or a portion thereof is out on loan.
* Non-income producing security.
ADR American Depositary Receipt
+ Stated interest rate, before rebate earned by borrower of securities
on loan.
++ Represents investment purchased with collateral received for
securities on loan.
(a) Affiliated investment. The Fund holds 0.67% (based on net assets) of
Adams Express Company. A director of the Fund also serves as a
director to such company. During the year ended December 31, 2008
there were no purchases or sales of this security.
(b) Represents issuers 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,
2008.
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See accompanying notes to financial statements.
3
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2008
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ASSETS
Investments, at value, including collateral
for securities on loan of $1,022,748:
Unaffiliated issuers (cost - $66,878,434)(1) $ 60,093,583
Affiliated issuer (cost - $605,822) 397,485
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Total investments (cost - $67,484,256) 60,491,068
Receivables:
Dividends 189,433
Interest 933
Prepaid expenses 1,452
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Total Assets 60,682,886
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LIABILITIES
Payables:
Due to custodian 1,860
Upon return of securities loaned 1,022,748
Investment management fees (net of fee waivers) 42,782
Directors' fees 30,771
Other accrued expenses 75,162
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Total Liabilities 1,173,323
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NET ASSETS (applicable to 6,835,701 shares of
common stock outstanding) $ 59,509,563
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NET ASSET VALUE PER SHARE ($59,509,563 / 6,835,701) $ 8.71
============
NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 6,835,701 shares issued and
outstanding (100,000,000 shares authorized) $ 6,836
Paid-in capital 72,139,403
Accumulated net realized loss on investments (5,643,488)
Net unrealized depreciation in value of investments (6,993,188)
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Net assets applicable to shares outstanding $ 59,509,563
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(1) Includes securities out on loan to brokers with a market value of
$1,021,565.
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See accompanying notes to financial statements.
4
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2008
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INVESTMENT INCOME
Income:
Dividends (including $24,255 earned from affiliated issuer) $ 2,218,294
Interest 15,915
Securities lending 24,863
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Total Investment Income 2,259,072
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Expenses:
Investment management fees 906,969
Legal and audit fees 109,068
Directors' fees 108,619
Administration fees 91,215
Printing 70,941
Accounting fees 35,185
Custodian fees 23,484
Transfer agent fees 19,427
Reverse split fees 18,750
Stock exchange listing fees 9,112
Insurance 6,940
Miscellaneous 4,200
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Total Expenses 1,403,910
Less: Management fee waivers (87,091)
Less: Fees paid indirectly (42,490)
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Net Expenses 1,274,329
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Net Investment Income 984,743
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NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized loss from investments (3,741,734)
Capital gain distributions from regulated
investment companies and real estate
investment trust 8,983
Net change in unrealized appreciation in
value of investments (33,698,235)
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Net realized and unrealized loss on investments (37,430,986)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(36,446,243)
============
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See accompanying notes to financial statements.
5
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
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For the Years Ended
December 31,
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2008 2007
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DECREASE IN NET ASSETS
Operations:
Net investment income $ 984,743 $ 1,120,928
Net realized gain/(loss) from investments (3,741,734) 8,478,941
Capital gain distributions from regulated investment companies
and real estate investment trust 8,983 50,393
Net change in unrealized appreciation in value of investments (33,698,235) (2,452,733)
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Net increase/(decrease) in net assets resulting from operations (36,446,243) 7,197,529
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Dividends and distributions to shareholders:
Net investment income (984,743) (1,120,928)
Net realized capital gains -- (8,509,935)
Return-of-capital (27,088,110) (19,451,697)
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Total dividends and distributions to shareholders (28,072,853) (29,082,560)
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Capital stock transactions:*
Cash in lieu of 81 fractional shares from the
reverse stock split (544) --
Proceeds from 196,609 and 228,404 shares newly issued
and/or from treasury in reinvestment of dividends
and distributions, respectively 3,761,155 5,808,750
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Total capital share transactions 3,760,611 5,808,750
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Total decrease in net assets (60,758,485) (16,076,281)
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NET ASSETS
Beginning of year 120,268,048 136,344,329
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End of year $ 59,509,563 $ 120,268,048
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* Shares are adjusted for the one-for-four reverse stock split that was
effective December 23, 2008.
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See accompanying notes to financial statements.
6
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CORNERSTONE STRATEGIC VALUE FUND, INC.
FINANCIAL HIGHLIGHTS*
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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.
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For the Years Ended December 31,
---------------------------------------------------------------
2008 2007 2006 2005 2004
---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of year $ 18.12 $ 21.28 $ 22.60 $ 25.92 $ 27.60
-------- --------- --------- --------- ---------
Net investment income # 0.15 0.16 0.20 0.12 0.20
Net realized and unrealized gain/(loss) on investments (5.55) 0.96 2.64 0.72 2.20
-------- --------- --------- --------- ---------
Net increase/(decrease) in net assets
resulting from operations (5.40) 1.12 2.84 0.84 2.40
-------- --------- --------- --------- ---------
Dividends and distributions to shareholders:
Net investment income (0.15) (0.16) (0.16) (0.16) (0.20)
Net realized capital gains -- (1.32) -- (4.00) --
Return-of-capital (4.01) (3.00) (4.00) -- (3.96)
-------- --------- --------- --------- ---------
Total dividends and distributions to shareholders (4.16) (4.48) (4.16) (4.16) (4.16)
-------- --------- --------- --------- ---------
Capital stock transactions:
Anti-dilutive effect due to shares issued in
reinvestment of dividends and distributions 0.15 0.20 -- -- 0.08
-------- --------- --------- --------- ---------
Net asset value, end of year $ 8.71 $ 18.12 $ 21.28 $ 22.60 $ 25.92
======== ========= ========= ========= =========
Market value, end of year $ 7.62 $ 20.20 $ 33.80 $ 28.20 $ 34.04
======== ========= ========= ========= =========
Total investment return (a) (49.92) (29.04)% 45.36% (1.32)% 8.38%
======== ========= ========= ========= =========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $ 59,510 $ 120,268 $ 136,344 $ 139,706 $ 154,690
Ratio of expenses to average net assets,
net of fee waivers, if any (b) 1.40% 1.23% 1.22% 1.20% 1.28%
Ratio of expenses to average net assets,
excluding fee waivers, if any (c) 1.54% 1.35% 1.32% 1.36% 1.50%
Ratio of expenses to average net assets,
net of fee waivers, if any (c) 1.44% 1.25% 1.25% 1.26% 1.36%
Ratio of net investment income to
average net assets 1.08% 0.86% 0.85% 0.58% 0.73%
Portfolio turnover rate 13.24% 10.38% 10.59% 21.60% 39.05%
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* Per share amounts prior to December 23, 2008 have been restated to
reflect a one-for-four reverse stock split.
# 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
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE A. ORGANIZATION
Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. Its
investment objective is to seek long-term capital appreciation through
investment primarily in equity securities of 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.
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
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. Readily marketable portfolio securities listed on the NYSE
are valued, except as indicated below, at the last sale price reflected on the
consolidated tape at the close of the NYSE on the business day as of which such
value is being determined. If there has been no sale on such day, the securities
are valued at the mean of the closing bid and asked prices on such day. If no
bid or asked prices are quoted on such day or if market prices may be unreliable
because of events occurring after the close of trading, then the security is
valued by such method as the Board of Directors shall determine in good faith to
reflect its fair market value. Readily marketable securities not listed on the
NYSE but listed on other domestic or foreign securities exchanges are valued in
a like manner. Portfolio securities traded on more than one securities exchange
are valued at the last sale price on the business day as of which such value is
being determined as reflected on the consolidated tape at the close of the
exchange representing the principal market for such securities. Securities
trading on the Nasdaq Stock Market, Inc. ("NASDAQ") are valued at the closing
price.
Readily marketable securities traded in the over-the counter market, including
listed securities whose primary market is believed by Cornerstone Advisors, Inc.
(the "Investment Adviser" or "Cornerstone") to be over-the-counter, are valued
at the mean of the current bid and asked prices as reported by the NASDAQ or, in
the case of securities not reported by the NASDAQ or a comparable source, as the
Board of Directors deem appropriate to reflect their fair market value. Where
securities are traded on more than one exchange and also over-the-counter, the
securities will generally be valued using the quotations the Board of Directors
believes reflect most closely the value of such securities.
At December 31, 2008, 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 NYSE Alternext US LLC is closed.
On March 19, 2008, Financial Accounting Standards Board released Statement of
Financial Accounting Standards No. 161, "Disclosures about Derivative
instruments and Hedging Activities" ("FAS 161"). FAS 161 requires qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts of and gains and losses on derivative
instruments, and disclosures about credit-risk-related contingent features in
derivative agreements. The application of FAS 161 is required for fiscal years
beginning after November 15, 2008 and interim periods within those fiscal years.
At this time, management is evaluating the implications of FAS 161 and its
impact on the financial statements is not expected to be material.
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.
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8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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(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 2005 through 2008. The Fund has
initiated discussions with the Internal Revenue Service's New York Regional
Office regarding a technical tax issue relating to whether the Fund's historic
dividend reinvestment plan may have resulted in a violation of certain
Subchapter M requirements of the Internal Revenue Code for certain prior tax
years. The outcome of this matter is currently uncertain including, whether
ultimately it might negatively affect the tax status of the Fund. The Fund will
continue to monitor this matter closely and is pursuing a potential resolution
with the Internal Revenue Service by seeking to obtain a closing letter that, if
successful, will avoid a material negative tax impact to the Fund. There was no
material impact to the financial statements or, other than as described herein,
the disclosures thereto as a result of the adoption of this pronouncement.
DISTRIBUTIONS TO SHAREHOLDERS: Effective June 25, 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 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
================================================================================
9
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
maintain the distribution, taxable to shareholders and to disclose that portion
of the distribution that is classified as ordinary income. Although it has no
current intention to do so, the Board may terminate this distribution policy at
any time and such termination may have an adverse effect on the market price for
the Fund's common shares. The Fund determines annually whether to distribute any
net realized long-term capital gains in excess of net realized short-term
capital losses, including capital loss carryovers, if any. To the extent that
the Fund's taxable income in any calendar year exceeds the aggregate amount
distributed pursuant to this distribution policy, an additional distribution may
be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent
that the aggregate amount distributed in any calendar year exceeds the Fund's
taxable income, the amount of that excess may constitute a return-of-capital for
tax purposes. A return-of-capital distribution reduces the cost basis of an
investor's shares in the Fund. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
NOTE C. FAIR VALUE
The Fund adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective
January 1, 2008. In accordance with FAS 157, fair value is defined as the price
that the Fund would receive upon selling an investment in a timely transaction
to an independent buyer in the principal or most advantageous market of the
investment. FAS 157 established a three-tier hierarchy to maximize the use of
observable market data and minimize the use of unobservable inputs and to
establish classification of fair value measurements for disclosure purposes.
Inputs refer broadly to the assumptions that market participants would use in
pricing the asset or liability, including assumptions about risk, for example,
the risk inherent in a particular valuation technique used to measure fair value
including such a pricing model and/or the risk inherent in the inputs to the
valuation technique. Inputs may be observable or unobservable. Observable inputs
are inputs that reflect the assumptions market participants would use in pricing
the asset or liability developed based on market data obtained from sources
independent of the reporting entity. Unobservable inputs are inputs that reflect
the reporting entity's own assumptions about the assumptions market participants
would use in pricing the asset or liability developed based on the best
information available in the circumstances. The three-tier hierarchy of inputs
is summarized in the three broad Levels listed below.
o Level 1 - quoted prices in active markets for identical investments
o Level 2 - other significant observable inputs (including quoted prices
for similar investments, interest rates, prepayment speeds, credit
risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in deter- mining the fair value of investments)
The inputs or methodology used in valuing securities are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of December 31, 2008 in valuing
the Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted
Prices $58,979,455 --
Level 2 - Other
Significant
Observable Inputs 1,511,613 --
Level 3 - Significant
Unobservable Inputs -- --
----------- -----------
Total $60,491,068 --
=========== ===========
--------
* Other financial instruments include futures, forwards and swap contracts.
The Fund did not have any assets or liabilities that were measured at fair value
on a recurring basis using significant unobservable inputs (Level 3) at December
31, 2008.
================================================================================
10
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
NOTE D. 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, 2008, 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 and extraordinary expenses) exceeded
an annual rate of 0.10% and 0.11% of average annual weekly net assets, through
February 29, 2008, and thereafter, respectively. For the year ended December 31,
2008, Cornerstone earned $906,969 for investment management services, of which
it waived $87,091. 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 $42,490 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $87,608 for the year ended December 31,
2008 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, served as Secretary of the Fund until February 15,
2008.
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the yeended December 31, 2008 were as follows:
ADAMS
EXPRESS
COMPANY
--------
Market value at
beginning of year $698,940
========
Shares at beginning
of year 49,500
Shares purchased
during the year --
Shares sold during
the year --
--------
Shares at end of year 49,500
========
Dividend income earned
during the year 24,255
========
Cost of purchases
during the year --
Proceeds from sales
during the year --
Net realized gain/(loss)
during the year --
Market value at
end of year $397,485
========
NOTE F. INVESTMENT IN SECURITIES
For the year ended December 31, 2008, purchases and sales of securities, other
than short-term investments, were $12,137,958 and $34,882,842 respectively.
================================================================================
11
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
NOTE G. SHARES OF COMMON STOCK
The Fund has 100,000,000 shares of common stock authorized and 6,835,701 shares
outstanding at December 31, 2008. As of that date, three individuals that
control Cornerstone owned 21,371 shares in the Fund.
Transactions in common stock for the year ended December 31, 2008 were as
follows+:
Shares at beginning of year 6,639,173
Shares newly issued in reinvestment
of dividends and distributions 196,609
Shares paid in cash in lieu of fractional
shares from the reverse stock split (81)
---------
Shares at end of year 6,835,701
=========
------
+ Share amounts reflect the one-for-four reverse stock split that was
effective December 23, 2008.
NOTE H. 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, 2008. No limit has
been placed on the number of shares to be repurchased by the Fund other than
those imposed by federal securities laws.
All purchases are made in accordance with federal securities laws, with shares
repurchased held in treasury effective January 1, 2002, for future use by the
Fund.
NOTE I. 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 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, 2008, was $1,021,565.
During the year ended December 31, 2008, the Fund earned $24,863 in securities
lending income which is included under the caption SECURITIES LENDING in the
Statement of Operations.
NOTE J. 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.
================================================================================
12
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------
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
--------------- -----------------
2008 2007 2008 2007
---- ---- ---- ----
$ 984,743 $3,365,187 $27,088,110 $19,451,697
LONG-TERM CAPITAL GAINS
-----------------------
2008 2007
---- ----
-- $6,265,676
At December 31, 2008 the components of the accumulated deficit on a tax basis,
for the Fund were as follows:
Capital loss carryforward $ (5,171,824)
Net unrealized depreciation (6,993,188)
Other accumulated losses (471,664)
------------
Total distributable earnings $(12,636,676)
============
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, 2008, the Fund decreased net realized loss by $1,139,305 and
decreased paid-in capital by $1,139,305. 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, 2008, the Fund incurred
Post-October losses in the amount of $471,664.
At December 31, 2008, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $5,171,824 of which $1,139,305 expires in 2009, $250,210
expires in 2010, $484,687 expires in 2011, and $3,297,622 expires in 2016. These
capital loss carryforwards are subject to an annual limitation of $1,139,305 for
the year ended December 31, 2009. At December 31, 2008, 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
$67,484,256, $5,679,070, $(12,672,258) and $(6,993,188), respectively.
NOTE K. SUBSEQUENT EVENTS
Effective February 13, 2009, Kayadti A. Madison resigned as Treasurer. Effective
that same day Gary A. Bentz was appointed as Assistant Treasurer.
Effective February 28, 2009, Ultimus Fund Solutions, LLC replaced Bear Stearns
Funds Management Inc. as Fund Administrator.
================================================================================
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
New York, New York
We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2008, 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, 2008, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cornerstone Strategic Value Fund, Inc. as of December 31, 2008, 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 24, 2009
================================================================================
14
RESULTS OF SPECIAL MEETING OF STOCKHOLDERS (UNAUDITED)
On October 15, 2008, a Special Meeting of Stockholders of Cornerstone Strategic
Value Fund, Inc. was held and the following matter was voted upon based on
27,116,390 shares of common stock outstanding on August 18, 2008:
(1) To approve a one-for-four reverse stock split of the Fund's issued and
outstanding shares of common stock and the amendment to the Articles of
Incorporation.
FOR AGAINST ABSTAIN
18,127,847 5,121,816 401,958
================================================================================
15
2008 TAX INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. (the "Fund") is required by Subchapter M
of the Internal Revenue Code of 1986, as amended, to advise its shareholders
within 60 days of the Fund's year end (December 31, 2008) 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 $28,072,853 in dividend and
distributions paid to shareholders in respect of such year, is represented by
$984,743 of ordinary income, and $27,088,110 of return-of-capital.
As indicated in this notice, significant portions of the Fund's distributions
for 2008 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, 2008 the following dividends and distributions per share
were paid by the Fund:
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(PER SHARE AMOUNTS)+
PAYMENT DATES: 1/31/08 2/29/08 3/31/08 4/30/08 5/30/08 6/30/08
-------- -------- -------- -------- -------- --------
Ordinary Income(1) $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030
Return-of-Capital(2) 0.0837 0.0837 0.0837 0.0837 0.0837 0.0837
-------- -------- -------- -------- -------- --------
Total: $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867
======== ======== ======== ======== ======== ========
PAYMENT DATES: 7/31/08 8/29/08 9/30/08 10/31/08 11/28/08 12/19/08
-------- -------- -------- -------- -------- --------
Ordinary Income(1) $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030 $ 0.0030
Return-of-Capital(2) 0.0837 0.0837 0.0837 0.0837 0.0837 0.0837
-------- -------- -------- -------- -------- --------
Total: $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867 $ 0.0867
======== ======== ======== ======== ======== ========
----------------------------------------------------------------------------------------------------------
+ Per share amounts do not reflect the one-for-four reverse stock split
that was effective December 23, 2008.
(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 NOT be 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 federal
tax rate of 15%. This is reported in Box 1b on Form 1099-DIV. Ordinary income
dividends should be reported as dividend income on Form 1040. Please note that
to utilize the lower tax rate for qualifying dividend income, shareholders
generally must have held their shares in the Fund for at least 61 days during
the 121 day period beginning 60 days before the ex-dividend date.
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.
================================================================================
16
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED)
NUMBER OF
PORTFOLIOS IN
NAME AND POSITION FUND COMPLEX
ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE DIRECTORS
--------------------------------------------------------------------------------------------------------------------
Ralph W. Chairman of the President, Cornerstone Advisors, Inc.; 1998 3
Bradshaw** Board of Financial Consultant; President and
(Dec. 1950) Directors and Director of Cornerstone Total Return
President Fund, Inc.; President and Trustee of
Cornerstone Progressive Return Fund.
Thomas H. Director; Audit, Independent Financial Adviser; Director 1987 3
Lenagh Nominating and of Photonics Products Group; Director
(Nov. 1924) Corporate of Cornerstone Total Return 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 Total Return Fund, Inc.;
Trustee of Cornerstone Progressive
Return Fund.
Scott B. Rogers Director; Audit, Chairman, Board of Health Partners, 2000 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 Total
Return Fund, Inc.; Trustee of
Cornerstone Progressive Return Fund.
================================================================================
17
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONTINUED)
NUMBER OF
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
--------------------------------------------------------------------------------------------------------------------
Andrew A. Director; Attorney and senior member of Strauss 2000 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 Total Return Fund, Inc.; Trustee of
Cornerstone Progressive Return Fund.
Glenn W. Director; Chairman of the Board, Tower 2000 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 Total Return Fund, Inc.;
Governance Trustee of Cornerstone Progressive
Committee Return Fund.
Member
================================================================================
18
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONCLUDED)
NAME AND POSITION
ADDRESS* POSITION PRINCIPAL OCCUPATION WITH FUND
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE
------------------------------------------------------------------------------------------------------------------
Gary A. Bentz Chief Compliance Chairman and Chief Financial Officer of 2004, 2008,
(June 1956) Officer, Secretary, Cornerstone Advisors, Inc.; previous Director, 2009
and Assistant Vice President and Treasurer of the Fund and
Treasurer Cornerstone Total Return Fund, Inc.; Financial
Consultant, C.P.A.; Chief Compliance Officer,
Secretary, and Assistant Treasurer of
Cornerstone Total Return 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 Total Return Fund,
Inc.; Vice President and former Trustee of
Cornerstone Progressive Return Fund;
Financial Consultant; former Director of
Investors First Fund, Inc.
--------------------------------------------------------------------------------
* The mailing address of each Director and/or Officer with respect to
the Fund's operation is 305 Madison Ave., New York, NY 10165.
** 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 Adviser of the Fund.
================================================================================
19
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Cornerstone Strategic Value 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 shareholder 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
NYSE Alternext US 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 shareholders 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.
================================================================================
20
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.
================================================================================
21
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how Cornerstone Strategic Value Fund, Inc. (the "Fund")
voted proxies related to its portfolio securities during the 12-month period
ended June 30 of each year as well as the policies and procedures that the Fund
uses to determine how to vote proxies relating to its portfolio securities are
available by calling (513) 326-3597 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 (513) 326-3597. 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 Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:
1. Information from the Consumer: this category includes information the
Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address phone
number, social security number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your trans- actions with the Fund, its affiliates,
or others (such as your account number and balance, payment history,
parties to transactions, cost basis information, and other financial
information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
================================================================================
22
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment
company whose shares trade on the NYSE Alternext US LLC. Its investment
objective is to seek long-term capital appreciation through investment primarily
in equity securities of U.S. and non-U.S. com3panies. The Fund is managed by
Cornerstone Advisors, Inc.
SHAREHOLDER INFORMATION (UNAUDITED)
The Fund is listed on the NYSE Alternext US LLC (symbol "CLM"). 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
"CornstnStrat" and BARRON'S under the designation "Cornerstone Str Val". 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 STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in the report.
--------------------------------------------------------------------------------
================================================================================
23
================================================================================
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,
Secretary, and
Assistant Treasurer
William A. Clark Vice President
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
One West Pack Square Trust Co.
Suite 1650 59 Maiden Lane
Asheville, NC 28801 New York, NY 10038
INDEPENDENT REGISTERED
ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Ultimus Fund Solutions, LLC Tait, Weller & Baker LLP
305 Madison Avenue 1818 Market Street
New York, NY 10165 Suite 2400
Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Blank Rome LLP
101 Carnegie Center 405 Lexington Avenue
Princeton, NJ 08540 New York, NY 10174
EXECUTIVE OFFICES
305 Madison Avenue
New York, NY 10165
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (513) 326-3597.
CLM
LISTED
ALTERNEXT
CORNERSTONE STRATEGIC VALUE FUND, INC.
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 (513) 326-3597.
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,
2008 and December 31, 2007.
2008 2007
------- -------
Audit Fees $18,100 $17,200
Audit-related Fees -- --
Tax Fees (1) 3,600 3,500
All Other Fees -- --
------- -------
Total $21,700 $20,700
======= =======
(1) Tax services in connection with the registrant's excise tax calculations and
review of the registrant's applicable tax returns.
(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, 2007 and December 31, 2008).
(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.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2008
No. of
Description Shares Value
------------------------------------------------------ ---------------------
EQUITY SECURITIES - 99.11%
CLOSED-END FUNDS - 7.37%
Adams Express Company (a) 49,500 $ 397,485
Advent/Claymore Enhanced Growth & Income Fund 61,070 495,278
Dreman/Claymore Dividend & Income Fund 69,100 130,599
General American Investors Company, Inc. 3,000 52,200
Liberty All-Star Equity Fund 417,530 1,461,355
Liberty All-Star Growth Fund, Inc. 266,201 692,122
Zweig Fund, Inc. 401,750 1,157,040
----------
4,386,079
----------
CONSUMER DISCRETIONARY - 7.31%
Amazon.com, Inc. * 3,000 153,840
Comcast Corporation, Class A 11,555 195,048
DIRECTV Group, Inc. (The) * ^ 4,000 91,640
Gap, Inc. (The) 9,200 123,188
Home Depot, Inc. (The) 2,000 46,040
Johnson Controls, Inc. 3,500 63,560
Lowe's Companies, Inc. 5,900 126,968
McDonald's Corporation 9,900 615,681
News Corporation, Class A 10,000 90,900
NIKE, Inc., Class B ^ 6,100 311,100
Omnicom Group Inc. 6,200 166,904
Staples, Inc. 10,800 193,536
Starbucks Corporation * 2,800 26,488
Target Corporation 6,800 234,804
Time Warner Inc. 23,500 236,410
TJX Companies, Inc. (The) 3,000 61,710
Toyota Motor Corporation ADR 2,500 163,600
Viacom Inc., Class B * 5,450 103,877
Walt Disney Company (The) 59,200 1,343,248
----------
4,348,542
----------
CONSUMER STAPLES - 12.67%
Altria Group, Inc. 13,300 200,298
Archer-Daniels-Midland Company 3,960 114,167
Coca-Cola Company (The) 20,000 905,400
Colgate-Palmolive Company 8,900 610,006
ConAgra Foods, Inc. 7,400 122,100
CVS Caremark Corporation 10,430 299,758
General Mills, Inc. 2,500 151,875
H.J. Heinz Company 4,000 150,400
Kimberly-Clark Corporation 2,500 131,850
Kraft Foods Inc, Class A 10,932 293,524
Kroger Co. (The) 13,800 364,458
PepsiCo, Inc. 7,100 388,867
Philip Morris International Inc. 7,300 317,623
Procter & Gamble Company (The) 26,297 1,625,680
Sysco Corporation 9,800 224,812
Walgreen Co. 4,800 118,416
Wal-Mart Stores, Inc. 27,100 1,519,226
----------
7,538,460
----------
ENERGY - 12.17%
Baker Hughes Incorporated 10,600 339,942
Chevron Corporation 17,032 1,259,857
ConocoPhillips 10,474 542,553
ENSCO International Incorporated 2,500 70,975
Exxon Mobil Corporation 39,000 3,113,370
Halliburton Company 13,200 239,976
Marathon Oil Corp. 11,500 314,640
Noble Corporation ^ 2,500 55,150
Occidental Petroleum Corporation 10,500 629,895
Schlumberger Limited 8,000 338,640
Transocean Ltd. * 2,500 118,125
XTO Energy, Inc. 6,250 220,438
----------
7,243,561
----------
FINANCIALS - 11.58%
Aflac, Inc. 7,000 320,880
Allstate Corporation (The) 6,800 222,768
American Express Company 6,400 118,720
Bank of America Corporation 16,138 227,223
Bank of New York Mellon Corporation 5,754 163,011
Capital One Financial Corporation 2,500 79,725
Charles Schwab Corporation (The) 22,000 355,740
Goldman Sachs Group, Inc. (The) 2,800 236,292
Hudson City Bancorp, Inc. 9,000 143,640
JPMorgan Chase & Co. 47,632 1,501,837
Marsh & McLennan Companies, Inc. 10,000 242,700
MetLife, Inc. 5,700 198,702
Morgan Stanley 7,000 112,280
PNC Financial Services Group, Inc. 7,600 372,400
Prudential Financial, Inc. 4,200 127,092
T. Rowe Price Group Inc. 11,000 389,840
Travelers Companies, Inc. (The) 12,476 563,915
U.S. Bancorp 9,901 247,624
Wells Fargo & Company 42,900 1,264,692
----------
6,889,081
----------
HEALTHCARE - 14.25%
Abbott Laboratories 11,200 597,744
Aetna Inc. 11,000 313,500
Amgen Inc. * 9,900 571,725
Baxter International Inc. 5,000 267,950
Becton, Dickinson and Company 7,900 540,281
Biogen Idec Inc. * 3,000 142,890
Bristol-Myers Squibb Company 30,500 709,125
Cardinal Health, Inc. 7,950 274,036
Covidien Limited 2,599 94,188
Eli Lilly and Company 4,700 189,269
Gilead Sciences, Inc. * 7,000 357,980
Johnson & Johnson 22,900 1,370,107
McKesson Corporation 2,800 108,444
Medtronic, Inc. 14,500 455,590
Merck & Co. Inc. 17,500 532,000
Pfizer Inc. 23,560 417,248
Schering-Plough Corporation 18,500 315,055
Stryker Corporation 3,500 139,825
UnitedHealth Group Incorporated 19,500 518,700
WellPoint Inc. * 3,500 147,455
Wyeth 11,200 420,112
----------
8,483,224
----------
INDUSTRIALS - 9.62%
3M Co. 4,400 253,176
Boeing Company (The) 4,200 179,214
Burlington Northern Santa Fe Corporation 5,400 408,834
Caterpillar Inc. 6,800 303,756
CSX Corporation 6,500 211,055
Danaher Corporation 3,500 198,135
Deere & Company ^ 8,000 306,560
Emerson Electric Co. 8,400 307,524
FedEx Corp. 2,000 128,300
General Dynamics Corporation 3,200 184,288
General Electric Company 56,900 921,780
Honeywell International Inc. 5,000 164,150
Illinois Tool Works Inc. 4,800 168,240
Lockheed Martin Corporation 4,000 336,320
Norfolk Southern Corporation 5,500 258,775
Northrop Grumman Corporation 2,500 112,600
Raytheon Company 3,000 153,120
Union Pacific Corporation 4,000 191,200
United Parcel Service, Inc., Class B 4,100 226,156
United Technologies Corporation 7,500 402,000
Waste Management, Inc. ^ 9,300 308,202
----------
5,723,385
----------
INFORMATION TECHNOLOGY - 13.84%
Adobe Systems Incorporated * 4,200 89,418
Apple, Inc. * 8,500 725,475
Applied Materials, Inc. 17,800 180,314
Automatic Data Processing, Inc. 4,400 173,096
Cisco Systems, Inc. * 47,900 780,770
Corning Incorporated 16,500 157,245
Dell Inc. * 4,700 48,128
eBay Inc. * 2,500 34,900
EMC Corporation * 47,148 493,640
Google Inc. * 3,000 922,950
Hewlett-Packard Company 16,900 613,301
Intel Corporation 60,500 886,930
International Business Machines Corporation 10,600 892,096
Microsoft Corporation 65,200 1,267,488
Nortel Networks Corporation * 660 172
Oracle Corporation * 26,272 465,803
QUALCOMM Inc. 10,000 358,300
Texas Instruments Incorporated 6,400 99,328
Yahoo! Inc. * 4,000 48,800
----------
8,238,154
----------
MATERIALS - 2.49%
Alcoa Inc. 20,400 229,704
Dow Chemical Company (The) 5,400 81,486
E. I. du Pont de Nemours and Company 9,500 240,350
Freeport-McMoRan Copper & Gold, Inc. 5,000 122,200
International Paper Company 7,000 82,600
Monsanto Company 5,660 398,181
Praxair, Inc. 5,500 326,480
----------
1,481,001
----------
REAL ESTATE INVESTMENT TRUST - 0.18%
Simon Property Group, Inc. 2,000 106,260
----------
TELECOMMUNICATION SERVICES - 3.48%
AT&T Inc. 48,539 1,383,362
Verizon Communications Inc. 20,300 688,170
----------
2,071,532
----------
UTILITIES - 4.15%
American Electric Power Company, Inc. 8,000 266,240
Dominion Resources, Inc. 11,200 401,408
Duke Energy Corporation 15,800 237,158
Edison International 6,500 208,780
Exelon Corporation 3,000 166,830
FirstEnergy Corp. 5,000 242,900
FPL Group, Inc. 4,000 201,320
PG&E Corporation 5,000 193,550
Public Service Enterprise Group Incorporated 7,000 204,190
Southern Company (The) 9,400 347,800
----------
2,470,176
----------
TOTAL EQUITY SECURITIES
(cost - $65,972,643) 58,979,455
----------
SHORT-TERM INVESTMENTS - 2.54%
MONEY MARKET SECURITY - 0.82%
JPMorgan U.S. Government Money Market Fund 488,865 488,865
----------
Principal
Amount
(000's)
-----------
REPURCHASE AGREEMENT - 1.72%
J.P. Morgan Securities Inc. + ++
(Agreement dated 12/31/2008 to be
repurchased at $1,022,750, 0.04%,
1/2/2009, collateralized by $1,057,368
in United States Treasury Notes) $ 1,023 1,022,748
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $1,511,613) 1,511,613
------------
TOTAL INVESTMENTS - 101.65%
(cost - $67,484,256) 60,491,068
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.65)% (981,505)
------------
NET ASSETS - 100.00% $ 59,509,563
============
------------------------------
(a) Affiliated investment. The Fund holds 0.67% (based on net assets) of Adams
Express Company. A director of the Fund also serves as a director to such
company. During the fiscal year ended December 31, 2008 there were no purchases
or sales of this security.
* Non-income producing security.
^ Security or a portion thereof is out on loan.
ADR American Depositary Receipt
+ Stated interest rate, before rebate earned by borrower of securities on
loan.
++ Represents investment purchased with collateral received for securities on
loan.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
CORNERSTONE STRATEGIC VALUE FUND, INC.
NEW YORK, NEW YORK
We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2008, 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, 2008, by correspondence with the custodian.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Cornerstone Strategic Value Fund, Inc. as of December 31, 2008, 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, 2008 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 24, 2009
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 Total Return 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
Total Return Fund, Inc. and Cornerstone Progressive Return Fund). As of December
31, 2008, the total assets of Cornerstone Total Return Fund, Inc. was $22.5
million. As of December 31, 2008, the total assets of Cornerstone Progressive
Return Fund, Inc. was $70.0 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, 2008, 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 $10,001-$50,000 and for William A. Clark it is in the range
of $10,001-$50,000.
(b) None.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the Registrant's disclosure controls and procedures as of a date
within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of such date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics attached as EX-99.CODE ETH.
(a)(2) Separate certifications of Principal Executive and Financial Officers
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as
EX-99.CERT.
(b) Certification of Principal Executive and Financial Officers pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.
(99) Proxy Voting Policies of the Registrant and Adviser attached as
EX-99.VOTEREG.
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 6, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Cornerstone Strategic Value Fund, Inc.
By: /S/ RALPH W. BRADSHAW
-------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: March 6, 2009
By: /S/ GARY A. BENTZ
----------------------
Name: Gary A. Bentz
Title: Principal Financial Officer
Date: March 6, 2009