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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
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CORNERSTONE STRATEGIC VALUE FUND, INC.
(Exact name of registrant as specified in charter)
260 MADISON AVENUE, 8th FLOOR NEW YORK, NEW YORK 10016
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(Address of principal executive offices) (Zip code)
Frank J. Maresca
ULTIMUS FUND SOLUTIONS, LLC, 260 MADISON AVENUE, 8th FLOOR NEW YORK, NY 10016
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(Name and address of agent for service)
Registrant's telephone number, including area code: (646) 881-4985
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Date of fiscal year end: DECEMBER 31, 2010
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Date of reporting period: JUNE 30, 2010
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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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Directors and Corporate Officers
Ralph W. Bradshaw Chairman of the Board of
Directors and President
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Gary A. Bentz Chief Compliance Officer,
Secretary, and
Assistant Treasurer
Frank J. Maresca Treasurer
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
1075 Hendersonville Road Trust Co.
Suite 250 59 Maiden Lane
Asheville, NC 28803 New York, NY 10038
INDEPENDENT REGISTERED
ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Ultimus Fund Solutions, LLC Tait, Weller & Baker LLP
260 Madison Avenue 1818 Market Street
8th Floor Suite 2400
New York, NY 10016 Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
JPMorgan Chase Bank, N.A. Blank Rome LLP
14201 North Dallas Pkwy. 405 Lexington Avenue
Second Floor New York, NY 10174
Dallas, TX 75254
EXECUTIVE OFFICES
260 Madison Avenue
8th Floor
New York, NY 10016
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (513) 326-3597.
CLM
LISTED
NYSE
AMEX(TM)
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2010
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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
Results of Annual Meeting of Stockholders 14
Investment Management Agreement Approval Disclosure 15
Description of Dividend Reinvestment Plan 16
Proxy Voting and Portfolio Holdings Information 18
Privacy Policy Notice 18
Summary of General Information 19
Shareholder Information 19
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2010 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Information Technology 17.9
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Financials 13.2
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Healthcare 11.6
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Consumer Staples 10.9
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Energy 10.1
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Industrials 10.0
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Consumer Discretionary 9.7
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Closed-End Funds 6.7
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Utilities 3.5
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Materials 3.1
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Telecommunication Services 2.6
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Other 0.7
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobill Corporation Energy 3.6
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2. Apple, Inc. Information Technology 3.1
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3. Microsoft Corporation Information Technology 2.5
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4. JPMorgan Chase & Company Financials 2.3
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5. International Business Machines Corporation Information Technology 2.1
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6. Procter & Gamble Company (The) Consumer Staples 2.0
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7. Cisco System, Inc. Information Technology 2.0
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8. AT&T, Inc. Telecommunication Services 1.9
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9. Google, Inc. - Class A Information Technology 1.9
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10. Liberty All-Star Equity Fund Closed-End Funds 1.8
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.29%
CLOSED-END FUNDS - 6.69%
CORE - 5.89%
Liberty All-Star Equity Fund 218,630 $ 870,147
Liberty All-Star Growth Fund 196,201 669,046
Zweig Fund, Inc. (The) 253,750 761,250
Other Core (a)(b) 526,638
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2,827,081
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REAL ESTATE - 0.80%
Other Real Estate (a) 381,450
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TOTAL CLOSED-END FUNDS 3,208,531
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CONSUMER DISCRETIONARY - 9.86%
Amazon.com, Inc. * 3,000 327,780
McDonald's Corporation 11,400 750,918
Target Corporation 8,800 432,696
Walt Disney Company (The) 10,200 321,300
Yum! Brands, Inc. 9,000 351,360
Other Consumer Discretionary (a) 2,542,960
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4,727,014
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CONSUMER STAPLES - 10.84%
Altria Group, Inc. 20,800 416,832
Coca-Cola Company (The) 13,500 676,620
Kraft Foods, Inc. - Class A 10,932 306,096
PepsiCo, Inc. 5,600 341,320
Procter & Gamble Company (The) 16,297 977,494
Wal-Mart Stores, Inc. 10,100 485,507
Other Consumer Staples (a) 1,993,908
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5,197,777
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ENERGY - 10.09%
Chevron Corporation 10,732 728,273
Conocophillips 14,974 735,074
Exxon Mobil Corporation 29,936 1,708,462
Marathon Oil Corporation 11,500 357,535
Schlumberger Ltd. 6,000 332,040
Other Energy (a) 975,005
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4,836,389
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No. of
Description Shares Value
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FINANCIALS - 13.14%
Bank of America Corporation 25,138 $ 361,233
Goldman Sachs Group, Inc. (The) 5,000 656,350
JPMorgan Chase & Company 30,132 1,103,133
PNC Financial Services Group, Inc. 7,600 429,400
Travelers Companies, Inc. (The) 9,476 466,693
Wells Fargo & Company 21,400 547,840
Other Financials (a) 2,736,329
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6,300,978
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HEALTHCARE - 11.63%
Abbott Laboratories 9,200 430,376
Amgen, Inc. * 6,700 352,420
Bristol-Myers Squibb Company 19,000 473,860
Johnson & Johnson 13,400 791,404
Merck & Company, Inc. 15,267 533,887
Pfizer, Inc. 38,622 550,750
UnitedHealth Group, Inc. 11,000 312,400
Other Health Care (a) 2,132,403
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5,577,500
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INDUSTRIALS - 10.01%
3M Company 4,400 347,556
Caterpillar, Inc. 5,300 318,371
Deere & Company 6,500 361,920
General Electric Company 51,900 748,398
United Technologies Corporation 5,000 324,550
Other Industrials (a) 2,699,382
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4,800,177
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INFORMATION TECHNOLOGY - 17.89%
Apple, Inc. * 5,900 1,484,027
Cisco Systems, Inc. * 45,400 967,474
Google, Inc. - Class A * 2,000 889,900
Hewlett-Packard Company 11,400 493,392
Intel Corporation 39,500 768,275
International Business Machines Corporation 8,100 1,000,188
Microsoft Corporation 51,200 1,178,112
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See accompanying notes to financial statements.
2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED), (CONCLUDED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY (CONTINUED)
Oracle Corporation 22,272 $ 477,957
QUALCOMM, Inc. 10,000 328,400
Other Information Technology (a) 990,774
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8,578,499
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MATERIALS - 3.09%
E.I. Du Pont de Nemours & Company 9,500 328,605
Praxair, Inc. 6,500 493,935
Other Materials (a) 661,367
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1,483,907
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REAL ESTATE INVESTMENT TRUST - 0.00%
Total Real Estate Investment Trust (a) 1,131
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TELECOMMUNICATION SERVICES -- 2.57%
AT&T, Inc. 37,039 895,973
Verizon Communications, Inc.^ 12,000 336,240
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1,232,213
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UTILITIES - 3.48%
Other Utilities (a) 1,671,075
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TOTAL EQUITY SECURITIES
(cost - $49,484,492) 47,615,191
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No. of
Description Shares Value
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SHORT-TERM INVESTMENT - 0.83%
MONEY MARKET FUND - 0.83%
JPMorgan U.S. Government Money Market Fund
(cost - $395,924) 395,924 395,924
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TOTAL INVESTMENTS - 100.12%
(cost - $49,880,416) 48,011,115
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LIABILITIES IN EXCESS OF OTHER ASSETS - (0.12)% (56,654)
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NET ASSETS - 100.00% $ 47,954,461
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(a) Represents issuers not identified as a top 50 holding in terms of market
value and issues or issuers not exceeding 1% of net assets individually or
in the aggregate, respectively, as of June 30, 2010.
(b) Affiliated investment. The Fund holds 0.50% (based on net assets) of
Adams Express Company. A director of the Fund also serves as a director to
such company. There were no purchases or sales of this security during the
six months ended June 30, 2010.
* Non-income producing security.
^ Security or a portion thereof is out on loan.
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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 - JUNE 30, 2010 (UNAUDITED)
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ASSETS
Investments, at value
Unaffiliated issuers (cost - $49,558,126) $ 47,772,723
Affiliated issuer (cost - $322,290) 238,392
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Total investments (cost - $49,880,416) 48,011,115
Deposits with Brokers(1) 332,836
Receivables:
Dividends 67,858
Prepaid expenses 4,829
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Total Assets 48,416,638
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LIABILITIES
Payables:
Upon return of securities loaned 332,836
Investment management fees 40,693
Directors' fees 26,182
Administration fees 4,805
Other accrued expenses 57,661
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Total Liabilities 462,177
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NET ASSETS (applicable to 7,024,001 shares
of common stock outstanding) $ 47,954,461
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NET ASSET VALUE PER SHARE ($47,954,461 (div) 7,024,001) $ 6.83
======
NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 7,024,001
shares issued and outstanding
(100,000,000 shares authorized) $ 7,024
Paid-in capital 53,238,191
Accumulated net realized loss on investments (3,421,453)
Net unrealized depreciation in value of investments (1,869,301)
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Net assets applicable to shares outstanding $ 47,954,461
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(1) Includes securities out on loan to brokers with a market value of $318,840.
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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 SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends (including $1,320 earned from an affiliated issuer) $ 734,208
Securities lending 796
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Total Investment Income 735,004
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Expenses:
Investment management fees 272,885
Legal and audit fees 53,535
Directors' fees 52,564
Administration fees 32,782
Printing 24,473
Accounting fees 19,644
Transfer agent fees 9,472
Stock exchange listing fees 7,210
Custodian fees 7,127
Insurance 4,865
Miscellaneous 1,736
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Total Expenses 486,293
Less: Fees paid indirectly (4,097)
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Net Expenses 482,196
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Net Investment Income 252,808
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NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain from unaffiliated investments 1,037,554
Capital gain distributions from regulated investment companies 8,382
Net change in unrealized depreciation in value of investments (5,504,469)
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Net realized and unrealized loss on investments (4,458,533)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (4,205,725)
============
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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 Six
Months Ended For the
June 30, Year Ended
2010 December 31,
(Unaudited) 2009
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INCREASE/(DECREASE) IN NET ASSETS
Operations:
Net investment income $ 252,808 $ 430,985
Net realized gain from investments 1,045,936 36,794
Net change in unrealized
appreciation/(depreciation)
in value of investments (5,504,469) 10,628,356
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Net increase/(decrease) in net assets
resulting from operations (4,205,725) 11,096,135
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Dividends and distributions to shareholders:
Net investment income (252,808) (430,985)
Return-of-capital (5,611,713) (14,022,576)
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Total dividends and distributions to shareholders (5,864,521) (14,453,561)
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Capital stock transactions:
Proceeds from 54,593 and 133,707 shares
newly issued in reinvestment of dividends
and distributions, respectively 577,943 1,294,627
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Total decrease in net assets (9,492,303) (2,062,799)
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NET ASSETS
Beginning of period 57,446,764 59,509,563
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End of period $47,954,461 $ 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 period 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 Six
Months Ended
June 30, 2010 For the Years Ended December 31,*
(Unaudited) 2009 2008 2007 2006 2005
------------- ---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of period $ 8.24 $ 8.71 $ 18.12 $ 21.28 $ 22.60 $ 25.92
------- ------- ------- -------- -------- --------
Net investment income (#) 0.04 0.06 0.15 0.16 0.20 0.12
Net realized and unrealized gain/(loss)
on investments (0.64) 1.52 (5.55) 0.96 2.64 0.72
------- ------- ------- -------- -------- --------
(Net increase/(decrease) in net assets)
resulting from operations (0.60) 1.58 (5.40) 1.12 2.84 0.84
------- ------- ------- -------- -------- --------
Dividends and distributions to shareholders:
Net investment income (0.04) (0.06) (0.15) (0.16) (0.16) (0.16)
Net realized capital gains -- -- -- (1.32) -- (4.00)
------- ------- ------- -------- -------- --------
Return-of-capital (0.80) (2.03) (4.01) (3.00) (4.00) --
------- ------- ------- -------- -------- --------
Total dividends and distributions
to shareholders (0.84) (2.09) (4.16) (4.48) (4.16) (4.16)
------- ------- ------- -------- -------- --------
Capital stock transactions:
Anti-dilutive effect due to shares issued in
reinvestment of dividends and distributions 0.03 0.04 0.15 0.20 -- --
------- ------- ------- -------- -------- --------
Net asset value, end of period $ 6.83 $ 8.24 $ 8.71 $ 18.12 $ 21.28 $ 22.60
======= ======= ======= ======== ======== ========
Market value, end of period $ 10.53 $ 11.61 $ 7.62 $ 20.20 $ 33.80 $ 28.20
======= ======= ======= ======== ======== ========
Total investment return(a) (1.86)%(b) 89.55% (49.92)% (29.04)% 45.36% (1.32)%
======= ======= ======= ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $47,954 $57,447 $59,510 $120,268 $136,344 $139,706
Ratio of expenses to average net assets,
net of fee waivers, if any (c)(d) 1.77%(e) 1.80% 1.40% 1.23% 1.22% 1.20%
Ratio of expenses to average net assets,
excluding fee waivers, if any (d)(f) 1.78%(e) 2.01% 1.54% 1.35% 1.32% 1.36%
Ratio of expenses to average net assets,
net of fee waivers, if any (d)(f) 1.78%(e) 1.95% 1.44% 1.25% 1.25% 1.26%
Ratio of net investment income to
average net assets 1.78%(e) 0.79% 1.08% 0.86% 0.85% 0.58%
Portfolio turnover rate 3.44%(b) 10.81% 13.24% 10.38% 10.59% 21.60%
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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) Not annualized.
(c) Expenses are net of fees paid indirectly.
(d) Expenses do not include expenses of investment companies in which the
Fund invests.
(e) Annualized.
(f) 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 (UNAUDITED)
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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 June 30, 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 six months ended June 30, 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
accrued
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8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
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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 June
30, 2010, the Fund does not have any interest or penalties associated with the
underpayment of any income taxes. Management reviewed any uncertain tax
positions for open tax years 2006 through 2009 and for the period ended June 30,
2010. 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 classified as ordinary income. Although it has no
current intention to do so, the Board may
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9
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
- --------------------------------------------------------------------------------
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
distribu(not)tions 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 transactions, 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 (UNAUDITED), (CONTINUED)
- --------------------------------------------------------------------------------
The following is a summary of the inputs used as of June 30, 2010 in valuing the
Fund's investments carried at value:
INVESTMENTS IN OTHER FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
- --------------------------------------------------------------------------------
Level 1 - Quoted Prices
Equity Investments $47,615,191 --
Short-Term Investments 395,924 --
Level 2 - Other Significant
Observable Inputs -- --
Level 3 - Significant
Unobservable Inputs -- --
------------ -------------
Total $48,011,115 --
=========== =============
- --------
* Other financial instruments include futures, forwards and swap contracts.
During the period ended June 30, 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 June 30,
2010.
RECENT ACCOUNTING PRONOUNCEMENT: 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 measure(not)ments. 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 is not expected to 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.
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 six months ended June,
2010, Cornerstone earned $272,885 for investment management services.
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.
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
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
- --------------------------------------------------------------------------------
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.
NOTE E. AFFILIATED INVESTMENTS
Transactions in affiliates for the six months ended June 30, 2010 were as
follows:
ADAMS
EXPRESS
COMPANY
--------
Market value at beginning of period $226,460
========
Shares at beginning of period 26,400
Shares purchased during the period --
Shares sold during the period --
--------
Shares at end of period 26,400
========
Dividend income earned
during the period $ 1,320
========
Cost of purchases during the period --
Proceeds from sales during the period --
Net realized gain/(loss) during the period --
Market value at end of period $238,392
========
NOTE F. INVESTMENT IN SECURITIES
For the six months ended June 30, 2010, purchases and sales of securities, other
than short-term investments, were $1,857,384 and $7,088,277, respectively.
NOTE G. SHARES OF COMMON STOCK
The Fund has 100,000,000 shares of common stock authorized and 7,024,001 shares
outstanding at June 30, 2010. Transactions in common stock for the six months
ended June 30, 2010 were as follows:
Shares at beginning of period 6,969,408
Shares newly issued in reinvestment
of dividends and distributions 54,593
---------
Shares at end of period 7,024,001
=========
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 six ended June 30, 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.
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED), (CONTINUED)
- --------------------------------------------------------------------------------
The market value of securities on loan to brokers at June 30, 2010, was
$318,840. During the six months ended June 30, 2010, the Fund earned $796 in
securities lending income which is included under the caption Securities lending
in the Statement of Operations.
NOTE J. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.
The tax character of dividends and distributions paid during the year ended
December 31, 2009 for the Fund was ordinary income $430,985 and
return-of-capital $14,022,576.
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. 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").
At December 31, 2009, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $4,467,228 of which $250,210 expires in 2010, $484,687
expires in 2011, $3,297,622 expires in 2016, and $434,709 expires in 2017.
At June 30, 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 depreciation from investments were $49,880,416, $4,843,055,
$(6,712,356) and $(1,869,301), respectively.
- --------------------------------------------------------------------------------
13
RESULTS OF MEETING OF STOCKHOLDERS (UNAUDITED)
On July 20, 2010, the Annual Meeting of Stockholders of the Fund was held and
the following matters were voted upon based on 7,014,951 shares of common stock
outstanding on June 1, 2010:
(1) To approve the re-election of two Class III directors until the 2013
Annual Meeting.
Name of Directors For Withhold
----------------- ----- --------
Glenn W. Wilcox, Sr. 5,716,871 269,674
Andrew A. Strauss 5,731,909 254,637
2) To consider and vote upon an advisory proposal from the Board of Directors
regarding the Fund's Managed Distribution Plan. Regarding the Fund's
Managed Distribution Plan.
For Abstain
----- -------
2(a) No Managed Distribution Plan 221,354 510,331
2(b) A Low-Level Managed Distribution Plan 244,523 504,999
2(c) A High-Level Managed Distribution Plan 557,666 370,018
- --------------------------------------------------------------------------------
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 continuation 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 continuation of the Agreement
occurred at an in person meeting of the Board held on February 12, 2010.
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 materials and information and
discussions with management of the Investment Manager, the Board determined that
the approval of the continuation 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 companies 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 described the services provided
by the Investment Manager to the Fund and included an overview of the Investment
Manager's investment philosophy, management style and plan, including regarding
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 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 companies 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. The Board was advised by independent
legal counsel with respect to its deliberations and its duties when considering
the Agreement's continuance. 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 performance of the Fund, the profitability of the
Investment Manager's relationship with the Fund, the comparability of the
proposed fee to fees paid by closed-end funds in the Fund's peer group, and the
level of quality of investment management personnel. The Board determined that
the Agreement is consistent with the best interests of the Fund and its
shareholders, 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
(including a separate vote of all the Independent Directors present in person at
the meeting) approved the continuance of the Agreement with respect to the Fund.
- --------------------------------------------------------------------------------
15
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 proxy will
- --------------------------------------------------------------------------------
16
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED), (CONCLUDED)
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.
- --------------------------------------------------------------------------------
17
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.
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 with the Fund and its
affiliates: this category includes information about your transactions
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.
- --------------------------------------------------------------------------------
18
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
published each Monday in The Wall Street Journal under the designation
"CornstnStrat" and Barron's under the designation "Cornerstone Str Val". Such
information is available weekly and may be obtained by contacting the Fund at
the general inquiry phone number.
- --------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund without examination by
independent registered public accountants who do not express an opinion there
on. 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
19
This page intentionally left blank.
CORNERSTONE STRATEGIC VALUE FUND, INC.
ITEM 2. CODE OF ETHICS.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not required
ITEM 6. SCHEDULE OF INVESTMENTS.
(a)
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED)
DESCRIPTION NO. OF SHARES VALUE
- ------------------------------------------------------------------------------------
EQUITY SECURITIES - 99.29%
CLOSED-END FUNDS - 6.69%
CORE - 5.89%
Adams Express Company (The) (a) 26,400 $ 238,392
Gabelli Equity Trust, Inc. 9,000 40,410
Liberty All-Star Equity Fund 218,630 870,147
Liberty All-Star Growth Fund 196,201 669,046
Tri-Continental Corporation 22,800 247,836
Zweig Fund, Inc. (The) 253,750 761,250
-----------
2,827,081
-----------
REAL ESTATE - 0.80%
Cohen & Steers Quality Income Realty Fund, Inc. 33,000 208,890
Cohen & Steers REIT & Preferred Income Fund, Inc. 14,000 147,840
LMP Real Estate Income Fund, Inc. 3,000 24,720
-----------
381,450
-----------
TOTAL CLOSED-END FUNDS 3,208,531
-----------
CONSUMER DISCRETIONARY - 9.86%
Amazon.com, Inc. * 3,000 327,780
Best Buy Company, Inc. 6,500 220,090
Comcast Corporation - Class A 14,555 252,820
DIRECTV Group, Inc. (The) - Class A * 4,000 135,680
Family Dollar Stores, Inc. 2,000 75,380
Gap, Inc. (The) 9,200 179,032
Home Depot, Inc. (The) 2,000 56,140
Lowe's Companies, Inc. 5,900 120,478
McDonald's Corporation 11,400 750,918
News Corporation - Class A 10,000 119,600
NIKE, Inc. - Class B 4,100 276,955
Omnicom Group, Inc. 4,200 144,060
Staples, Inc. 12,800 243,840
Starbucks Corporation 2,800 68,040
Target Corporation 8,800 432,696
Time Warner Cable, Inc. 1,966 102,389
Time Warner, Inc. 2,900 83,839
TJX Companies, Inc. (The) 7,000 293,650
Viacom, Inc. - Class B 5,450 170,967
Walt Disney Company (The) 10,200 321,300
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
DESCRIPTION NO. OF SHARES VALUE
- ------------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (CONTINUED)
Yum! Brands, Inc. 9,000 $ 351,360
-----------
4,727,014
-----------
CONSUMER STAPLES - 10.84%
Altria Group, Inc. 20,800 416,832
Archer-Daniels-Midland Company 3,960 102,247
Coca-Cola Company (The) 13,500 676,620
Colgate-Palmolive Company 3,400 267,784
ConAgra Foods, Inc. 3,400 79,288
Costco Wholesale Corporation 2,500 137,075
CVS Caremark Corporation 8,430 247,168
General Mills, Inc. 5,000 177,600
H.J. Heinz Company 4,000 172,880
Kimberly-Clark Corporation 4,500 272,835
Kraft Foods, Inc. - Class A 10,932 306,096
PepsiCo, Inc. 5,600 341,320
Philip Morris International, Inc. 2,500 114,600
Procter & Gamble Company (The) 16,297 977,494
Sysco Corporation 10,300 294,271
Walgreen Company 4,800 128,160
Wal-Mart Stores, Inc. 10,100 485,507
-----------
5,197,777
-----------
ENERGY - 10.09%
Anadarko Petroleum Corporation 2,700 97,443
Baker Hughes, Inc. 6,100 253,577
Chevron Corporation 10,732 728,273
Conocophillips 14,974 735,074
Exxon Mobil Corporation 29,936 1,708,462
Halliburton Company 9,700 238,135
Marathon Oil Corporation 11,500 357,535
Occidental Petroleum Corporation 3,500 270,025
Schlumberger Ltd. 6,000 332,040
Transocean Ltd. * 2,500 115,825
-----------
4,836,389
-----------
FINANCIALS - 13.14%
AFLAC, Inc. 5,500 234,685
Allstate Corporation (The) 6,800 195,364
American Express Company 6,400 254,080
Bank of America Corporation 25,138 361,233
Bank of New York Mellon Corporation (The) 7,754 191,446
BB&T Corporation 3,500 92,085
Capital One Financial Corporation 2,500 100,750
Charles Schwab Corporation (The) 17,000 241,060
Chubb Corporation (The) 3,500 175,035
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
DESCRIPTION NO. OF SHARES VALUE
- ------------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
Goldman Sachs Group, Inc. (The) 5,000 $ 656,350
Hudson City Bancorp, Inc. 15,500 189,720
JPMorgan Chase & Company 30,132 1,103,133
Marsh & McLennan Companies, Inc. 10,000 225,500
MetLife, Inc. 5,700 215,232
Morgan Stanley 11,500 266,915
PNC Financial Services Group, Inc. 7,600 429,400
T. Rowe Price Group, Inc. 3,000 133,170
Travelers Companies, Inc. (The) 9,476 466,693
U.S. Bancorp 9,901 221,287
Wells Fargo & Company 21,400 547,840
-----------
6,300,978
-----------
HEALTH CARE - 11.63%
Abbott Laboratories 9,200 430,376
Aetna, Inc. 5,000 131,900
Amgen, Inc. * 6,700 352,420
Baxter International, Inc. 5,000 203,200
Becton, Dickinson and Company 3,900 263,718
Biogen Idec, Inc. * 4,000 189,800
Bristol-Myers Squibb Company 19,000 473,860
Cardinal Health, Inc. 7,950 267,199
Covidien PLC 2,599 104,428
Eli Lilly & Company 4,700 157,450
Gilead Sciences, Inc. * 6,000 205,680
Johnson & Johnson 13,400 791,404
McKesson Corporation 1,800 120,888
Medtronic, Inc. 8,000 290,160
Merck & Company, Inc. 15,267 533,887
Pfizer, Inc. 38,622 550,750
Stryker Corporation 2,000 100,120
UnitedHealth Group, Inc. 11,000 312,400
WellPoint, Inc. * 2,000 97,860
-----------
5,577,500
-----------
INDUSTRIALS - 10.01%
3M Company 4,400 347,556
Boeing Company (The) 2,200 138,050
Caterpillar, Inc. 5,300 318,371
CSX Corporation 3,500 173,705
Deere & Company 6,500 361,920
Emerson Electric Company 6,000 262,140
General Dynamics Corporation 3,200 187,392
General Electric Company 51,900 748,398
Honeywell International, Inc. 5,000 195,150
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
DESCRIPTION NO. OF SHARES VALUE
- ------------------------------------------------------------------------------------
INDUSTRIALS (CONTINUED)
Illinois Tool Works, Inc. 4,800 $ 198,144
Lockheed Martin Corporation 3,000 223,500
Norfolk Southern Corporation 5,500 291,775
Northrop Grumman Corporation 2,500 136,100
Raytheon Company 3,500 169,365
Union Pacific Corporation 4,000 278,040
United Parcel Service, Inc. - Class B 4,100 233,249
United Technologies Corporation 5,000 324,550
Waste Management, Inc. 6,800 212,772
-----------
4,800,177
-----------
INFORMATION TECHNOLOGY - 17.89%
Adobe Systems, Inc. * 4,200 111,006
Apple, Inc. * 5,900 1,484,027
Applied Materials, Inc. 10,800 129,816
Automatic Data Processing, Inc. 4,400 177,144
Cisco Systems, Inc. * 45,400 967,474
Corning, Inc. 4,000 64,600
Dell, Inc. * 2,700 32,562
eBay, Inc. * 2,500 49,025
EMC Corporation * 12,148 222,309
Google, Inc. - Class A * 2,000 889,900
Hewlett-Packard Company 11,400 493,392
Intel Corporation 39,500 768,275
International Business Machines Corporation 8,100 1,000,188
Microsoft Corporation 51,200 1,178,112
Oracle Corporation 22,272 477,957
QUALCOMM, Inc. 10,000 328,400
Texas Instruments, Inc. 6,400 148,992
Yahoo!, Inc. * 4,000 55,320
-----------
8,578,499
-----------
MATERIALS - 3.09%
Alcoa, Inc. 11,400 114,684
Dow Chemical Company (The) 5,400 128,088
E.I. Du Pont de Nemours & Company 9,500 328,605
Freeport-McMoRan Copper & Gold, Inc. 5,000 295,650
Monsanto Company 2,660 122,945
Praxair, Inc. 6,500 493,935
-----------
1,483,907
-----------
REAL ESTATE INVESTMENT TRUST - 0.00%
Simon Property Group, Inc. 14 1,131
-----------
TELECOMMUNICATION SERVICES - 2.57%
AT&T, Inc. 37,039 895,973
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2010 (UNAUDITED) (CONTINUED)
DESCRIPTION NO. OF SHARES VALUE
- ------------------------------------------------------------------------------------
TELECOMMUNICATION SERVICES (CONTINUED)
Verizon Communications, Inc. 12,000 $ 336,240
-----------
1,232,213
-----------
UTILITIES - 3.48%
American Electric Power Company, Inc. 5,000 161,500
Dominion Resources, Inc. 7,700 298,298
Duke Energy Corporation 15,800 252,800
Exelon Corporation 3,000 113,910
FirstEnergy Corporation 3,000 105,690
Nextera Energy, Inc. 4,000 195,040
PG&E Corporation 3,000 123,300
Public Service Enterprises Group, Inc. 4,500 140,985
Southern Company (The) 8,400 279,552
-----------
1,671,075
-----------
TOTAL EQUITY SECURITIES (cost - $49,484,492) 47,615,191
-----------
SHORT-TERM INVESTMENT - 0.83%
MONEY MARKET FUND - 0.83%
JPMorgan U.S. Government Money Market Fund
(cost - $ 395,924) 395,924 395,924
-----------
TOTAL INVESTMENTS - 100.12% (cost - $49,880,416) 48,011,115
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.12)% (56,654)
-----------
NET ASSETS - 100.00% $47,954,461
===========
- --------
(a) Affiliated investment. The Fund holds 0.50% (based on net assets) of Adams
Express Company. A director of the Fund also serves as a director to such
company. There were no purchases or sales of this security during the six months
ended June 30, 2010.
* Non-income producing security.
^^ Security or a portion thereof is out on loan.
(b) Not applicable
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not required
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not required
(b) William A. Clark has resigned as a Portfolio Manager. As of the date
of the filing of this Form N-CSR, Ralph W. Bradshaw is the sole
Portfolio Manager of registrant.
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: Not required
(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.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, President
(Principal Executive Officer)
Date SEPTEMBER 2, 2010
---------------------------
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
--------------------------------------------
Ralph W. Bradshaw, President
(Principal Executive Officer)
Date SEPTEMBER 2, 2010
---------------------
By (Signature and Title)* /S/ FRANK J. MARESCA
--------------------------------------------
Frank J. Maresca, Treasurer
(Principal Financial Officer)
Date SEPTEMBER 2, 2010
----------------------
* Print the name and title of each signing officer under his or her signature.