UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05150
Cornerstone Strategic Value Fund, Inc.
(Exact name of registrant as specified in charter)
383 Madison Avenue, New York, New York 10179
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(Address of principal executive offices) (Zip code)
Jodi Levine
383 Madison Avenue, New York, NY 10179
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 272-3550
Date of fiscal year end: December 31, 2007
Date of reporting period: June 30, 2007
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2007
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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
Result of Annual Meeting of Stockholders 12
Description of Dividend Reinvestment Plan 13
Investment Management Agreement Approval Disclosure 15
Proxy Voting and Portfolio Holdings Information 16
Privacy Policy Notice 16
Summary of General Information 17
Shareholder Information 17
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2007 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Financials 20.2
Information Technology 15.0
Healthcare 11.8
Energy 10.8
Consumer Discretionary 10.7
Industrials 10.6
Consumer Staples 9.4
Telecommunication Services 3.6
Utilities 3.5
Materials 2.5
Closed-End Funds 1.2
Other 0.7
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 4.6
2. General Electric Company Industrials 2.9
3. Citigroup Inc. Financials 2.2
4. Microsoft Corporation Information Technology 2.2
5. Bank of America Corporation Financials 2.2
6. EMC Corporation Information Technology 2.1
7. Johnson & Johnson Healthcare 1.9
8. AT&T Inc. Telecommunication Services 1.8
9. Procter & Gamble Company (The) Consumer Staples 1.7
10. Cisco Systems, Inc. Information Technology 1.6
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2007 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.80%
CLOSED-END FUNDS - 1.21%
Total Closed-End Funds (a) $ 1,612,969
------------
CONSUMER DISCRETIONARY - 10.69%
Home Depot, Inc. (The) 23,100 908,985
NIKE, Inc., Class B 14,600 851,034
Time Warner Inc. 76,000 1,599,040
Walt Disney Company (The) 27,200 928,608
Other Consumer
Discretionary (a) 9,947,228
------------
14,234,895
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CONSUMER STAPLES - 9.40%
Altria Group, Inc. 22,300 1,564,122
Coca-Cola Company (The) 27,000 1,412,370
PepsiCo, Inc. ^ 17,600 1,141,360
Procter & Gamble Company (The) 37,797 2,312,798
Walgreen Co. 18,800 818,552
Other Consumer Staples (a) 5,267,151
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12,516,353
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ENERGY - 10.77%
Baker Hughes Incorporated ^ 10,600 891,778
Chevron Corporation 24,532 2,066,576
ConocoPhillips 10,474 822,209
Exxon Mobil Corporation 73,500 6,165,179
Marathon Oil Corp. 15,000 899,400
Schlumberger Limited ^ 17,500 1,486,450
Other Energy (a) 2,012,989
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14,344,581
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FINANCIALS - 20.19%
American Express Company ^ 19,600 1,199,128
American International Group, Inc. 16,831 1,178,675
Bank of America Corporation 59,138 2,891,257
Citigroup Inc. 57,300 2,938,917
Goldman Sachs Group, Inc. (The) 7,300 1,582,275
JPMorgan Chase & Co. 36,632 1,774,820
Metlife, Inc. 15,200 980,096
Morgan Stanley 15,500 1,300,140
Prudential Financial, Inc. 10,700 1,040,361
Wachovia Corporation 19,600 1,004,500
Wells Fargo & Company ^ 48,400 1,702,228
Other Financials (a) 9,292,190
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26,884,587
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HEALTHCARE - 11.84%
Abbott Laboratories 28,000 1,499,400
Amgen Inc. * 22,400 1,238,496
Johnson & Johnson 40,900 2,520,258
Medtronic, Inc. 21,500 1,114,990
Merck & Co. Inc. 17,500 871,500
Pfizer Inc. ^ 36,060 922,054
UnitedHealth Group Incorporated 22,000 1,125,080
WellPoint Inc. * 14,000 1,117,620
Wyeth ^ 20,200 1,158,268
Other Healthcare (a) 4,198,800
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15,766,466
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INDUSTRIALS - 10.63%
3M Co. ^ 9,400 815,826
Boeing Company (The) ^ 9,200 884,672
General Electric Company 100,900 3,862,452
Other Industrials (a) 8,589,444
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14,152,394
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INFORMATION TECHNOLOGY - 15.00%
Cisco Systems, Inc. * 77,400 2,155,590
EMC Corporation * 156,648 2,835,329
Google Inc. * 2,500 1,308,450
Hewlett-Packard Company ^ 19,900 887,938
Intel Corporation 60,500 1,437,480
See accompanying notes to financial statements.
2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2007 (UNAUDITED) (CONCLUDED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY (CONTINUED)
International Business Machines Corporation 12,600 $ 1,326,150
Microsoft Corporation 98,200 2,893,954
Oracle Corporation ^ * 44,272 872,601
Texas Instruments Incorporated 23,900 899,357
Other Information Technology (a) 5,360,048
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19,976,897
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MATERIALS - 2.50%
Total Materials (a) 3,326,658
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REAL ESTATE INVESTMENT TRUST - 0.45%
Total Real Estate Investment Trust (a) 604,760
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TELECOMMUNICATION SERVICES - 3.64%
AT&T Inc. 56,539 2,346,368
Verizon Communications Inc. 41,300 1,700,321
Other Telecommunication Services (a) 807,542
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4,854,231
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UTILITIES - 3.48%
TXU Corp. 12,400 834,520
Other Utilities (a) 3,805,127
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4,639,647
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TOTAL EQUITY SECURITIES
(cost - $97,627,172) 132,914,438
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Principal
Amount
Description (000's) Value
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SHORT-TERM INVESTMENTS - 4.31%
REPURCHASE AGREEMENTS - 4.31%
Bear, Stearns & Co. Inc. +
(Agreements dated 6/29/2007 to be
repurchased at $5,738,796) (b) $ 5,737 $ 5,736,895
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TOTAL SHORT-TERM INVESTMENTS
(cost - $5,736,895) 5,736,895
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TOTAL INVESTMENTS - 104.11%
(cost - $103,364,067) 138,651,333
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LIABILITIES IN EXCESS OF OTHER ASSETS - (4.11)% (5,477,390)
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NET ASSETS - 100.00% $133,173,943
============
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* Non-income producing security.
+ Includes investments purchased with collateral received for securities on
loan.
^ Security or a portion thereof is out on loan.
(a) Represents issues not identified as a top 50 holding in terms of market
value and issues or issuers not exceeding 1% of net assets individually or
in the aggregate, respectively, as of June 30, 2007.
(b) At June 29, 2007, the maturity date for all repurchase agreements held was
July 2, 2007, with interest rates ranging from 2.6875% to 5.3750% and
collateralized by $5,845,698 in U.S. Treasury Bonds.
See accompanying notes to financial statements.
3
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2007 (UNAUDITED)
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ASSETS
Investments, at value, including collateral for securities
on loan of $5,439,510 (Cost $103,364,067)(1) $138,651,333
Receivables:
Dividends 131,585
Interest 2,726
Prepaid expenses 14,484
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Total Assets 138,800,128
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LIABILITIES
Payables:
Upon return of securities loaned 5,439,510
Investment management fees (net of fee waivers) 103,088
Directors' fees 31,907
Other accrued expenses 49,820
Due to custodian 1,860
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Total Liabilities 5,626,185
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NET ASSETS (applicable to 26,086,455 shares of common stock outstanding) $133,173,943
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NET ASSET VALUE PER SHARE ($133,173,943 / 26,086,455) $ 5.11
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NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 26,703,891 shares issued and
26,086,455 shares outstanding (100,000,000 shares authorized) $ 26,086
Paid-in capital 120,327,590
Cost of 617,435 shares repurchased (17,153,887)
Accumulated net realized loss on investments (5,313,112)
Net unrealized appreciation in value of investments 35,287,266
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Net assets applicable to shares outstanding $133,173,943
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(1) Includes securities out on loan to brokers with a market value of
$5,369,277.
See accompanying notes to financial statements.
4
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2007 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends $ 1,322,381
Interest 21,139
Securities lending 22,148
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Total Investment Income 1,365,668
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Expenses:
Investment management fees 665,546
Administration fees 66,554
Directors' fees 54,300
Legal and audit fees 30,002
Printing 24,661
Accounting fees 19,525
Transfer agent fees 12,127
Custodian fees 10,860
Stock exchange listing fees 8,285
Insurance 4,158
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Total Expenses 896,018
Less: Management fee waivers (63,663)
Less: Fees paid indirectly (10,860)
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Net Expenses 821,495
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Net Investment Income 544,173
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investments 1,766,010
Capital gain distributions from regulated investment companies 495
Net change in unrealized appreciation in value of investments 6,129,486
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Net realized and unrealized gain on investments 7,895,991
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 8,440,164
============
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 Six
Months Ended
June 30, 2007 For the Year Ended
(unaudited) December 31, 2006
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DECREASE IN NET ASSETS
Operations:
Net investment income $ 544,173 $ 1,150,839
Net realized gain/(loss) from investments 1,766,010 (61,098)
Capital gain distributions from regulated investment companies 495 39,515
Net change in unrealized appreciation in value of investments 6,129,486 16,725,100
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Net increase in net assets resulting from operations 8,440,164 17,854,356
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Dividends and distributions to shareholders:
Net investment income (544,173) (1,150,839)
Net realized capital gains (1,766,010) --
Return-of-capital (12,120,607) (25,065,536)
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Total dividends and distributions to shareholders (14,430,790) (26,216,375)
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Capital stock transactions:
Proceeds from 443,381 and 932,769 shares newly issued
or from treasury in reinvestment of dividends
and distributions, respectively 2,820,240 5,000,232
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Total decrease in net assets (3,170,386) (3,361,787)
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NET ASSETS
Beginning of period 136,344,329 139,706,116
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End of period $133,173,943 $136,344,329
============ ============
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 period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
For the Six
Months Ended For the Years Ended December 31,
June 30, 2007 ------------------------------------------------------------
(unaudited) 2006 2005 2004 2003 2002
----------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 5.32 $ 5.65 $ 6.48 $ 6.90 $ 6.41 $ 9.20
-------- -------- -------- -------- -------- --------
Net investment income/(loss) # 0.02 0.05 0.03 0.05 0.04 (0.01)
Net realized and unrealized gain/(loss)
on investments 0.31 0.66 0.18 0.55 1.44 (2.29)
-------- -------- -------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations 0.33 0.71 0.21 0.60 1.48 (2.30)
-------- -------- -------- -------- -------- --------
Dividends and distributions to shareholders:
Net investment income (0.02) (0.04) (0.04) (0.05) (0.04) --
Net realized capital gains (0.07) -- (1.00) -- -- --
Return-of-capital (0.47) (1.00) -- (0.99) (0.95) (0.50)
-------- -------- -------- -------- -------- --------
Total dividends and distributions to shareholders (0.56) (1.04) (1.04) (1.04) (0.99) (0.50)
-------- -------- -------- -------- -------- --------
Capital stock transactions:
Anti-dilutive effect due to capital
stock repurchased -- -- -- -- -- 0.02
Anti-dilutive/(dilutive) effect due to shares
issued in reinvestment of dividends
and distributions 0.02 -- -- 0.02 -- (0.01)
-------- -------- -------- -------- -------- --------
Total capital stock transactions 0.02 -- -- 0.02 -- 0.01
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 5.11 $ 5.32 $ 5.65 $ 6.48 $ 6.90 $ 6.41
======== ======== ======== ======== ======== ========
Market value, end of period $ 9.18 $ 8.45 $ 7.05 $ 8.51 $ 9.00 $ 5.85
======== ======== ======== ======== ======== ========
Total investment return (a) 18.30% 45.36% (1.32)% 8.38% 77.69% (20.85)%
======== ======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $133,174 $136,344 $139,706 $154,690 $ 26,565 $ 24,376
Ratio of expenses to average net assets,
net of fee waivers, if any (b) 1.22%(d) 1.22% 1.20% 1.28% 1.20% 1.80%
Ratio of expenses to average net assets,
excluding fee waivers, if any (c) 1.32%(d) 1.32% 1.36% 1.50% 1.59% 2.17%
Ratio of expenses to average net assets,
net of fee waivers, if any (c) 1.24%(d) 1.25% 1.26% 1.36% 1.25% 1.86%
Ratio of net investment income/(loss) to
average net assets 0.81%(d) 0.85% 0.58% 0.73% 0.68% (0.13)%
Portfolio turnover rate 2.82% 10.59% 21.60% 39.05% 11.88% 29.63%
# 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 exclude the reduction for fees paid indirectly.
(d) Annualized.
See accompanying notes to financial statements.
7
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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NOTE A. SIGNIFICANT ACCOUNTING POLICIES
Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. Its
investment objective is to seek long-term capital appreciation through
investment 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.
The following is a summary of significant accounting policies consistently
followed by the Fund:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. Securities and assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Board. Fair valuation methodologies and procedures
may include, but are not limited to: analysis and review of financial and
non-financial information about the company; comparisons to the valuation and
changes in valuation of similar securities, including reference to special
reports prepared by analysts and or reports published in the financial press,
the financial conditions and prospects of the issuer available, including
considering any recent management or capital structure changes or other recent
events that may impact the price of the security; and evaluation of any other
information that could be indicative of the value of the security. At June 30,
2007, the Fund held no securities valued in good faith by the Board of
Directors. The net asset value per share of the Fund is calculated weekly and on
the last business day of the month with the exception of those days on which the
American Stock Exchange, LLC is closed.
On September 20, 2006, the FASB released Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" ("FAS 157"). FAS 157 establishes an
authoritative definition of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. The
application of FAS 157 is required for fiscal years, beginning after November
15, 2007 and interim periods within those fiscal years. At this time, the Fund
is evaluating the implication of FAS 157 and its impact on the financial
statements has not yet been determined.
REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Investment
Manager" or "Cornerstone") considers creditworthy. The seller under a repurchase
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the
8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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repurchase price plus accrued interest. Cornerstone monitors daily, the
mark-to-market of the value of the collateral, and, if necessary, requires the
seller to maintain additional securities, so that the value of the collateral is
not less than the repurchase price. Default by or bankruptcy of the seller
would, however, expose the Fund to possible loss because of adverse market
action or delays in connection with the disposition of the underlying
securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex- dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
In July 2006, the Financial Accounting Standards Board ("FASB") released FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), an
interpretation of FASB Statement No. 109. FIN 48 provides guidance for how
uncertain tax positions should be recognized, measured, presented and disclosed
in the financial statements. FIN 48 requires the accounting and disclosure of
tax positions taken or expected to be taken in the course of preparing the
Fund's tax returns to determine whether the tax positions are "more likely than
not" of being sustained by the applicable tax authority. Tax positions not
deemed to meet the more likely than not threshold would be recorded as a tax
benefit or expense in the current year. Adoption of FIN 48 is effective during
the first required financial reporting period for fiscal years beginning after
December 15, 2006. Management adopted FIN 48 on June 29, 2007. There was no
material impact to the financial statements or disclosures thereto as a result
of the adoption of this pronouncement.
DISTRIBUTIONS TO SHAREHOLDERS: Effective 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, beginning in 2007, based on the Fund's
net asset value on the last business day in each October. The terms of the
distribution policy will be reviewed and approved at least annually by the
Fund's Board of Directors and can be modified at their discretion. To the extent
that these distributions exceed the current earnings of the Fund, the balance
will be generated from sales of portfolio securities held by the Fund, which
will either be short-term or long-term capital gains or a tax-free
return-of-capital. To the extent these distributions are not represented by net
investment income and capital gains, they will not represent yield or investment
return on the Fund's investment portfolio. The Fund plans to maintain this
distribution policy even if regulatory requirements would make part of a
return-of-capital, necessary to maintain the distribution, taxable to
shareholders and to disclose that portion of the distribution that is classified
as ordinary income. Although it has no current intention to do so, the Board may
terminate this distribution policy at any time and such 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
9
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
constitute a return-of-capital for tax purposes. A return-of-capital
distribution reduces the cost basis of an investor's shares in the Fund.
Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.
NOTE B. AGREEMENTS
Cornerstone serves as the Fund's Investment Manager with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund, an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. For the year 2007, Cornerstone
voluntarily agreed to waive its management fees from the Fund to the extent that
the Fund's net monthly operating expenses (including basic legal fees but
excluding other legal expenses) exceed a rate of 0.10% of average net assets.
For the six months ended June 30, 2007, Cornerstone earned $665,546 for
investment management services, of which it waived $63,663. The Investment
Manager may discontinue such undertaking at any time during the fiscal year
without notice to fund shareholders.
Included in the Statement of Operations, under the caption Fees paid indirectly,
are expense offsets of $10,860 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $19,410 for the six months ended June 30,
2007 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, serves as Secretary of the Fund.
NOTE C. INVESTMENT IN SECURITIES
For the six months ended June 30, 2007, purchases and sales of securities, other
than short-term investments, were $3,776,432 and $14,540,402 respectively.
NOTE D. SHARE REPURCHASE PROGRAM
As has been done in the past to enhance shareholder value, pursuant to Section
23 of the Investment Company Act of 1940, as amended, the Fund may again in the
future purchase shares of its common stock on the open market from time to time,
at such times, and in such amounts as may be deemed advantageous to the Fund.
Nothing herein shall be considered a commitment to purchase such shares. The
Fund had no repurchases during the six months ended June 30, 2007. No limit has
been placed on the number of shares to be repurchased by the Fund other than
those imposed by federal securities laws.
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 E. SECURITIES LENDING
To generate additional income, the Fund may lend up to 33 1/3% of its total
assets. The Fund receives payments from borrowers equivalent to the dividends
and interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or 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.
10
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
The value of securities on loan to brokers at June 30, 2007, was $5,369,277.
During the six months ended June 30, 2007, the Fund earned $22,148 in securities
lending income which is included under the caption Securities lending in the
Statement of Operations.
NOTE F. FEDERAL INCOME TAXES
Income and capital gains distributions are deter- mined in accordance with
federal income tax regulations, which may differ from GAAP. These differences
are primarily due to differing treatments of losses deferred due to wash sales
and Post-October losses (as later defined), and excise tax regulations.
The tax character of dividends and distributions paid during the years ended
December 31, for the Fund were as follows:
ORDINARY INCOME RETURN-OF-CAPITAL
--------------- -----------------
2006 2005 2006 2005
---- ---- ---- ----
$1,150,839 $980,195 $25,065,536 --
LONG-TERM CAPITAL GAINS
-----------------------
2006 2005
---- ----
-- $24,369,995
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2006, the Fund did not incur Post-October losses.
At December 31, 2006, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $5,257,673 of which $2,513,030 expires in 2008,
$1,281,365 expires in 2009, $693,207 expires in 2010, $635,700 expires in 2011,
and $134,371 expires in 2012.
At June 30, 2007, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation from investments were $103,420,001, $35,818,433,
$(587,101) and $35,231,332, respectively.
11
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On April 16, 2007, the Annual Meeting of Stockholders of Cornerstone Strategic
Value Fund, Inc. was held and the following matter was voted upon based on
25,739,422 shares of common stock outstanding on February 16, 2007:
(1) To approve the re-election of two Class III Directors until the 2010
Annual Meeting.
NAME OF CLASS III DIRECTORS FOR WITHHOLD
Andrew A. Strauss 24,097,615 299,467
Glenn W. Wilcox, Sr. 24,100,656 296,427
12
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. 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. American Stock Transfer & Trust Company serves as the Agent
that administers the Plan for the shareholders in the Plan.
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
share- holder. Shareholders who do not wish to have Distributions automatically
reinvested should so notify the Agent at P.O. Box 922, Wall Street Station, New
York, New York 10269-0560. Under the Plan, the Fund's Distributions to
shareholders are reinvested in full and fractional shares as described below.
When the Fund declares a Distribution the Agent, on the shareholder's behalf,
will (i) receive additional authorized shares from the Fund either newly issued
or repurchased from shareholders by the Fund and held as treasury stock ("Newly
Issued Shares") or (ii) purchase outstanding shares on the open market, on the
American Stock Exchange, LLC or elsewhere, with cash allocated to it by the Fund
("Open Market Purchases").
The method for determining the number of shares to be received when
Distributions are reinvested will vary depending upon whether the net asset
value of the Fund's shares is higher or lower than its market price. If the net
asset value of the Fund's shares is lower than its market price, the number of
Newly Issued Shares received will be determined by dividing the amount of the
Distribution either by the Fund's net asset value per share or by 95% of its
market price, whichever is higher. If the net asset value of the Fund's shares
is higher than its market price, shares acquired by the Agent in Open Market
Purchases will be allocated to the reinvesting share- holders based on the
average cost of such Open Market Purchases.
Whenever the Fund declares a Distribution and the net asset value of the Fund's
shares is higher than its market price, the Agent will apply the amount of such
Distribution payable to Plan participants of the Fund in Fund shares (less such
Plan participant's pro rata share of brokerage commissions incurred with respect
to Open Market Purchases in connection with the reinvestment of such
Distribution) to the purchase on the open market of Fund shares for such Plan
participant's account. Such purchases will be made on or after the payable date
for such Distribution, and in no event more than 30 days after such date except
where temporary curtailment or suspension of purchase is necessary to comply
with applicable provisions of federal securities laws. The Agent may aggregate a
Plan participant's purchases with the purchases of other Plan participants, and
the average price (including brokerage commissions) of all shares purchased by
the Agent shall be the price per share allocable to each Plan participant.
Registered shareholders who do not wish to have their Distributions
automatically reinvested should so notify the Fund in writing. If a shareholder
has not elected to receive cash Distributions and the Agent does not receive
notice of an election to receive cash Distributions prior to the record date of
any Distribution, the shareholder will automatically receive such Distributions
in additional shares.
Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Distribution payment date.
When a Participant withdraws from the Plan, or upon 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.
13
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
The Agent will hold shares in the account of the Plan participant in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan. Each
participant, nevertheless, has the right to receive certificates for whole
shares owned. 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.
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.
14
INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED)
The Board of Directors including, the Independent Directors, (the "Board") of
Cornerstone Strategic Value Fund, Inc.(the "Fund") considers the approval of the
Investment Management Agreement (the "Agreement") between Cornerstone Advisors,
Inc. (the "Investment Manager") and the Fund on an annual basis. The most recent
approval of the Agreement occurred at a meeting of the Board held on February
16, 2007.
In determining whether to approve the Agreement, the Board requested and
received extensive materials and information from the Investment Manager to
assist them in considering the approval of the continuance of the Agreement.
Based on their review of the information requested and provided, and the
discussions with management of the Investment Manager, the Board determined that
the approval of the Agreement was consistent with the best interests of the Fund
and its shareholders, and would enable the Fund to continue to receive high
quality services at a cost that is appropriate, reasonable, and in the best
interests of the Fund and its shareholders. The Board made these determinations
on the basis of the following factors, among others: (1) the nature and quality
of the services provided by the Investment Manager; (2) the cost to the
Investment Manager for providing such services, with special attention to the
Investment Manager's profitability (and whether the Investment Manager realizes
any economies of scale); (3) the direct and indirect benefits received by the
Investment Manager from its relationship with the Fund and the other investment
company advised by the Investment Manager; and (4) comparative information as to
the management fees, expense ratios and performance of other similarly situated
closed-end investment companies.
The materials provided by the Investment Manager to the Board described the
services provided by the Investment Manager to the Fund and included an overview
of the Investment Manager and its investment process and policies, including the
Investment Manager's extensive knowledge and experience in the closed-end fund
industry. The Board also discussed the knowledge of the Investment Manager with
respect to managing the Fund's monthly distribution policy and the extent to
which such policy contributes to the market's positive valuation of the Fund.
The Board also favorably received the Investment Manager's continued commitment
to voluntarily waive its management fees from the Fund to the extent that
monthly operating expenses exceed 0.10% of average net assets calculated monthly
(including basic legal fees but excluding other extraordinary legal expenses).
The Board also reviewed and discussed a comparison of the Fund's performance
with comparable closed-end funds and a comparison of the Fund's expense ratios
and management fees with those comparable funds. Additionally, the Investment
Manager presented an analysis of its profitability based on its contractual
relationship with the Fund and the other investment company advised by the
Investment Manager.
The Board carefully evaluated this information, taking into consideration many
factors including, the overall high quality of the personnel, operations,
financial condition, investment management capabilities, methodologies, and
performance of the Investment Manager, and was advised by independent legal
counsel with respect to its deliberations. Based on its review of the
information requested and provided, the Board determined that the management
fees payable to the Investment Manager under the Agreement are fair and
reasonable in light of the services to be provided, the anticipated costs of
these services, the profitability of the Investment Manager's relationship with
the Fund, and the comparability of the proposed fee to fees paid by comparable
closed-end funds. The Board determined that the Agreement is consistent with the
best interests of the Fund and its share- holders, and enables the Fund to
receive high quality services at a cost that is appropriate, reasonable, and in
the best interests of the Fund and its shareholders.
Accordingly, in light of the above considerations and such other factors and
information it considered relevant, the Board by a unanimous vote of those
present in person at the meeting (including a separate vote of the Independent
Directors present in person at the meeting) approved the continuance of the
Agreement with respect to the Fund.
15
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 (212) 272-3550 or on the website of the Securities and
Exchange Commission, http://www.sec.gov.
This report incorporates a Summary Schedule of Investments for the Fund. A
complete Schedule of Investments for the Fund may be obtained free of charge by
contacting the Fund at (212) 272-3550.
The Fund files a complete schedule of its portfolio holdings for the first and
third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the SEC's Public Reference Room may be obtained by calling (202)
551-8090.
PRIVACY POLICY NOTICE (UNAUDITED)
The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:
1. Information from the Consumer: this category includes information
the Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address phone
number, social security number, assets, income and date of birth);
and
2. Information about the Consumer's transactions: this category
includes information about your trans- actions with the Fund, its
affiliates, or others (such as your account number and balance,
payment history, parties to transactions, cost basis information,
and other financial information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
16
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment
company whose shares trade on the American Stock Exchange, LLC. Its investment
objective is to seek long-term capital appreciation through investment 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 American Stock Exchange, LLC (symbol "CLM"). The share
price is published in: The New York Times (daily) under the designation
"CornerStrt" and The Wall Street Journal (daily) and Barron's (each Monday)
under the designation "CornstnStrat." The net asset value per share is available
weekly and may be obtained by contacting the Fund at the general inquiry phone
number.
--------------------------------------------------------------------------------
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940, as amended, that Cornerstone Strategic Value Fund, Inc. may
from time to time purchase shares of its capital stock in the open market.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information from
the records of the Fund without examination by independent registered public
accountants who do not express an opinion thereon. 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.
--------------------------------------------------------------------------------
17
CORNERSTONE STRATEGIC VALUE FUND, INC.
DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of Directors and President
William A. Clark Director and Vice President
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Gary A. Bentz Chief Compliance Officer
Thomas R. Westle Secretary
Jodi B. Levine Treasurer
INVESTMENT MANAGER
Cornerstone Advisors, Inc.
One West Pack Square
Suite 1650
Asheville, NC 28801
ADMINISTRATOR
Bear Stearns Funds Management Inc.
383 Madison Avenue
New York, NY 10179
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179
STOCK TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Co.
59 Maiden Lane
New York, NY 10038
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Tait, Weller & Baker LLP
1818 Market Street
Suite 2400
Philadelphia, PA 19103
LEGAL COUNSEL
Blank Rome LLP
405 Lexington Avenue
New York, NY 10174
For shareholder inquiries, registered shareholders should call
(800) 937-5449. For general inquiries, please call (212) 272-3550.
[AMEX LOGO]
LISTED
CLM(TM)
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2007 (UNAUDITED)
--------------------------------------------------------------------------------
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
EQUITY SECURITIES - 99.80%
CLOSED-END FUNDS - 1.21%
Adams Express Company 49,500 $ 737,055
General American Investors Company ^ 3,000 121,650
Liberty All-Star Equity Fund 67,300 604,354
Liberty All-Star Growth Fund, Inc. 26,300 149,910
------------
1,612,969
------------
CONSUMER DISCRETIONARY - 10.69%
Amazon.com, Inc. ^ * 5,500 376,255
Bed Bath & Beyond Inc. * 4,200 151,158
Best Buy Co., Inc. ^ 3,625 169,179
Carnival Corporation ^ 11,800 575,486
Citadel Broadcasting Corporation 2,088 13,468
Clear Channel Communications, Inc. 3,300 124,806
Coach, Inc. * 3,500 165,865
Comcast Corporation, Class A * 28,555 802,967
Fortune Brands, Inc. 3,500 288,295
Gannett Co., Inc. 3,500 192,325
Gap, Inc. (The) 12,200 233,020
Goodyear Tire & Rubber Company (The) * 4,500 156,420
Harley-Davidson, Inc. 4,400 262,284
Hilton Hotels Corporation 6,200 207,514
Home Depot, Inc. (The) 23,100 908,985
J.C. Penney Company, Inc. 4,500 325,710
Johnson Controls, Inc. 2,500 289,425
Kohl's Corporation * 2,500 177,575
Lowe's Companies, Inc. 22,400 687,456
Macy's, Inc. 11,052 439,649
Marriott International, Inc., Class A 4,200 181,608
Mattel, Inc. 5,500 139,095
McDonald's Corporation 15,100 766,476
News Corporation, Class A 23,000 487,830
NIKE, Inc., Class B 14,600 851,034
Omnicom Group Inc. ^ 13,200 698,544
Sears Holdings Corporation * 503 85,258
Staples, Inc. 10,800 256,284
Starbucks Corporation * 5,800 152,192
Target Corporation 11,800 750,480
Time Warner Inc. 76,000 1,599,040
TJX Companies, Inc. (The) 3,000 82,500
Toyota Motor Corporation ADR ^ 2,500 314,700
Viacom Inc., Class B * 9,450 393,404
Walt Disney Company (The) 27,200 928,608
------------
14,234,895
------------
CONSUMER STAPLES - 9.40%
Altria Group, Inc. 22,300 1,564,122
Anheuser-Busch Companies, Inc. 6,200 323,392
Archer-Daniels-Midland Company 9,460 313,031
Coca-Cola Company (The) 27,000 1,412,370
Colgate-Palmolive Company 3,400 220,490
ConAgra Foods, Inc. 6,900 185,334
Costco Wholesale Corporation ^ 4,000 234,080
CVS Corporation 18,430 671,774
General Mills, Inc. ^ 12,000 701,040
H.J. Heinz Company 4,000 189,880
Kimberly-Clark Corporation 5,500 367,895
Kraft Foods Inc, Class A 15,432 543,978
Kroger Co. (The) 13,800 388,194
PepsiCo, Inc. ^ 17,600 1,141,360
Procter & Gamble Company (The) 37,797 2,312,798
Sara Lee Corporation 4,500 78,300
Sysco Corporation 9,800 323,302
Walgreen Co. 18,800 818,552
Wal-Mart Stores, Inc. 15,100 726,461
------------
12,516,353
------------
ENERGY - 10.77%
Anadarko Petroleum Corp. 2,600 135,174
Baker Hughes Incorporated ^ 10,600 891,778
BJ Services Company 3,500 99,540
Chevron Corporation 24,532 2,066,576
ConocoPhillips 10,474 822,209
Devon Energy Corporation 2,500 195,725
Exxon Mobil Corporation 73,500 6,165,179
Halliburton Company 6,700 231,150
Marathon Oil Corp. 15,000 899,400
Occidental Petroleum Corporation 10,500 607,740
Schlumberger Limited ^ 17,500 1,486,450
Valero Energy Corporation 6,000 443,160
XTO Energy, Inc. 5,000 300,500
------------
14,344,581
------------
FINANCIALS - 20.19%
AFLAC Incorporated 7,000 359,800
Allstate Corporation (The) 9,300 572,043
American Express Company ^ 19,600 1,199,128
American International Group, Inc. 16,831 1,178,675
Aon Corporation 4,900 208,789
Bank of America Corporation 59,138 2,891,257
Bank of New York Company, Inc. (The) 11,400 472,416
BB&T Corporation 4,000 162,720
Bear Stearns Companies, Inc. (The) 2,500 350,000
Broadridge Financial Solutions Inc. 3,850 73,612
CB Richard Ellis Group, Inc., Class A ^ * 6,500 237,250
Charles Schwab Corporation (The) 6,000 123,120
Chubb Corporation (The) 4,100 221,974
Citigroup Inc. 57,300 2,938,917
Fannie Mae 4,000 261,320
Franklin Resources, Inc. ^ 3,700 490,139
Freddie Mac 2,900 176,030
Goldman Sachs Group, Inc. (The) 7,300 1,582,275
Hartford Financial Services Group, Inc. (The) 6,000 591,060
JPMorgan Chase & Co. 36,632 1,774,820
Lehman Brothers Holdings Inc. ^ 7,200 536,544
Marsh & McLennan Companies, Inc. ^ 6,000 185,280
Merrill Lynch & Co., Inc. 7,200 601,776
Metlife, Inc. 15,200 980,096
Morgan Stanley 15,500 1,300,140
National City Corporation 12,700 423,164
PNC Financial Services Group, Inc. ^ 4,600 329,268
Prudential Financial, Inc. 10,700 1,040,361
State Street Corporation ^ 3,500 239,400
SunTrust Banks, Inc. 7,600 651,624
Travelers Companies, Inc. (The) ^ 9,476 506,966
U.S. Bancorp ^ 21,901 721,638
UnumProvident Corporation 2,600 67,886
Wachovia Corporation 19,600 1,004,500
Washington Mutual, Inc. ^ 11,550 492,492
Wells Fargo & Company ^ 48,400 1,702,228
Western Union Company ^ 11,324 235,879
------------
26,884,587
------------
HEALTHCARE - 11.84%
Abbott Laboratories 28,000 1,499,400
Aetna Inc. 6,000 296,400
Amgen Inc. * 22,400 1,238,496
Applera Corporation 8,000 244,320
Baxter International Inc. 5,000 281,700
Becton, Dickinson and Company 6,900 514,050
Biogen Idec Inc. * 3,000 160,500
Bristol-Myers Squibb Company 18,500 583,860
Cardinal Health, Inc. 2,950 208,388
Eli Lilly and Company 4,700 262,636
Gilead Sciences, Inc. * 7,000 271,390
IMS Health Incorporated ^ 3,000 96,390
Johnson & Johnson 40,900 2,520,258
McKesson Corporation 5,300 316,092
Medco Health Solutions, Inc. * 2,687 209,559
Medtronic, Inc. 21,500 1,114,990
Merck & Co. Inc. 17,500 871,500
Pfizer Inc. ^ 36,060 922,054
Schering-Plough Corporation 17,500 532,700
Stryker Corporation 3,500 220,815
UnitedHealth Group Incorporated 22,000 1,125,080
WellPoint Inc. * 14,000 1,117,620
Wyeth ^ 20,200 1,158,268
------------
15,766,466
------------
INDUSTRIALS - 10.63%
3M Co. ^ 9,400 815,826
Boeing Company (The) ^ 9,200 884,672
Burlington Northern Santa Fe Corporation 2,900 246,906
Caterpillar Inc. 6,800 532,440
CSX Corporation 10,000 450,800
Danaher Corporation 3,500 264,250
Emerson Electric Co. 12,000 561,600
FedEx Corp. ^ 4,500 499,365
General Dynamics Corporation ^ 6,200 484,964
General Electric Company 100,900 3,862,452
Honeywell International Inc. ^ 12,500 703,500
Illinois Tool Works Inc. 13,300 720,727
Ingersoll-Rand Company Ltd., Class A 4,500 246,690
Lockheed Martin Corporation 4,000 376,520
Norfolk Southern Corporation ^ 5,500 289,135
Northrop Grumman Corporation ^ 5,000 389,350
Southwest Airlines Co. 5,700 84,987
Tyco International Ltd. ^ 10,397 351,315
Union Pacific Corporation 2,000 230,300
United Parcel Service, Inc., Class B 9,600 700,800
United Technologies Corporation 11,000 780,230
Waste Management, Inc. ^ 17,300 675,565
------------
14,152,394
------------
INFORMATION TECHNOLOGY - 15.00%
Adobe Systems Incorporated * 4,200 168,630
Agilent Technologies Inc. * 8,000 307,520
Analog Devices, Inc. 3,500 131,740
Apple Computer, Inc. ^ * 3,000 366,120
Applied Materials, Inc. ^ 33,800 671,606
Automatic Data Processing, Inc. ^ 15,400 746,438
Cisco Systems, Inc. * 77,400 2,155,590
Corning Incorporated * 8,000 204,400
Dell Inc. * 4,700 134,185
eBay Inc. * 8,500 273,530
Electronic Data Systems Corporation 5,000 138,650
EMC Corporation * 156,648 2,835,329
First Data Corporation ^ 15,824 516,970
Google Inc. * 2,500 1,308,450
Hewlett-Packard Company ^ 19,900 887,938
Intel Corporation 60,500 1,437,480
International Business Machines Corporation 12,600 1,326,150
Micron Technology, Inc. ^ * 11,500 144,095
Microsoft Corporation 98,200 2,893,954
Motorola, Inc. 15,200 269,040
Oracle Corporation ^ * 44,272 872,601
QUALCOMM Inc. 17,000 737,630
Sun Microsystems, Inc. * 7,500 39,450
Texas Instruments Incorporated 23,900 899,357
Yahoo! Inc. * 18,800 510,044
------------
19,976,897
------------
MATERIALS - 2.50%
Alcoa Inc. 16,900 684,957
Dow Chemical Company (The) 10,400 459,888
E. I. du Pont de Nemours and Company 14,800 752,432
International Paper Company ^ 10,500 410,025
Monsanto Company 10,160 686,206
Newmont Mining Corporation ^ 3,000 117,180
Praxair, Inc. 3,000 215,970
------------
3,326,658
------------
REAL ESTATE INVESTMENT TRUST - 0.45%
Simon Property Group, Inc. ^ 6,500 604,760
------------
TELECOMMUNICATION SERVICES - 3.64%
ALLTEL Corporation 4,000 270,200
AT&T Inc. 56,539 2,346,368
Sprint Nextel Corporation ^ 25,946 537,342
Verizon Communications Inc. 41,300 1,700,321
------------
4,854,231
------------
UTILITIES - 3.48%
American Electric Power Company, Inc. ^ 8,000 360,320
CenterPoint Energy, Inc. 10,000 174,000
Dominion Resources, Inc. ^ 4,600 397,026
Duke Energy Corporation ^ 15,800 289,140
Edison International 6,500 364,780
Exelon Corporation 6,000 435,600
FirstEnergy Corp. 5,000 323,650
FPL Group, Inc. ^ 4,000 226,960
PG&E Corporation 9,000 407,700
Public Service Enterprise Group Incorporated 3,500 307,230
Southern Company (The) 11,900 408,051
TXU Corp. 12,400 834,520
Williams Companies, Inc. (The) 3,500 110,670
------------
4,639,647
------------
TOTAL EQUITY SECURITIES
(cost - $97,627,172) 132,914,438
------------
PRINCIPAL
AMOUNT
(000'S)
---------
SHORT-TERM INVESTMENTS - 4.31%
REPURCHASE AGREEMENTS - 4.31%
Bear, Stearns & Co. Inc. + ++
(Agreements dated 6/29/2007 to be repurchased
at $2,867,452, 2.6875%, 7/2/2007, collateralized
by $2,920,214 in United States Treasury Bonds) $ 2,867 $ 2,866,810
Bear, Stearns & Co. Inc. + ++
(Agreements dated 6/29/2007 to be repurchased
at $2,573,852, 5.3750%, 7/2/2007, collateralized
by $2,619,758 in United States Treasury Bonds) 2,573 2,572,700
Bear, Stearns & Co. Inc.
(Agreements dated 6/29/2007 to be repurchased
at $297,491, 4.3000%, 7/2/2007, collateralized
by $305,726 in United States Treasury Bonds) 297 297,385
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $5,736,895) 5,736,895
------------
TOTAL INVESTMENTS - 104.11%
(cost - $103,364,067) 138,651,333
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (4.11)% (5,477,390)
------------
NET ASSETS - 100.00% $133,173,943
============
---------
ADR American Depositary Receipt
* Non-income producing security.
+ Stated interest rate, before rebate earned by borrower of securities on
loan.
++ Represents investment purchased with collateral received for securities on
loan.
^ Security or a portion thereof is out on loan.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANIES AND
AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial
officer have evaluated the Registrant's disclosure controls and procedures as of
a date within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of such date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial
officer are aware of no changes in the Registrant's internal control over
financial reporting that occurred during the Registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Separate certifications of Principal Executive and Financial
Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as
EX-99.CERT.
(b) Certification of Principal Executive and Financial Officers pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.
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.
Cornerstone Strategic Value Fund, Inc.
By: /s/ RALPH W. BRADSHAW
---------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: August 31, 2007
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: /s/ RALPH W. BRADSHAW
---------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: August 31, 2007
By: /s/ JODI B. LEVINE
------------------
Name: Jodi B. Levine
Title: Principal Financial Officer
Date: August 31, 2007