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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)
350 Jericho Turnpike, Suite 206 Jericho, New York 11753
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(Address of principal executive offices) (Zip code)
Frank J. Maresca
Ultimus Fund Solutions, LLC 350 Jericho Turnpike, Suite 206 Jericho,
New York 11753
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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, 2010
Date of reporting period: December 31, 2010
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.
ITEM 1. REPORTS TO STOCKHOLDERS.
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
Tax Information 15
Additional Information Regarding the Fund's Directors and Corporate Officers 16
Description of Dividend Reinvestment Plan 19
Proxy Voting and Portfolio Holdings Information 21
Privacy Policy Notice 22
Summary of General Information 25
Shareholder Information 25
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY -- AS OF DECEMBER 31, 2010 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Closed-End Funds 17.2
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Information Technology 15.5
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Financials 11.7
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Energy 9.1
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Healthcare 8.6
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Consumer Discretionary 8.6
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Industrials 8.1
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Consumer Staples 8.0
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Materials 2.9
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Utilities 2.6
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Telecommunication Services 2.4
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Other 5.3
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 3.4
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2. Eaton Vance Risk-Managed Diversified
Equity Income Fund Closed-End Funds 3.0
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3. Apple, Inc. Information Technology 3.0
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4. Eaton Vance Tax-Managed Diversified
Equity Income Fund Closed-End Funds 2.6
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5. Microsoft Corporation Information Technology 2.2
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6. JPMorgan Chase & Company Financials 2.0
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7. Alpine Total Dynamic Dividend Fund Closed-End Funds 2.0
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8. International Business Machines
Corporation Information Technology 1.9
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9. Google, Inc. -- Class A Information Technology 1.9
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10. AT&T, Inc. Telecommunication Services 1.7
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS -- AS OF DECEMBER 31, 2010
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No. of
Description Shares Value
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EQUITY SECURITIES - 94.70%
CLOSED-END FUNDS - 17.22%
CORE - 3.80%
Adams Express Company
(The)(a) 48,400 $ 518,848
General American Investors
Company, Inc. 18,300 490,806
Liberty All-Star Equity Fund 160,130 789,441
Other Core(b) 644,100
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2,443,195
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CORPORATE DEBT FUNDS INVESTMENT
GRADE-RATED -- 1.63%
AllianceBernstein
Income Fund 87,230 691,734
Other Corporate Debt Funds
Investment Grade-Rated(b) 355,076
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1,046,810
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DEVELOPED MARKET - 0.06%
Total Developed Market(b) 36,780
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GLOBAL - 2.03%
Alpine Total Dynamic
Dividend Fund 213,412 1,263,399
Other Global(b) 39,100
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1,302,499
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GLOBAL INCOME - 0.47%
Total Global Income (b) 302,940
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HIGH CURRENT YIELD (LEVERAGED) -- 0.13%
Other High Current Yield
(Leveraged)(b) 89,941
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OPTION ARBITRAGE/OPTIONS STRATEGIES - 7.02%
Eaton Vance Risk-Managed
Diversified Equity
Income Fund 146,464 1,945,042
Eaton Vance Tax-Managed
Diversified Equity
Income Fund 147,120 1,663,927
Eaton Vance Tax-Managed
Global Diversified Equity
Income Fund 58,000 610,740
Other Option Arbitrage/
Options Strategies(b) 289,955
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4,509,664
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No. of
Description Shares Value
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REAL ESTATE - 0.55%
Other Real Estate(b) $ 355,270
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SECTOR EQUITY - 1.18%
Petroleum & Resources
Corporation(a) 7,600 205,276
Other Sector Equity(b) 548,974
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754,250
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VALUE - 0.35%
Other Value(b) 225,179
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TOTAL CLOSED-END FUNDS 11,066,528
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CONSUMER DISCRETIONARY - 8.62%
Amazon.com, Inc. * 3,000 540,000
McDonald's Corporation 11,400 875,064
Target Corporation 8,800 529,144
Yum! Brands, Inc. 9,000 441,450
Other Consumer
Discretionary(b) 3,156,037
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5,541,695
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CONSUMER STAPLES - 8.01%
Altria Group, Inc. 20,800 512,096
Coca-Cola Company (The) 13,500 887,895
Procter & Gamble
Company (The) 16,297 1,048,386
Wal-Mart Stores, Inc. 10,100 544,693
Other Consumer Staples(b) 2,156,104
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5,149,174
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ENERGY - 9.11%
Chevron Corporation 10,732 979,295
ConocoPhillips 14,974 1,019,730
Exxon Mobil Corporation 29,936 2,188,920
Halliburton Company 9,700 396,051
Marathon Oil Corporation 11,500 425,845
Schlumberger Ltd. 6,000 501,000
Other Energy(b) 343,350
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5,854,191
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FINANCIALS - 11.68%
Goldman Sachs Group,
Inc. (The) 5,000 840,800
JPMorgan Chase & Company 30,132 1,278,199
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See accompanying notes to financial statements.
2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS -- AS OF DECEMBER 31, 2010 (CONCLUDED)
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No. of
Description Shares Value
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FINANCIALS (CONTINUED)
PNC Financial Services
Group, Inc. 7,600 $ 461,472
Travelers Companies,
Inc. (The) 9,476 527,908
Wells Fargo & Company 21,400 663,186
Other Financials (b) 3,734,361
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7,505,926
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HEALTH CARE - 8.63%
Abbott Laboratories 9,200 440,772
Bristol-Myers Squibb
Company 19,000 503,120
Johnson & Johnson 13,400 828,790
Merck & Company, Inc. 15,267 550,223
UnitedHealth Group, Inc. 11,000 397,210
Other Health Care(b) 2,827,739
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5,547,854
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INDUSTRIALS - 8.08%
Caterpillar, Inc. 5,300 496,398
Deere & Company 6,500 539,825
General Electric Company 46,900 857,801
United Technologies
Corporation 5,000 393,600
Other Industrials (b) 2,905,823
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5,193,447
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INFORMATION TECHNOLOGY - 15.47%
Apple, Inc.* 5,900 1,903,104
Cisco Systems, Inc.* 29,400 594,762
Google, Inc. - Class A * 2,000 1,187,940
Hewlett-Packard Company 11,400 479,940
Intel Corporation 39,500 830,685
International Business
Machines Corporation 8,100 1,188,756
Microsoft Corporation 51,200 1,429,504
Oracle Corporation 25,272 791,014
QUALCOMM, Inc. 10,000 494,900
Other Information
Technology (b) 1,037,349
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9,937,954
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No. of
Description Shares Value
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MATERIALS - 2.93%
E.I. Du Pont de
Nemours & Company 9,500 $ 473,860
Freeport-McMoRan
Copper & Gold, Inc. 5,000 600,450
Praxair, Inc. 6,500 620,555
Other Materials (b) 184,356
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1,879,221
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REAL ESTATE INVESTMENT TRUST - 0.00%
Total Real Estate
Investment Trust (b) 1,393
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TELECOMMUNICATION SERVICES - 2.36%
AT&T, Inc. 37,039 1,088,206
Verizon Communications, Inc. 12,000 429,360
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1,517,566
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UTILITIES - 2.59%
Other Utilities (b) 1,662,079
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TOTAL EQUITY SECURITIES
(cost - $51,914,107) 60,857,028
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SHORT-TERM INVESTMENTS - 7.30%
MONEY MARKET SECURITY - 7.30%
JPMorgan U.S. Government
Money Market Fund
(cost - $ 4,690,985) 4,690,985 4,690,985
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TOTAL INVESTMENTS - 102.00%
(cost - $56,605,092) 65,548,013
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (2.00)% (1,282,324)
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NET ASSETS - 100.00% $64,265,689
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(a) Affiliated investment. The Fund holds 0.81% and 0.32% (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 year ended December 31, 2010 there were additional
purchases of 22,000 shares of Adams Express and 7,600 shares of Petroleum &
Resources Corporation with a cost of $218,433 and $168,587, respectively.
There were no sales of either of these securities.
(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 December 31, 2010.
* Non-income producing security.
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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, 2010
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ASSETS
Investments, at value:
Unaffiliated issuers (cost - $55,895,782) $ 64,823,889
Affiliated issuers (cost - $709,310) 724,124
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Total investments (cost - $56,605,092) 65,548,013
Receivables:
Dividends 77,409
Prepaid expenses 3,168
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Total Assets 65,628,590
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LIABILITIES
Payables:
Securities purchased 1,224,773
Investment management fees 47,608
Directors' fees 26,000
Administration fees 5,008
Other accrued expenses 59,512
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Total Liabilities 1,362,901
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NET ASSETS (applicable to 8,511,413 shares of
common stock outstanding) $ 64,265,689
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NET ASSET VALUE PER SHARE ($64,265,689 (divided by) 8,511,413) $ 7.55
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NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 8,511,413
shares issued and outstanding
(100,000,000 shares authorized) $ 8,511
Paid-in capital 59,531,436
Accumulated net realized loss on investments (4,217,179)
Net unrealized appreciation in value of investments 8,942,921
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Net assets applicable to shares outstanding $ 64,265,689
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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, 2010
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INVESTMENT INCOME
Income:
Dividends from non-affiliated investments
(including tax withheld of $94) $1,322,287
Dividends from affiliated investments 5,348
Securities lending 796
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Total Investment Income 1,328,431
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Expenses:
Investment management fees 532,131
Directors' fees 106,804
Legal and audit fees 86,884
Administration fees 58,297
Printing 44,838
Accounting fees 41,736
Transfer agent fees 20,905
Custodian fees 12,963
Stock exchange listing fees 9,045
Insurance 6,527
Miscellaneous 3,209
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Total Expenses 923,339
Less: Fees paid indirectly (4,097)
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Net Expenses 919,242
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Net Investment Income 409,189
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from unaffiliated investments 29,336
Capital gain distributions from regulated
investment companies 6,811
Capital gain distributions from affiliated
regulated investment companies 23,408
Net change in unrealized appreciation in
value of investments 5,307,753
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Net realized and unrealized gain on investments 5,367,308
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,776,497
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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,
--------------------------------
2010 2009
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 409,189 $ 430,985
Net realized gain from investments 59,555 36,794
Net change in unrealized appreciation/(depreciation)
in value of investments 5,307,753 10,628,356
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Net increase in net assets resulting from operations 5,776,497 11,096,135
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Dividends and distributions to shareholders:
Net investment income (468,744) (430,985)
Return-of-capital (11,304,528) (14,022,576)
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Total dividends and distributions to shareholders (11,773,272) (14,453,561)
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Capital stock transactions:
Proceeds from rights offerings of 1,433,827
and 0 shares of newly issued common stock, respectively 11,812,869 --
Offering expenses associated with the rights offering (90,887) --
Proceeds from 108,178 and 133,707 shares newly issued in
reinvestment of dividends and distributions, respectively 1,093,718 1,294,627
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Net increase in net assets from capital stock transactions 12,815,700 1,294,627
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Total increase/(decrease) in net assets 6,818,925 (2,062,799)
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NET ASSETS
Beginning of year 57,446,764 59,509,563
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End of year $ 64,265,689 $ 57,446,764
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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,*
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2010 2009 2008 2007 2006
------- ------ ------- ------- -------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of year $ 8.24 $ 8.71 $ 18.12 $ 21.28 $ 22.60
------- ------ ------- ------- -------
Net investment income # 0.06 0.06 0.15 0.16 0.20
Net realized and unrealized gain/(loss)
on investments 0.76 1.52 (5.55) 0.96 2.64
------- ------ ------- ------- -------
(Net increase/(decrease) in net assets)
resulting from operations 0.82 1.58 (5.40) 1.12 2.84
------- ------ ------- ------- -------
Dividends and distributions
to shareholders:
Net investment income (0.07) (0.06) (0.15) (0.16) (0.16)
Net realized capital gains -- -- -- (1.32) --
Return-of-capital (1.61) (2.03) (4.01) (3.00) (4.00)
------- ------ ------- ------- -------
Total dividends and distributions
to shareholders (1.68) (2.09) (4.16) (4.48) (4.16)
------- ------ ------- ------- -------
Capital stock transactions:
Anti-dilutive effect due to
shares issued:
Rights offering 0.13 -- -- -- --
Reinvestment of dividends
and distributions 0.04 0.04 0.15 0.20 --
------- ------ ------- ------- -------
Total anti-dilutive effect
due to shares issued 0.17 0.04 0.15 0.20 --
Net asset value, end of year $ 7.55 $ 8.24 $ 8.71 $ 18.12 $ 21.28
======= ====== ======= ======= =======
Market value, end of year $ 8.84 $11.61 $ 7.62 $ 20.20 $ 33.80
======= ====== ======= ======= =======
Total investment return(a) (10.19)% 89.55% (49.92)% (29.04)% 45.36%
======= ====== ======= ======= =======
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $64,266 $57,447 $59,510 $120,268 $136,344
(Ratio of expenses to average net assets,
net of fee waivers, if any (b)(c) 1.73% 1.80% 1.40% 1.23% 1.22%
(Ratio of expenses to average net assets,
excluding fee waivers, if any (c)(d) 1.74% 2.01% 1.54% 1.35% 1.32%
(Ratio of expenses to average net assets,
net of fee waivers, if any (c)(d) 1.74% 1.95% 1.44% 1.25% 1.25%
(Ratio of net investment income to
average net assets 0.77% 0.79% 1.08% 0.86% 0.85%
Portfolio turnover rate 25.28% 10.81% 13.24% 10.38% 10.59%
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* Effective December 23, 2008, a reverse stock split of 1:4 occurred. All
per share amounts have been restated according to the terms of the
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 period 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 do not include expenses of investments companies in which the
Fund invests.
(d) Expenses exclude the reduction for fees paid indirectly.
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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 conformity 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.
SUBSEQUENT EVENTS: The Fund has evaluated the need for additional disclosures
and/or adjustments resulting from subsequent events through the date its
financial statements were issued. Based on this evaluation, no additional
disclosures or adjustments were required to such financial statements.
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 Manager" 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, 2010, 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 Amex LLC is closed.
The Fund is exposed to financial market risks, including the valuations of its
investment portfolio. For the year ended December 31, 2010, the Fund did not
engage in derivative instruments and other hedging activities.
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 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
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8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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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.
RISKS ASSOCIATED WITH INVESTMENTS IN OTHER CLOSED-END FUNDS: Closed-end
investment companies are subject to the risks of investing in the underlying
securities. The Fund, as a holder of the securities of the closed-end investment
company, will bear its pro rata portion of the closed-end investment company's
expenses, including advisory fees. These expenses are in addition to the direct
expenses of the Fund's own operations.
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.
The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting
Standards Codification defines the threshold for recognizing the benefits of
tax-return positions in the financial statements as "more-likely-than-not" to be
sustained by the taxing authority and requires measurement of a tax position
meeting the more-likely-than-not criterion, based on the largest benefit that is
more than 50 percent likely to be realized. The Fund's policy is to classify
interest and penalties associated with underpayment of federal and state income
taxes, if any, as income tax expense on its Statement of Operations. As of
December 31, 2010, the Fund does not have any interest or penalties associated
with the under-payment of any income taxes. Management reviewed any uncertain
tax positions for open tax years 2007 through 2009; or expected to be taken in
the Fund's 2010 tax return. There was no material impact to the financial
statements or, other than as described below, the disclosures thereto as a
result of the adoption of this pronouncement. The Fund and the Investment
Manager have entered into a closing letter 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 closing letter avoids any potential material negative tax impact
to the Fund. Pursuant to the closing letter, the Investment Manager paid any
settlement amount owed to the Internal Revenue Service.
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
maintain the distribution, taxable to shareholders and to disclose that portion
of the distribution that is
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9
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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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.
MANAGED DISTRIBUTION RISK: Under the managed distribution policy, the Fund makes
monthly distributions to shareholders at a rate that may include periodic
distributions of its net income and net capital gains, ("Net Earnings"), or from
return-of-capital. If, for any fiscal year where total cash distributions
exceeded Net Earnings (the "Excess"), the Excess would decrease the Fund's total
assets and, as a result, would have the likely effect of increasing the Fund's
expense ratio. There is a risk that the total Net Earnings from the Fund's
portfolio would not be great enough to offset the amount of cash distributions
paid to Fund shareholders. If this were to be the case, the Fund's assets would
be depleted, and there is no guarantee that the Fund would be able to replace
the assets. In addition, in order to make such distributions, the Fund may have
to sell a portion of its investment portfolio at a time when independent
investment judgment might not dictate such action. Furthermore, such assets used
to make distributions will not be available for investment pursuant to the
Fund's investment objective.
NOTE C. FAIR VALUE
As required by the Fair Value Measurement and Disclosures Topic of the FASB
Accounting Standards Codification, the Fund has performed an analysis of all
assets and liabilities measured at fair value to determine the significance and
character of all inputs to their fair value determination.
The fair value hierarchy prioritizes the inputs to valuation techniques used to
measure fair value into the following three broad categories.
o Level 1 - quoted unadjusted prices for identical instruments in active
markets to which the Fund has access at the date of measurement.
o Level 2 - quoted prices for similar instruments in active markets; quoted
prices for identical or similar instruments in markets that are not active;
and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. Level 2 inputs
are those in markets for which there are few trans- actions, the prices are
not current, little public information exists or instances where prices
vary substantially over time or among brokered market makers.
o Level 3 - model derived valuations in which one or more significant inputs
or significant value drivers are unobservable. Unobservable inputs are
those inputs that reflect the Fund's own assumptions that market
participants would use to price the asset or liability based on the best
available information.
--------------------------------------------------------------------------------
10
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
The following is a summary of the inputs used as of December 31, 2010 in valuing
the Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
--------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $60,857,028 --
Short-Term Investments 4,690,985
Level 2 - Other Significant
Observable Inputs -- --
Level 3 - Significant
Unobservable Inputs -- --
----------- -----------
Total $65,548,013 --
=========== ===========
---------
* Other financial instruments include futures, forwards and swap contracts.
The breakdown of the Fund's investments into major categories is disclosed in
its Summary Schedule of Investments.
During the year ended December 31, 2010 the Fund did not have any significant
transfers in and out of Level 1 or Level 2. 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, 2010.
In January 2010, the FASB Accounting Standards Board issued Accounting Standards
Update ("ASU") No. 2010-06 "Improving Disclosures about Fair Value
Measurements". ASU 2010-06 amends FASB Accounting Standards Codification Topic,
Fair Value Measurements and Disclosures, to require additional disclosures
regarding fair value measurements. Certain disclosures required by ASU No.
2010-06 are effective for interim and annual reporting periods beginning after
December 15, 2009, and other required disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. Management has evaluated the impact ASU No. 2010-06 and has determined
that it will not have a significant impact on its financial statement
disclosures.
NOTE D. AGREEMENTS
Certain officers of the Fund are also officers of Cornerstone or Ultimus Fund
Solutions, LLC ("Ultimus"). Such officers are paid no fees by the Fund for
serving as officers of the Fund.
Included in the Statement of Operations, under the caption Fees paid indirectly,
are expense offsets of $4,097 arising from credits earned on portfolio
transactions executed with brokers, pursuant to directed brokerages arrangement.
INVESTMENT MANAGEMENT AGREEMENT
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. For the year ended December
31, 2010, Cornerstone earned $532,131 for investment management services.
ADMINISTRATION AGREEMENT
Under the terms of the Administration Agreement, Ultimus supplies executive,
administrative and regulatory services for the Fund. Ultimus supervises the
preparation of reports to stockholders for the Fund, reports to and filings with
the Securities and Exchange Commission and materials for meetings of the Board
of Directors. For these services, the Fund pays Ultimus a monthly fee at an
annual rate of 0.100% of its average daily net assets up to $250 million and
0.075% of such assets in excess of $250 million, subject to an annual minimum
fee of $50,000.
FUND ACCOUNTING AGREEMENT
Under the terms of the Fund Accounting Agreement, Ultimus calculates the net
asset value per share and maintains the financial books and records of the Fund.
For the performance of these services, the Fund pays Ultimus a base fee of
$2,500 per month plus an asset based fee of 0.010% of the first $500 million of
average daily net assets and 0.005% of such assets in excess of $500 million.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the year ended December 31, 2010 were as follows:
ADAMS PETROLEUM &
EXPRESS RESOURCES
COMPANY CORPORATION
------------ -------------
Market value at
beginning of year $ 266,460 $ --
=========== ============
Shares at beginning
of year 26,400 --
Shares purchased
during the year 22,000 7,600
Shares sold during
the period -- --
----------- ------------
Shares at end of year 48,400 7,600
=========== ============
Dividend income earned
during the year $ 4,664 $ 684
=========== ============
Cost of purchases
during the year $ 218,433 $ 168,587
Proceeds from sales
during the year -- --
Net realized gain/(loss)
during the year -- --
Capital gain distribution $ 16,720 $ 6,688
Market value at
end of year $ 518,848 $ 205,276
NOTE F. INVESTMENT IN SECURITIES
For the year ended December 31, 2010, purchases and sales of securities, other
than short-term investments, were $13,369,749 and $14,862,547 respectively.
NOTE G. SHARES OF COMMON STOCK
The Fund has 100,000,000 shares of common stock authorized and 8,511,413 shares
outstanding at December 31, 2010. Transactions in common stock for the year
ended December 31, 2010 were as follows:
Shares at beginning of year 6,969,408
Shares newly issued from rights offering 1,433,827
Shares newly issued in reinvestment
of dividends and distributions 108,178
---------
Shares at end of year 8,511,413
=========
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, 2010. 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 Fund had no securities on loan to brokers at December 31, 2010. During the
year ended December 31, 2010, the Fund earned $796 in securities lending income
which is included under the caption Securities lending in the Statement of
Operations.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------
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.
The tax character of dividends and distributions paid to stockholders during the
years ended December 31, for the Fund were as follows:
Ordinary Income Return-of-Capital
------------------------- ----------------------------
2010 2009 2010 2009
------- ------ ------ ------
$468,744 $430,985 $11,304,528 $14,022,576
At December 31, 2010 the components of accumulated income on a tax basis, for
the Fund were as follows:
Capital loss carryforward $ (4,217,018)
Net unrealized appreciation 8,924,760
------------
Total distributable income $ 4,725,742
=============
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, 2010, the Fund decreased net realized loss by $190,655 and
decreased net investment loss by 59,555, and decreased paid in capital by
$250,210. 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"). The Fund incurred no such
loss.
At December 31, 2010, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $4,217,018 of which $484,687 expires in 2011, $3,297,622
expires in 2016, and $434,709 expires in 2017. At December 31, 2010, 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 $56,605,253, $10,668,494, $(1,725,734) and $8,942,760,
respectively.
NOTE K. SUBSEQUENT EVENTS
On February 11, 2011, the Board of Directors approved U.S. Bank, N.A. to replace
JPMorgan Chase Bank, N.A. as Custodian.
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
Jericho, New York
We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the summary schedule of
investments as of December 31, 2010, 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, 2010, 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 Strategic Value Fund, Inc. as of December 31, 2010, 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 28, 2011
--------------------------------------------------------------------------------
14
2010 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, 2010) as to the federal tax
status of the dividends and distributions received by the Fund's shareholders in
respect of such fiscal year. The $11,773,272 in dividends and distributions paid
to shareholders in respect of such year, is represented by $468,744 of ordinary
income, and $11,304,528 of return-of-capital.
As indicated in this notice, significant portions of the Fund's distributions
for 2010 were comprised of a return-of-capital; accordingly these distributions
do not represent yield or investment return on the Fund's portfolio.
SOURCES OF DIVIDENDS AND DISTRIBUTIONS (Per Share Amounts)
Payment Dates: 1/29/10 2/26/10 3/31/10 4/30/10 5/28/10 6/30/10
------- ------- ------- ------- ------- -------
Ordinary Income(1) $0.0049 $0.0049 $0.0049 $0.0049 $0.0049 $0.0049
Return-of-Capital(2) 0.1349 0.1349 0.1349 0.1349 0.1349 0.1349
------- ------- ------- ------- ------- -------
Total: $0.1398 $0.1398 $0.1398 $0.1398 $0.1398 $0.1398
======= ======= ======= ======= ======= =======
Payment Dates: 7/30/10 8/31/10 9/30/10 10/29/10 11/30/10 12/31/10
------- ------- ------- ------- ------- -------
Ordinary Income(1) $0.0049 $0.0049 $0.0049 $0.0049 $0.0049 $0.0049
Return-of-Capital(2) 0.1349 0.1349 0.1349 0.1349 0.1349 0.1349
------- ------- ------- ------- ------- -------
Total: $0.1398 $0.1398 $0.1398 $0.1398 $0.1398 $0.1398
======= ======= ======= ======= ======= =======
--------------------------------------------------------------------------------
(1) Ordinary Income Dividend - This is the total per share amount of ordinary
income dividends and short-tern capital gain distributions (if appli-
cable) 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.
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. They
will generally not be entitled to foreign tax credit or deduction for the
withholding taxes paid by the Fund.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investment in the Fund.
--------------------------------------------------------------------------------
15
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
-----------------------------------------------------------------------------------------------------
Chairman of President, Cornerstone Advisors, Inc.; 1998 3
Ralph W. the Board of Financial Consultant; President and
Bradshaw** Directors and Director of Cornerstone Total Return
(Dec. 1950) President Fund, Inc.; President and Trustee of
Cornerstone Progressive Return Fund.
Thomas H. Director; Audit, Director of Cornerstone Total Return 1987 3
Lenagh Nominating Fund, Inc.; Trustee of Cornerstone
(Nov. 1924) and Corporate Progressive Return Fund; Director of
Governance Adams Express Company, Petroleum
Committee & Resources Corporation and PPGI
Member Industries.
Edwin Meese III Director; Audit, Independent Financial Advisor; 2001 3
(Dec. 1931) Nominating Director of Photonics Products
and Corporate Group; Distinguished Fellow, The
Governance Heritage Foundation Washington D.C.;
Committee Distinguished Visiting Fellow at the
Member Hoover Institution, Stanford University;
Senior Adviser, Revelation L.P.; Director
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 Inc.; Chief Executive Officer, Asheville
and 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.
--------------------------------------------------------------------------------
16
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONTINUED)
NUMBER OF
PORTFOLIOS IN
NAME AND POSITION FUND COMPLEX
ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY
(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; Director of Cornerstone
(Nov. 1953) Nominating Total Return Fund, Inc.; Trustee of
and Corporate Cornerstone Progressive Return Fund.
Governance
Committee and
Audit Committee
Member
Glenn W. Director; Chairman of the Board, Tower 2000 3
Wilcox, Sr. Chairman of Associates, Inc.; Chairman of the
(Dec. 1931) Audit Committee, Board and Chief Executive Officer of
Nominating Wilcox Travel Agency, Inc.; Director of
and Corporate Cornerstone Total Return Fund, Inc.;
Governance Trustee of Cornerstone Progressive
Committee Return Fund.
Member
--------------------------------------------------------------------------------
17
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONCLUDED)
NAME AND POSITION
ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE
-----------------------------------------------------------------------------------------------------
Gary A. Bentz Chief Compliance Chairman and Chief Financial Officer 2004, 2008,
(June 1956) Officer, Secretary, of Cornerstone Advisors, Inc.; Financial 2009
and Assistant Consultant, C.P.A., Chief Compliance
Treasurer Officer, Secretary, and Assistant Treasurer
of Cornerstone Total Return Fund, Inc. and
Cornerstone Progressive Return Fund.
Frank J. Maresca Treasurer Executive Vice President of Ultimus Fund 2009
(Oct. 1958) Solutions, LLC (since March 2009); previous
Executive Director, JP Morgan Chase &
Co. (since June 2008); previous President
of Bear Stearns Funds Management, Inc.;
previous Senior Managing Director of Bear
Stearns & Co., Inc.; Treasurer of Cornerstone
Total Retrun Fund, Inc. and Cornerstone
Progressive Return Fund (since May 2009).
--------------------------------------------------------------------------------
* The mailing address of each Director and/or Officer with respect to the
Fund's operation is 350 Jericho Turnpike, Suite 206, Jericho, NY 11753.
** 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.
--------------------------------------------------------------------------------
18
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 Amex 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
--------------------------------------------------------------------------------
19
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
proxy will include those shares purchased pursuant to the Plan. Each
participant, nevertheless, has the right to receive certificates for whole
shares owned. The Agent will distribute all proxy solicitation materials to
participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the shareholder's name and held for the account of
beneficial owners participating in the Plan.
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.
--------------------------------------------------------------------------------
20
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
is 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.
--------------------------------------------------------------------------------
21
PRIVACY POLICY (UNAUDITED)
FACTS WHAT DOES CORNERSTONE STRATEGIC VALUE FUND, INC.
(THE "FUND") DO WITH YOUR PERSONAL INFORMATION?
--------------------------------------------------------------------------------
Why? Financial companies choose how they share your personal information. Federal
law gives consumers the right to limit some but not all sharing. Federal law also
requires us to tell you how we collect, share, and protect your personal
information. Please read this notice carefully to understand what we do.
--------------------------------------------------------------------------------
What? The types of personal information we, and our service providers, on our behalf,
collect and share depend on the product or service you have with us. This
information can include:
--------------------------------------------------------------------------------
o Social Security number
o account balances
o account transactions
o transaction history
o wire transfer instructions
o checking account information
When you are no longer our customer, we continue to share your information as
described in this notice.
How? All financial companies need to share customers' personal information to run
their everyday business. In the section below, we list the reasons financial
companies can share their customers ' personal information; the reasons the
Fund, and our service providers, on our behalf, choose to share; and whether
you can limit this sharing.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
22
PRIVACY POLICY (UNAUDITED) (CONTINUED)
Reasons we can share your Does the Cornerstone
personal information Fund share? Can you limit this sharing?
-----------------------------------------------------------------------------------
FOR OUR EVERYDAY BUSINESS PURPOSES Yes No
- such as to process your transactions,
maintain your account(s), respond to
court orders and legal investigations, or
report to credit bureaus
-----------------------------------------------------------------------------------
FOR OUR MARKETING PURPOSES - to No We don't share
offer our products and services to you
-----------------------------------------------------------------------------------
FOR JOINT MARKETING WITH OTHER No We don't share
FINANCIAL COMPANIES
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES' EVERYDAY BUSINESS Yes No
PURPOSES - information about your
transactions and experiences
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES' EVERYDAY BUSINESS No We don't share
PURPOSES - information about your
creditworthiness
-----------------------------------------------------------------------------------
FOR OUR AFFILIATES TO MARKET TO YOU No We don't share
-----------------------------------------------------------------------------------
FOR NONAFFILIATES TO MARKET TO YOU No We don't share
-----------------------------------------------------------------------------------
QUESTIONS? Call (513) 326-3597.
-----------------------------------------------------------------------------------
WHAT WE DO
-----------------------------------------------------------------------------------
WHO IS PROVIDING THIS NOTICE? Cornerstone Strategic Value Fund, Inc. (the "Fund")
-----------------------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S To protect your personal information from unauthorized
SERVICE PROVIDERS, ON THE FUND'S access and use, we and our service providers use security
BEHALF PROTECT MY PERSONAL measures that comply with federal law. These measures
INFORMATION? include computer safeguards and secured files and
buildings.
-----------------------------------------------------------------------------------------------
HOW DOES THE FUND AND THE FUND'S We collect your personal information, for example, when
SERVICE PROVIDERS, ON THE FUND'S you:
BEHALF COLLECT MY PERSONAL
INFORMATION? o open an account
o provide account information
o give us your contact information
o make a wire transfer
We also collect your information from others,
such as credit bureaus, affiliates, or other companies.
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
23
PRIVACY POLICY (UNAUDITED) (CONCLUDED)
WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only
o sharing for affiliates' everyday
business purposes - information about
your creditworthiness
o affiliates from using your
information to market to you
o sharing for nonaffiliates to market
to you
State laws and individual companies may give
you additional rights to limit sharing.
--------------------------------------------------------------------------------
DEFINITIONS
--------------------------------------------------------------------------------
Affiliates Companies related by common ownership or control.
They can be financial and nonfinancial companies.
o CORNERSTONE ADVISORS, INC.
--------------------------------------------------------------------------------
NONAFFILIATES Companies not related by common ownership or control.
They can be financial and nonfinancial companies.
o THE FUND DOES NOT SHARE WITH NONAFFILIATES, SO THEY CAN
MARKET TO YOU.
--------------------------------------------------------------------------------
JOINT MARKETING A formal agreement between nonaffiliated financial
companies that together market financial products or
services to you.
o THE FUND DOES NOT JOINTLY MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
24
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment
company whose shares trade on the NYSE Amex LLC. 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 managed by Cornerstone
Advisors, Inc.
SHAREHOLDER INFORMATION (UNAUDITED)
The Fund is listed on the NYSE Amex LLC (symbol "CLM"). The previous week's net
asset value per share, market price, and related premium or discount are
available on The Wall Street Journal website at
http://online.wsj.com/mdc/public/page/2_3040-CEF34.html under the designation
"Cornerstone Strat Value (CLM)" and on the Barron's website at
http://online.barrons.com/mdc/public/page/2_3040-CEF34.html under the same
designation. 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.
--------------------------------------------------------------------------------
25
CORNERSTONE STRATEGIC VALUE FUND, INC.
ITEM 2. CODE OF ETHICS.
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 financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party. Pursuant to Item 12(a)(1), a
copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR.
During the period covered by this report, the code of ethics has not been
amended, and the registrant has not granted any waivers, including implicit
waivers, from the provisions of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that the registrant does not
have an audit committee financial expert serving on its audit committee. The
audit committee determined that, although none of its members meet the technical
definition of an audit committee financial expert, the experience provided by
each member of the audit committee together offer the registrant adequate
oversight for the registrant's current level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees. The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the registrant's
annual financial statements or for services that are normally provided
by the accountant in connection with statutory and regulatory filings
or engagements were $18,500 and $18,100 with respect to the
registrant's fiscal years ended December 31, 2010 and 2009,
respectively.
(b) Audit-Related Fees. No fees were billed in either of the last two
fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item.
(c) Tax Fees. The aggregate fees billed for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax
planning were $3,900 and $3,600 with respect to the registrant's
fiscal years ended December 31, 2010 and 2009, respectively. The
services comprising these fees are the preparation of the registrant's
federal and state income and federal excise tax returns.
(d) All Other Fees. No fees were billed in either of the last two fiscal
years for products and services provided by the principal accountant,
other than the services reported in paragraphs (a) through (c) of this
Item.
(e)(1) Before the principal accountant is engaged by the registrant to
render (i) audit, audit-related or permissible non-audit services to
the registrant or (ii) non-audit services to the registrant's
investment adviser and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to 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 minimus thresholds are not exceeded, as such thresholds are
determined by the audit committee in accordance with applicable
Commission regulations.
(e)(2) None of the services described in paragraph (b) through (d) of this
Item were approved by the audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year were attributed to work performed by persons other
than the principal accountant's full-time, permanent employees.
(g) During the fiscal years ended December 31, 2010 and 2009, aggregate
non-audit fees of $3,900 and $3,600, respectively, were billed by the
registrant's principal accountant for services rendered to the
registrant. No non-audit fees were billed in either of the last two
fiscal years by the registrant's principal accountant for services
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the registrant.
(h) The principal accountant has not provided any non-audit services to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with
or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant.
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. Glenn W. Wilcox, Sr., (Chairman), Edwin Meese,
III, Thomas H. Lenagh, Andrew A. Strauss and Scott B. Rogers are the
members of the registrant's audit committee.
(b) Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------------------
EQUITY SECURITIES - 94.70%
CLOSED-END FUNDS - 17.22%
CORE - 3.80%
Adams Express Company (The) a) 48,400 $518,848
Gabelli Equity Trust, Inc. 16,323 92,552
General American Investors Company, Inc. 18,300 490,806
Liberty All-Star Equity Fund 160,130 789,441
Royce Micro-Cap Trust, Inc. 4,000 39,200
Royce Value Trust, Inc. 5,000 72,700
SunAmerica Focused Alpha Large-Cap Fund, Inc. 8,000 125,920
Tri-Continental Corporation 22,800 313,728
-----------
2,443,195
-----------
CORPORATE DEBT FUNDS INVESTMENT
GRADE-RATED - 1.63%
AllianceBernstein Income Fund 87,230 691,734
Federated Enhanced Treasury Income Fund 17,966 300,032
Invesco Van Kampen Bond Fund 2,953 55,044
-----------
1,046,810
-----------
DEVELOPED MARKET - 0.06%
Japan Equity Fund 6,000 36,780
-----------
GLOBAL - 2.03%
Alpine Total Dynamic Dividend Fund 213,412 1,263,399
Clough Global Allocation Fund 2,500 39,100
-----------
1,302,499
-----------
GLOBAL INCOME - 0.47%
Nuveen Multi-Currency Short-Term Government Income Fund 22,000 302,940
-----------
HIGH CURRENT YIELD (LEVERAGED) - 0.13%
First Trust Strategic High Income Fund II 8,900 41,652
First Trust Strategic High Income Fund III 11,101 48,289
-----------
89,941
-----------
OPTION ARBITRAGE/OPTIONS STRATEGIES - 7.02%
Dow 30 Enhanced Premium & Income Fund, Inc. 27,934 289,955
Eaton Vance Risk-Managed Diversified Equity Income Fund 146,464 1,945,042
Eaton Vance Tax-Managed Diversified Equity Income Fund 147,120 1,663,927
See accompanying notes to schedule of investments.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
CLOSED-END FUNDS (CONTINUED)
Eaton Vance Tax-Managed Global Diversified Equity
Income Fund 58,000 $610,740
-----------
4,509,664
-----------
REAL ESTATE - 0.55%
Alpine Global Premier Properties Fund 38,000 269,420
LMP Real Estate Income Fund, Inc. 8,500 85,850
-----------
355,270
-----------
SECTOR EQUITY - 1.18%
Cohen & Steers Infrastructure Fund, Inc. 14,500 238,090
Evergreen Utilities and High Income Fund 18,180 210,888
Gabelli Healthcare & Wellness Rx Trust (The) 4,361 30,876
Macquarie Global Infrastructure Total Return Fund, Inc. 4,000 69,120
Petroleum & Resources Corporation (a) 7,600 205,276
-----------
754,250
-----------
VALUE - 0.35%
Claymore Dividend & Income Fund 11,960 179,759
Royce Focus Trust, Inc. 6,000 45,420
-----------
225,179
-----------
TOTAL CLOSED-END FUNDS 11,066,528
-----------
CONSUMER DISCRETIONARY - 8.62%
Amazon.com, Inc. ** Non-income producing security. 3,000 540,000
Best Buy Company, Inc. 6,500 222,885
Comcast Corporation - Class A 14,555 319,773
DIRECTV Group, Inc. (The) - Class A * 4,000 159,720
Family Dollar Stores, Inc. 2,000 99,420
Ford Motor Company * 12,000 201,480
Gap, Inc. (The) 9,200 203,688
Home Depot, Inc. (The) 2,000 70,120
McDonald's Corporation 11,400 875,064
News Corporation - Class A 10,000 145,600
NIKE, Inc. - Class B 4,100 350,222
Starbucks Corporation 2,800 89,964
Target Corporation 8,800 529,144
Time Warner Cable, Inc. 1,966 129,815
Time Warner, Inc. 7,900 254,143
TJX Companies, Inc. (The) 7,000 310,730
Viacom, Inc. - Class B 5,450 215,875
Walt Disney Company (The) 10,200 382,602
See accompanying notes to schedule of investments.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
CONSUMER DISCRETIONARY (CONTINUED)
Yum! Brands, Inc. 9,000 $441,450
-----------
5,541,695
-----------
CONSUMER STAPLES - 8.01%
Altria Group, Inc. 20,800 512,096
Coca-Cola Company (The) 13,500 887,895
Colgate-Palmolive Company 3,400 273,258
Costco Wholesale Corporation 2,500 180,525
CVS Caremark Corporation 8,430 293,111
General Mills, Inc. 5,000 177,950
H.J. Heinz Company 4,000 197,840
Kraft Foods, Inc. - Class A 6,932 218,427
PepsiCo, Inc. 5,600 365,848
Philip Morris International, Inc. 2,500 146,325
Procter & Gamble Company (The) 16,297 1,048,386
Sysco Corporation 10,300 302,820
Wal-Mart Stores, Inc. 10,100 544,693
-----------
5,149,174
-----------
ENERGY - 9.11%
Chevron Corporation 10,732 979,295
ConocoPhillips 14,974 1,019,730
Exxon Mobil Corporation 29,936 2,188,920
Halliburton Company 9,700 396,051
Marathon Oil Corporation 11,500 425,845
Occidental Petroleum Corporation 3,500 343,350
Schlumberger Ltd. 6,000 501,000
-----------
5,854,191
-----------
FINANCIALS - 11.68%
AFLAC, Inc. 5,500 310,365
Allstate Corporation (The) 6,800 216,784
American Express Company 6,400 274,688
Bank of New York Mellon Corporation (The) 7,754 234,171
BB&T Corporation 3,500 92,015
Capital One Financial Corporation 2,500 106,400
Chubb Corporation (The) 3,500 208,740
Citigroup, Inc. * 60,000 283,800
Franklin Resources, Inc. 1,500 166,815
Goldman Sachs Group, Inc. (The) 5,000 840,800
Hudson City Bancorp, Inc. 15,500 197,470
JPMorgan Chase & Company 30,132 1,278,199
Loews Corporation 2,000 77,820
Marsh & McLennan Companies, Inc. 10,000 273,400
MetLife, Inc. 5,700 253,308
Morgan Stanley 7,500 204,075
See accompanying notes to schedule of investments.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
FINANCIALS (CONTINUED)
PNC Financial Services Group, Inc. 7,600 $461,472
Prudential Financial, Inc. 4,000 234,840
State Street Corporation 3,000 139,020
T. Rowe Price Group, Inc. 3,000 193,620
Travelers Companies, Inc. (The) 9,476 527,908
U.S. Bancorp 9,901 267,030
Wells Fargo & Company 21,400 663,186
-----------
7,505,926
-----------
HEALTH CARE - 8.63%
Abbott Laboratories 9,200 440,772
Aetna, Inc. 5,000 152,550
Allergan, Inc. 2,500 171,675
Amgen, Inc. * 6,700 367,830
Becton, Dickinson and Company 3,900 329,628
Biogen Idec, Inc. * 4,000 268,200
Bristol-Myers Squibb Company 19,000 503,120
Cardinal Health, Inc. 7,950 304,564
Covidien PLC 2,599 118,670
Eli Lilly & Company 4,700 164,688
Express Scripts, Inc. * 3,000 162,150
Gilead Sciences, Inc. * 6,000 217,440
Johnson & Johnson 13,400 828,790
McKesson Corporation 1,800 126,684
Medtronic, Inc. 6,000 222,540
Merck & Company, Inc. 15,267 550,223
Stryker Corporation 2,000 107,400
UnitedHealth Group, Inc. 11,000 397,210
WellPoint, Inc. * 2,000 113,720
-----------
5,547,854
-----------
INDUSTRIALS - 8.08%
3M Company 4,400 379,720
Boeing Company (The) 2,200 143,572
Caterpillar, Inc. 5,300 496,398
CSX Corporation 3,500 226,135
Deere & Company 6,500 539,825
Emerson Electric Company 6,000 343,020
General Dynamics Corporation 3,200 227,072
General Electric Company 46,900 857,801
Illinois Tool Works, Inc. 2,500 133,500
Lockheed Martin Corporation 3,000 209,730
Northrop Grumman Corporation 2,500 161,950
Raytheon Company 3,500 162,190
Union Pacific Corporation 4,000 370,640
See accompanying notes to schedule of investments.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
INDUSTRIALS (CONTINUED)
United Parcel Service, Inc. - Class B 4,100 $297,578
United Technologies Corporation 5,000 393,600
Waste Management, Inc. 6,800 250,716
-----------
5,193,447
-----------
INFORMATION TECHNOLOGY - 15.47%
Apple, Inc. * 5,900 1,903,104
Cisco Systems, Inc. * 29,400 594,762
Cognizant Technology Solutions Corporation - Class A * 2,500 183,225
Corning, Inc. 12,000 231,840
eBay, Inc. * 2,500 69,575
EMC Corporation * 12,148 278,189
Google, Inc. - Class A * 2,000 1,187,940
Hewlett-Packard Company 11,400 479,940
Intel Corporation 39,500 830,685
International Business Machines Corporation 8,100 1,188,756
Microsoft Corporation 51,200 1,429,504
Oracle Corporation 25,272 791,014
QUALCOMM, Inc. 10,000 494,900
Texas Instruments, Inc. 6,400 208,000
Yahoo!, Inc. * 4,000 66,520
-----------
9,937,954
-----------
MATERIALS - 2.93%
Dow Chemical Company (The) 5,400 184,356
E.I. Du Pont de Nemours & Company 9,500 473,860
Freeport-McMoRan Copper & Gold, Inc. 5,000 600,450
Praxair, Inc. 6,500 620,555
-----------
1,879,221
-----------
REAL ESTATE INVESTMENT TRUST - 0.00%
Simon Property Group, Inc. 14 1,393
-----------
TELECOMMUNICATION SERVICES - 2.36%
AT&T, Inc. 37,039 1,088,206
Verizon Communications, Inc. 12,000 429,360
-----------
1,517,566
-----------
UTILITIES - 2.59%
Dominion Resources, Inc. 7,700 328,944
Duke Energy Corporation 15,800 281,398
Exelon Corporation 3,000 124,920
FirstEnergy Corporation 3,000 111,060
Nextera Energy, Inc. 4,000 207,960
PG&E Corporation 3,000 143,520
See accompanying notes to schedule of investments.
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2010 (CONTINUED)
UTILITIES (CONTINUED)
Public Service Enterprises Group, Inc. 4,500 $143,145
Southern Company (The) 8,400 321,132
-----------
1,662,079
-----------
TOTAL EQUITY SECURITIES (cost - $51,914,107) 60,857,028
-----------
SHORT-TERM INVESTMENTS - 7.30%
MONEY MARKET SECURITY - 7.30%
JPMorgan U.S. Government Money Market Fund
(cost - $4,690,985) 4,690,985 $ 4,690,985
-----------
TOTAL INVESTMENTS - 102.00% (cost - $56,605,092) 65,548,013
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.00)% (1,282,324)
-----------
NET ASSETS - 100.00% $64,265,689
===========
See accompanying notes to schedule of investments.
(a) Affiliated investment. The Fund holds 0.81% and 0.32% (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
year ended December 31, 2010 there were additional purchases of 22,000 shares of
Adams Express and 7,600 shares of Petroleum & Resources Corporation with a cost
of $218,433 and $168,587, respectively. There were no sales of either of these
securities.
(b) Not applicable
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 the
Cornerstone Strategic Value Fund, Inc. (the "Fund"), including the summary
schedule of investments as of December 31, 2010, 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, 2010, 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 the
Cornerstone Strategic Value Fund, Inc. as of December 31, 2010, 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, 2010 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 28, 2011
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The registrant and Cornerstone Advisors, Inc., the registrant's investment
adviser, share the same proxy voting policies and procedures. The proxy voting
policies and procedures of the registrant and Cornerstone Advisors, Inc. are
attached as Exhibit 99.VOTEREG.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) All information included in this Item is as of the date of the
filing of this Form N-CSR, unless otherwise noted. Ralph W. Bradshaw
and is the portfolio manager of the registrant. Mr. Bradshaw has acted
as portfolio manager since 2001. Mr. Bradshaw is President and Chief
Financial Officer of Cornerstone Advisors, Inc. and serves as
President and Chairman of the Board of the registrant, Cornerstone
Progressive Return Fund and Cornerstone Total Return Fund, Inc.
(a)(2) Ralph W. Bradshaw manages two other closed-end registered investment
companies: Cornerstone Progressive Return Fund and Cornerstone Total
Return Fund, Inc. As of December 31, 2010, net assets of Cornerstone
Progressive Return Fund were $55,276,998 and net assets of Cornerstone
Total Return Fund, Inc. were $25,913,220. Mr. Bradshaw manages no
accounts except for the registrant, Cornerstone Progressive Return
Fund and Cornerstone Total Return Fund, Inc. Mr. Bradshaw manages no
accounts where the advisory fee is based on the performance of the
account. No material conflicts of interest exist in connection with
the portfolio manager's management of the registrant's investments, on
the one hand, and the investment of the other accounts included in
response to this Item, on the other.
(a)(3) Compensation of Ralph W. Bradshaw includes a fixed salary paid by
Cornerstone Advisors, Inc. plus his share of the profits of
Cornerstone Advisors, Inc. The profitability of Cornerstone Advisors,
Inc. is primarily dependent upon the value of the assets of the
registrant and other managed accounts. However, compensation is not
directly based upon the registrant's performance or on the value of
the registrant's assets.
(a)(4) The dollar range of equity securities in the registrant beneficially
owned by the portfolio manager as of December 31, 2010 is as follows:
Ralph W. Bradshaw: $50,001 - $100,000
(b) Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
None
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which shareholders may
recommend nominees to the registrant's board of directors that have been
implemented after the registrant last provided disclosure in response to the
requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) or this
Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Attached hereto
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CODE ETH Code of Ethics
Exhibit 99.VOTEREG Proxy Voting Policies and Procedures
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
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.
(Registrant) Cornerstone Strategic Value Fund, Inc.
----------------------------------------------------------------
By (Signature and Title)* /s/ Ralph W. Bradshaw
-----------------------------------------------------
Ralph W. Bradshaw, Chairman and President
(Principal Executive Officer)
Date March 8, 2011
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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.
By (Signature and Title)* /s/ Ralph W. Bradshaw
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Ralph W. Bradshaw, Chairman and President
(Principal Executive Officer)
Date March 8, 2011
By (Signature and Title)* /s/ Frank J. Maresca
---------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date March 8, 2011
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* Print the name and title of each signing officer under his or her signature.