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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811- 05150
Cornerstone Strategic Value Fund, Inc.
(Exact name of registrant as specified in charter)
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, 2006
Date of reporting period: June 30, 2006
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
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ITEM 1. REPORTS TO STOCKHOLDERS.
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
JUNE 30, 2006
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2006
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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 11
Description of Dividend Reinvestment Plan 12
Investment Management Agreement Approval Disclosure 13
Proxy Voting and Portfolio Holdings Information 14
Privacy Policy Notice 14
Summary of General Information 15
Shareholder Information 15
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2006 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Financials 20.2
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Information Technology 14.2
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Healthcare 12.8
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Industrials 11.5
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Consumer Discretionary 10.4
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Energy 9.8
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Consumer Staples 9.7
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Utilities 3.3
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Telecommunication Services 3.3
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Materials 2.4
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Closed-End Domestic Funds 1.5
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Other 0.9
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 3.9
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2. General Electric Company Industrials 2.9
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3. Bank of America Corporation Financials 2.5
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4. Microsoft Corporation Information Technology 2.1
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5. Johnson & Johnson Healthcare 1.9
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6. Citigroup Inc. Financials 1.8
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7. EMC Corporation Information Technology 1.8
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8. Procter & Gamble Company (The) Consumer Staples 1.7
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9. American International Group, Inc. Financials 1.7
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10. Altria Group, Inc. Consumer Staples 1.6
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2006 (UNAUDITED)
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.57%
CLOSED-END DOMESTIC FUNDS - 1.49%
Zweig Fund, Inc. ^ 176,600 $ 941,278
Other Closed-End
Domestic Funds (a) 1,011,967
-------------
1,953,245
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CONSUMER DISCRETIONARY - 10.37%
Home Depot, Inc. (The) 28,100 1,005,699
Time Warner Inc. 76,000 1,314,800
Other Consumer
Discretionary (a) 11,305,373
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13,625,872
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CONSUMER STAPLES - 9.73%
Altria Group, Inc. 29,300 2,151,499
Coca-Cola Company (The) 23,500 1,010,970
PepsiCo, Inc. ^ 24,800 1,488,992
Procter & Gamble
Company (The) 41,297 2,296,113
Wal-Mart Stores, Inc. 39,800 1,917,166
Other Consumer Staples (a) 3,929,436
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12,794,176
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ENERGY - 9.80%
Chevron Corporation 27,532 1,708,636
ConocoPhillips 17,974 1,177,836
Exxon Mobil Corporation 84,000 5,153,400
Occidental Petroleum
Corporation 8,000 820,400
Schlumberger Limited ^ 22,000 1,432,420
Other Energy (a) 2,583,528
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12,876,220
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FINANCIALS - 20.23%
American Express Company 19,600 1,043,112
American International
Group, Inc. ^ 37,531 2,216,206
Bank of America Corporation 67,938 3,267,818
Citigroup Inc. 49,300 2,378,232
Freddie Mac 14,500 826,645
Goldman Sachs
Group, Inc. (The) ^ 7,300 1,098,139
JPMorgan Chase & Co. 40,132 1,685,544
Merrill Lynch & Co., Inc. 10,700 744,292
Metlife, Inc. ^ 15,200 778,392
Morgan Stanley 15,500 979,755
U.S. Bancorp 28,401 877,023
Wachovia Corporation 22,600 1,222,208
Wells Fargo & Company 24,200 1,623,336
Other Financials (a) 7,838,871
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26,579,573
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HEALTHCARE - 12.82%
Abbott Laboratories ^ 28,000 1,221,080
Amgen Inc. + 18,900 1,232,847
Bristol-Myers Squibb
Company 30,500 788,730
Johnson & Johnson ^ 40,900 2,450,728
Medtronic, Inc. 21,500 1,008,780
Pfizer Inc. ^ 77,560 1,820,333
UnitedHealth Group
Incorporated 23,000 1,029,940
Wyeth 19,200 852,672
Other Healthcare (a) 6,437,387
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16,842,497
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INDUSTRIALS - 11.53%
3M Co. ^ 15,400 1,243,858
Boeing Company (The) ^ 11,700 958,347
Caterpillar Inc. 11,800 878,864
General Electric Company 115,500 3,806,880
Other Industrials (a) 8,271,199
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15,159,148
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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, 2006 (UNAUDITED)(CONCLUDED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY - 14.16%
Cisco Systems, Inc. + 96,400 $ 1,882,692
EMC Corporation + 212,648 2,332,749
Hewlett-Packard Company ^ 27,900 883,872
Intel Corporation ^ 82,500 1,563,375
International Business
Machines Corporation ^ 12,600 967,932
Microsoft Corporation 120,900 2,816,970
QUALCOMM Inc. 21,000 841,470
Other Information
Technology (a) 7,326,236
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18,615,296
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MATERIALS - 2.40%
Total Materials (a) 3,151,889
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REAL ESTATE INVESTMENT TRUSTS - 0.41%
Total Real Estate
Investment Trusts (a) 539,110
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TELECOMMUNICATION SERVICES - 3.29%
AT&T Inc. ^ 48,364 1,348,872
BellSouth Corporation 23,000 832,600
Sprint Nextel Corporation ^ 38,446 768,536
Verizon Communications Inc. ^ 30,900 1,034,841
Other Telecommunication
Services (a) 334,103
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4,318,952
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UTILITIES - 3.34%
Total Utilities (a) 4,391,786
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TOTAL EQUITY SECURITIES
(cost - $116,572,604) 130,847,764
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Principal
Amount
Description (000's) Value
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SHORT-TERM INVESTMENTS - 1.75%
REPURCHASE AGREEMENTS - 1.75%
Bear, Stearns & Co. Inc. + (b)
(Agreement dated 6/30/2006
to be repurchased
at $2,302,578) $ 2,302 $ 2,301,892
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TOTAL SHORT-TERM INVESTMENTS
(cost - $2,301,892) 2,301,892
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TOTAL INVESTMENTS - 101.32%
(cost - $118,874,496) 133,149,656
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (1.32)% (1,737,955)
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NET ASSETS - 100.00% $ 131,411,701
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+ Non-income producing security.
^ Security or a portion thereof is out on loan.
+ Includes investments purchased with cash collateral received for securities
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, 2006.
(b) At June 30, 2006, the maturity date for all repurchase agreements held was
July 3, 2006, with interest rates ranging from 2.66% to 5.31%, and
collateralized by $2,371,096 in U.S. Treasury Bond STRIPs.
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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, 2006 (UNAUDITED)
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ASSETS
Investments, at value, including
collateral for securities
on loan $1,718,389
(Cost $118,874,496)(1) $ 133,149,656
Receivables:
Dividends 139,192
Interest 2,608
Prepaid expenses 14,254
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Total Assets 133,305,710
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LIABILITIES
Payables:
Upon return of securities loaned 1,718,389
Investment management fees 97,402
Directors' fees 28,385
Other accrued expenses 49,833
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Total Liabilities 1,894,009
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NET ASSETS (applicable to 25,138,175
shares of common stock outstanding) $ 131,411,701
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NET ASSET VALUE PER SHARE
($131,411,701 ./. 25,138,175) $ 5.23
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NET ASSETS CONSISTS OF
Capital stock, $0.001 par value;
25,138,175 shares issued and outstanding
(100,000,000 shares authorized) $ 25,138
Paid-in capital 139,981,964
Cost of 1,236,852 shares repurchased (17,516,253)
Accumulated net realized loss on investments (5,354,308)
Net unrealized appreciation in value of investments 14,275,160
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Net assets applicable to shares outstanding $ 131,411,701
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(1) Includes securities out on loan to brokers with a market value of
$ 1,712,428.
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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, 2006 (UNAUDITED)
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INVESTMENT INCOME
Income:
Dividends $ 1,370,937
Securities lending 34,871
Interest 1,184
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Total Investment Income 1,406,992
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Expenses:
Investment management fees 683,271
Administration fees 68,326
Directors' fees 54,052
Legal and audit fees 34,876
Printing 25,291
Accounting fees 19,702
Transfer agent fees 11,405
Custodian fees 10,084
Stock exchange listing fees 7,989
Insurance 4,067
Miscellaneous 1,240
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Total Expenses 920,303
Less: Management fee waivers (67,632)
Less: Fees paid indirectly (7,875)
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Net Expenses 844,796
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Net Investment Income 562,196
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investments (62,284)
Net change in unrealized appreciation in value of investments 1,842,480
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Net realized and unrealized gain on investments 1,780,196
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,342,392
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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 Year
June 30, 2006 Ended
(unaudited) December 31, 2005
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DECREASE IN NET ASSETS
Operations:
Net investment income $ 562,196 $ 834,753
Net realized gain/(loss) from investments (62,284) 27,008,793
Net change in unrealized appreciation
in value of investments 1,842,480 (22,438,516)
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Net increase in net assets resulting
from operations 2,342,392 5,405,030
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Dividends and distributions to shareholders:
Net investment income (562,196) (980,195)
Net realized capital gains -- (24,369,995)
Return-of-capital (12,424,982) --
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Total dividends and distributions
to shareholders (12,987,178) (25,350,190)
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Capital stock transactions:
Proceeds from 427,870 and 832,602
shares newly issued in reinvestment
of dividends and distributions, respectively 2,350,371 4,961,290
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Total decrease in net assets (8,294,415) (14,983,870)
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NET ASSETS
Beginning of period 139,706,116 154,689,986
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End of period $ 131,411,701 $ 139,706,116
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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, 2006 For the Years Ended December 31,
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(unaudited) 2005 2004 2003 2002 2001
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PER SHARE OPERATING
PERFORMANCE
Net asset value,
beginning of period $ 5.65 $ 6.48 $ 6.90 $ 6.41 $ 9.20 $ 11.31
----------- ----------- ----------- ----------- ---------- ----------
Net investment income/(loss) # 0.02 0.03 0.05 0.04 (0.01) (0.06)
Net realized and unrealized
gain/(loss) on investments
and foreign currency
related translations 0.08 0.18 0.55 1.44 (2.29) (2.13)
----------- ----------- ----------- ----------- ---------- ----------
Net increase/(decrease) in
net assets resulting
from operations 0.10 0.21 0.60 1.48 (2.30) (2.19)
----------- ----------- ----------- ----------- ---------- ----------
Dividends and distributions
to shareholders:
Net investment income (0.02) (0.04) (0.05) (0.04) -- --
Net realized gain on
investments and foreign
currency related transactions -- (1.00) -- -- -- --
Return-of-capital (0.50) -- (0.99) (0.95) (0.50) --
----------- ----------- ----------- ----------- ---------- ----------
Total dividends and
distributions to (0.52) (1.04) (1.04) (0.99) (0.50) --
----------- ----------- ----------- ----------- ---------- ----------
shareholders
Capital stock transactions:
Anti-dilutive effect
due to capital
stock repurchased -- -- -- -- 0.02 0.08
Anti-dilutive/(dilutive)
effect due to shares
issued in reinvestment
of dividends and distributions -- -- 0.02 -- (0.01) --
----------- ----------- ----------- ----------- ---------- ----------
Total capital stock transactions -- -- 0.02 -- 0.01 0.08
----------- ----------- ----------- ----------- ---------- ----------
Net asset value, end of period $ 5.23 $ 5.65 $ 6.48 $ 6.90 $ 6.41 $ 9.20
=========== =========== =========== =========== ========== ==========
Market value, end of period $ 7.19 $ 7.05 $ 8.51 $ 9.00 $ 5.85 $ 8.05
=========== =========== =========== =========== ========== ==========
Total investment return (a) 12.06% (1.32)% 8.38% 77.69% (20.85)% (23.98)%
=========== =========== =========== =========== ========== ==========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $ 131,412 $ 139,706 $ 154,690 $ 26,565 $ 24,376 $ 35,256
Ratio of expenses to average
net assets, net of fee
waivers, if any (b) 1.23%(d) 1.20% 1.28% 1.20% 1.80% 1.77%
Ratio of expenses to average
net assets, excluding
fee waivers, if any (c) 1.34%(d) 1.36% 1.50% 1.59% 2.17% 2.11%
Ratio of expenses to average
net assets, net of fee
waivers, if any (c) 1.24%(d) 1.26% 1.36% 1.25% 1.86% 1.95%
Ratio of net investment
income/(loss) to
average net assets 0.82%(d) 0.58% 0.73% 0.68% (0.13)% (0.64)%
Portfolio turnover rate 3.67% 21.60% 39.05% 11.88% 29.63% 59.83%
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# 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.
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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. 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 abut 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,
2006, 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.
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 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.
================================================================================
8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
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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.
DISTRIBUTIONS OF INCOME AND GAINS: Effective June 25, 2002, the Fund initiated a
fixed, monthly distribution to shareholders. 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 a 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 the 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 the distribution policy, an additional distribution may
be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent
that the aggregate amount distributed in any calendar year exceeds the Fund's
taxable income, the amount of that excess may constitute a return-of-capital for
tax purposes. A return-of-capital distribution reduces the cost basis of an
investor's shares in the Fund. Dividends and distributions to shareholders are
recorded by the Fund on the ex-dividend date.
NOTE 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 2006, 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, 2006, Cornerstone earned $683,271 for
investment management services, of which it waived $67,632. 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 $7,875 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $25,604 for the six months ended June 30,
2006 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, 2006, purchases and sales of securities, other
than short-term investments, were $5,026,535 and $14,811,373 respectively.
================================================================================
9
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
NOTE D. SECURITIES LENDING
To generate additional income, the Fund may lend up to 33 1/3% of its total
assets. The Fund receives payments from borrowers equivalent to the dividends
and interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers at
June 30, 2006, was $1,712,428.
NOTE E. 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 years ended December
31, for the Fund was as follows:
ORDINARY INCOME RETURN-OF-CAPITAL
--------------- -----------------
2005 2004 2005 2004
---- ---- ---- ----
$980,195 $729,442 -- $13,677,285
LONG-TERM CAPITAL GAINS
-----------------------
2005 2004
---- ----
$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, 2005, the Fund did not incur Post-October losses.
At December 31, 2005, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $5,292,024 of which $2,547,381 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, 2006, 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 $118,874,496, $20,003,680,
$(5,728,520) and $14,275,160, respectively.
================================================================================
10
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On April 10, 2006, the Annual Meeting of Stockholders of Cornerstone Strategic
Value Fund, Inc. was held and the following matter was voted upon based on
24,773,751 shares of common stock outstanding on February 17, 2006:
(1) To approve the re-election of three Class II Directors until the year
2009 Annual Meeting.
NAME OF CLASS II DIRECTORS FOR WITHHOLD
-------------------------- --- --------
Scott B. Rogers 21,279,926 261,505
William A. Clark 21,289,973 251,458
Thomas H. Lenagh 21,268,411 273,020
================================================================================
11
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 dividends
and 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 who have shares registered directly in their own names
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 the Agent at P.O. Box 922, Wall Street Station, New York, New
York 10269-0560 or call (877) 248-6416. Under the Plan, the Fund's respective
dividends and other distributions to shareholders are reinvested in full and
fractional shares as described below.
When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Distribution" and collectively, "Distributions"), 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").
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. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at the lower of (i) a price equal to the average
closing price of shares of the respective Fund over the five trading days
preceding the payment date of such Distribution or (ii) the net asset value of
the Fund as last determined prior to such payment date.
Registered shareholders who acquire their shares through Open Market Purchases
and 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 Dividend, 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 termination of the Plan as
provided below, 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 by 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-certified 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.
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.
================================================================================
12
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
17, 2006.
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 current premium of the Fund's market price
to its net asset value. 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 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 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.
================================================================================
13
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; 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.
================================================================================
14
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
included herein is taken 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 this
report.
--------------------------------------------------------------------------------
================================================================================
15
This page intentionally left blank.
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
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
One West Pack Square Trust Co.
Suite 1650 59 Maiden Lane
Asheville, NC 28801 New York, NY 10038
INDEPENDENT REGISTERED
ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Bear Stearns Funds Tait, Weller & Baker LLP
Management Inc. 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, 19103
PA
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Blank Rome LLP
101 Carnegie Center 405 Lexington Avenue
Princeton, NJ 08540 New York, NY 10174
EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-3550.
LOGO
AMERICAN
STOCK EXCHANGE(r)
LISTED
CLM
--------------------------------------------------------------------------------
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, 2006 (UNAUDITED)
===================================================================================
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
EQUITY SECURITIES - 99.57%
CLOSED-END DOMESTIC FUNDS - 1.49%
Adams Express Company 49,500 $ 637,065
General American Investors Company 3,000 108,300
Tri-Continental Corporation 13,700 266,602
Zweig Fund, Inc. ^ 176,600 941,278
------------
1,953,245
------------
CONSUMER DISCRETIONARY - 10.37%
Acco Brands Corporation + 235 5,146
Bed Bath & Beyond Inc. + 4,200 139,314
Best Buy Co., Inc. ^ 7,125 390,735
Black & Decker Corporation (The) 3,000 253,380
Carnival Corporation 11,800 492,532
CBS Corporation ^ 4,450 120,372
Circuit City Stores, Inc. ^ 5,000 136,100
Clear Channel Communications, Inc. ^ 8,800 272,360
Comcast Corporation, Special Class A + 19,037 623,271
D.R. Horton, Inc. 7,000 166,740
Eastman Kodak Company 1,400 33,292
eBay Inc. + 21,500 629,735
Federated Department Stores, Inc. 11,052 404,503
Ford Motor Company ^ 6,000 41,580
Fortune Brands, Inc. 3,500 248,535
Gannett Co., Inc. 6,000 335,580
Gap, Inc. (The) ^ 12,200 212,280
Goodyear Tire & Rubber Company (The) +^ 4,500 49,950
Harley-Davidson, Inc. 4,400 241,516
Hilton Hotels Corporation 11,200 316,736
Home Depot, Inc. (The) 28,100 1,005,699
J.C. Penney Company, Inc. 4,500 303,795
Kohl's Corporation + 5,000 295,600
Live Nation Inc. + 1,100 22,396
Lowe's Companies, Inc. 11,200 679,504
Marriott International, Inc., Class A 4,200 160,104
Mattel, Inc. 5,500 90,805
McDonald's Corporation 17,600 591,360
News Corporation 23,000 441,140
NIKE, Inc. 2,300 186,300
Omnicom Group Inc. 4,100 365,269
Sears Holdings Corporation + 503 77,885
Staples, Inc. 10,800 262,656
Starbucks Corporation + 10,800 407,808
Target Corporation 11,800 576,666
Time Warner Inc. 76,000 1,314,800
TJX Companies, Inc. (The) 7,000 160,020
Univision Communications Inc., Class A + 7,000 234,500
Viacom Inc. + 11,950 428,288
Walt Disney Company (The) 20,200 606,000
Yum! Brands, Inc. ^ 6,000 301,620
------------
13,625,872
------------
CONSUMER STAPLES - 9.73%
Altria Group, Inc. 29,300 2,151,499
-1-
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
Anheuser-Busch Companies, Inc. 6,200 282,658
Archer-Daniels-Midland Company ^ 5,460 225,389
Campbell Soup Company 2,000 74,220
Coca-Cola Company (The) 23,500 1,010,970
Coca-Cola Enterprises Inc. 3,000 61,110
Colgate-Palmolive Company 11,100 664,890
ConAgra Foods, Inc. 4,400 97,284
Costco Wholesale Corporation 6,500 371,345
CVS Corporation 5,000 153,500
General Mills, Inc. ^ 9,500 490,770
H.J. Heinz Company ^ 6,600 272,052
Kroger Co. (The) ^ 4,800 104,928
Pepsi Bottling Group, Inc. (The) 4,000 128,600
PepsiCo, Inc. ^ 24,800 1,488,992
Procter & Gamble Company (The) 41,297 2,296,113
Sara Lee Corporation 11,500 184,230
Sysco Corporation 5,800 177,248
Walgreen Co. 14,300 641,212
Wal-Mart Stores, Inc. 39,800 1,917,166
------------
12,794,176
------------
ENERGY - 9.80%
Anadarko Petroleum Corp. 11,800 562,742
Baker Hughes Incorporated 8,100 662,985
Chevron Corporation 27,532 1,708,636
ConocoPhillips 17,974 1,177,836
Devon Energy Corporation ^ 5,000 302,050
Exxon Mobil Corporation 84,000 5,153,400
Hugoton Royalty Trust ^ 298 8,851
Marathon Oil Corp. 7,500 624,750
Occidental Petroleum Corporation 8,000 820,400
Schlumberger Limited ^ 22,000 1,432,420
Transocean Inc. + 2,500 200,800
XTO Energy, Inc. 5,000 221,350
------------
12,876,220
------------
FINANCIALS - 20.23%
AFLAC Incorporated 7,000 324,450
Allstate Corporation (The) 9,300 508,989
American Express Company 19,600 1,043,112
American International Group, Inc. ^ 37,531 2,216,206
Ameriprise Financial, Inc. 3,120 139,370
Aon Corporation 4,900 170,618
Bank of America Corporation 67,938 3,267,818
Bank of New York Company, Inc. (The) 11,400 367,080
Charles Schwab Corporation (The) 12,000 191,760
Citigroup Inc. 49,300 2,378,232
Fannie Mae 13,000 625,300
Fifth Third Bancorp 2,500 92,375
Franklin Resources, Inc. ^ 3,700 321,197
Freddie Mac 14,500 826,645
Goldman Sachs Group, Inc. (The) ^ 7,300 1,098,139
Hartford Financial Services Group, Inc. (The) 6,000 507,600
JPMorgan Chase & Co. 40,132 1,685,544
Lehman Brothers Holdings Inc. 7,200 469,080
Marsh & McLennan Companies, Inc. 10,100 271,589
Merrill Lynch & Co., Inc. 10,700 744,292
Metlife, Inc. ^ 15,200 778,392
Morgan Stanley 15,500 979,755
National City Corporation 12,700 459,613
-2-
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
Northern Trust Corporation 3,500 193,550
PNC Financial Services Group, Inc. 7,100 498,207
Prudential Financial, Inc. 8,200 637,140
St. Paul Travelers Companies, Inc. (The) 9,476 422,440
State Street Corporation ^ 3,500 203,315
SunTrust Banks, Inc. 7,600 579,576
U.S. Bancorp 28,401 877,023
UnumProvident Corporation 8,100 146,853
Wachovia Corporation 22,600 1,222,208
Washington Mutual, Inc. 15,550 708,769
Wells Fargo & Company 24,200 1,623,336
------------
26,579,573
------------
HEALTH CARE - 12.82%
Abbott Laboratories ^ 28,000 1,221,080
Aetna Inc. 12,000 479,160
Amgen Inc. + 18,900 1,232,847
Applera Corporation 8,000 258,800
Baxter International Inc. ^ 5,000 183,800
Becton, Dickinson and Company 6,900 421,797
Biogen Idec Inc. + 8,000 370,640
Boston Scientific Corporation + 23,051 388,179
Bristol-Myers Squibb Company 30,500 788,730
Cardinal Health, Inc. 5,450 350,598
Caremark Rx, Inc. + 9,000 448,830
Eli Lilly and Company 11,000 607,970
Gilead Sciences, Inc. + 3,500 207,060
HCA, Inc. ^ 8,500 366,775
Hospira, Inc. + 3,700 158,878
IMS Health Incorporated 7,400 198,690
Johnson & Johnson ^ 40,900 2,450,728
McKesson Corporation 2,300 108,744
Medco Health Solutions, Inc. + 6,687 383,031
Medtronic, Inc. 21,500 1,008,780
Merck & Co. Inc. ^ 20,000 728,600
Pfizer Inc. ^ 77,560 1,820,333
Schering-Plough Corporation 17,000 323,510
Tenet Healthcare Corporation + 2,250 15,705
UnitedHealth Group Incorporated 23,000 1,029,940
WellPoint Inc. + ^ 6,000 436,620
Wyeth 19,200 852,672
------------
16,842,497
------------
INDUSTRIALS - 11.53%
3M Co. ^ 15,400 1,243,858
Boeing Company (The) ^ 11,700 958,347
Caterpillar Inc. 11,800 878,864
Cendant Corporation 28,000 456,120
CSX Corporation 9,000 633,960
Danaher Corporation ^ 3,500 225,120
Emerson Electric Co. 8,500 712,385
FedEx Corp. ^ 4,500 525,870
General Dynamics Corporation 6,200 405,852
General Electric Company 115,500 3,806,880
Honeywell International Inc. 12,500 503,750
Illinois Tool Works Inc. 10,800 513,000
Ingersoll-Rand Company Ltd. Class A 3,500 149,730
Lockheed Martin Corporation 4,000 286,960
Masco Corporation ^ 4,200 124,488
Norfolk Southern Corporation 10,000 532,200
-3-
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
Northrop Grumman Corporation 5,000 320,300
Rockwell Automation, Inc. 2,500 180,025
Southwest Airlines Co. 6,450 105,586
Textron Inc. 4,500 414,810
Tyco International Ltd. 15,397 423,418
Union Pacific Corporation ^ 2,000 185,920
United Parcel Service, Inc., Class B 5,300 436,349
United Technologies Corporation 11,000 697,620
Waste Management, Inc. ^ 12,200 437,736
------------
15,159,148
------------
INFORMATION TECHNOLOGY - 14.16%
Adobe Systems Incorporated 9,200 279,312
Analog Devices, Inc. 9,200 295,688
Apple Computer, Inc. + 3,000 171,360
Applied Materials, Inc. 33,800 550,264
Automatic Data Processing, Inc. 9,900 448,965
Cisco Systems, Inc. + 96,400 1,882,692
Corning Incorporated + 17,000 411,230
Dell Inc. + 18,700 456,467
Electronic Arts Inc. + 5,000 215,200
Electronic Data Systems Corporation 10,000 240,600
EMC Corporation + 212,648 2,332,749
First Data Corporation ^ 11,324 510,033
Freescale Semiconductor Inc., Class B + 6,512 191,453
Hewlett-Packard Company ^ 27,900 883,872
Intel Corporation ^ 82,500 1,563,375
International Business Machines Corporation ^ 12,600 967,932
Linear Technology Corporation 6,500 217,685
Lucent Technologies Inc. + 10,700 25,894
Maxim Integrated Products, Inc. ^ 2,300 73,853
Micron Technology, Inc. + 11,500 173,190
Microsoft Corporation 120,900 2,816,970
Motorola, Inc. 34,700 699,205
Oracle Corporation + 43,872 635,705
Paychex, Inc. 4,200 163,716
QUALCOMM Inc. 21,000 841,470
Sanmina-SCI Corporation + 5,500 25,300
Solectron Corporation + 3,000 10,260
Sun Microsystems, Inc. + 7,500 31,125
Symantec Corporation + 10,000 155,400
Texas Instruments Incorporated 23,900 723,931
Yahoo! Inc. + 18,800 620,400
------------
18,615,296
------------
MATERIALS - 2.40%
Air Products & Chemicals, Inc. 1,000 63,920
Alcoa Inc. 14,200 459,512
Dow Chemical Company (The) 15,400 601,062
E. I. du Pont de Nemours and Company 14,800 615,680
International Paper Company ^ 10,500 339,150
Monsanto Company 5,080 427,685
Newmont Mining Corporation 7,000 370,510
Praxair, Inc. 3,000 162,000
Rohm and Hass Company 1,000 50,120
Weyerhaeuser Company 1,000 62,250
------------
3,151,889
------------
REAL ESTATE INVESTMENT TRUST - 0.41%
Simon Property Group, Inc. ^ 6,500 539,110
-4-
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
TELECOMMUNICATIONS SERVICES - 3.29%
ALLTEL Corporation ^ 4,000 255,320
AT&T Inc. ^ 48,364 1,348,872
BellSouth Corporation 23,000 832,600
Embarq Corporation + 1,922 78,783
Sprint Nextel Corporation ^ 38,446 768,536
Verizon Communications Inc. ^ 30,900 1,034,841
------------
4,318,952
------------
UTILITIES - 3.34%
American Electric Power Company, Inc. 5,500 188,375
CenterPoint Energy, Inc. 13,900 173,750
Dominion Resources, Inc. 4,600 344,034
Duke Energy Corporation ^ 13,300 390,621
Edison International 4,000 156,000
Exelon Corporation 11,000 625,130
FirstEnergy Corp. 5,000 271,050
FPL Group, Inc. 4,000 165,520
PG&E Corporation 9,000 353,520
Progress Energy, Inc. ^ 3,500 150,045
Public Service Enterprise Group Incorporated 6,000 396,720
Southern Company (The) 11,900 381,395
TXU Corp. ^ 9,400 562,026
Williams Companies, Inc. (The) 10,000 233,600
------------
4,391,786
------------
TOTAL EQUITY SECURITIES
(cost - $116,572,604) 130,847,764
------------
PRINCIPAL
AMOUNT (000'S)
--------------
SHORT-TERM INVESTMENTS - 1.75%
REPURCHASE AGREEMENTS - 1.75%
Bear, Stearns & Co. Inc. * ** $ 1,327 1,326,514
(Agreement dated 6/30/2006 to be
repurchased at $1,326,807), 2.6562%,
7/3/2006, collateralized by $1,365,340 in U.S.
Treasury Bond STRIP)
Bear, Stearns & Co. Inc. 584 583,503
(Agreement dated 6/30/2006 to be
repurchased at $583,722), 4.5000%, 7/3/2006,
collateralized by $601,674 in U.S. Treasury
Bond STRIP)
Bear, Stearns & Co. Inc. * ** 392 391,875
(Agreement dated 6/30/2006 to be
repurchased at $392,048), 5.3125%, 7/3/2006,
collateralized by $404,083 in U.S. Treasury
Bond STRIP)
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $2,301,892) 2,301,892
------------
-5-
DESCRIPTION NO. OF SHARES VALUE
-----------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.32%
(cost - $118,874,496) 133,149,656
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (1.32)% (1,737,955)
------------
NET ASSETS - 100.00% $131,411,701
============
------------
+ 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.
-6-
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.
--------------------------------------------------------------------------------
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SIGNATURES
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, 2006
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, 2006
By: /S/ JODI B. LEVINE
------------------
Name: Jodi B. Levine
Title: Principal Financial Officer
Date: August 31, 2006
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