-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OL7fQDJ6wfLmTbeGZm456/zcXxQPPT4AHeNYj5tnIdBb9WyBBTcMIgqLd62q3z25 7IzYAFeTEjlXBUXWfmxbNw== 0000909012-03-000635.txt : 20030908 0000909012-03-000635.hdr.sgml : 20030908 20030908172335 ACCESSION NUMBER: 0000909012-03-000635 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030908 EFFECTIVENESS DATE: 20030908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORNERSTONE STRATEGIC VALUE FUND INC/ NEW CENTRAL INDEX KEY: 0000814083 IRS NUMBER: 133407699 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05150 FILM NUMBER: 03886608 BUSINESS ADDRESS: STREET 1: BEAR STEARNS FUNDS MANAGEMENT INC. STREET 2: 383 MADISON AVENUE - 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 BUSINESS PHONE: 2122722093 MAIL ADDRESS: STREET 1: BEAR STEARNS FUNDS MANAGEMENT INC. STREET 2: 383 MADISON AVENUE - 23RD FLOOR CITY: NEW YORK STATE: NY ZIP: 10179 FORMER COMPANY: FORMER CONFORMED NAME: CLEMENTE STRATEGIC VALUE FUND INC DATE OF NAME CHANGE: 19990622 FORMER COMPANY: FORMER CONFORMED NAME: CLEMENTE GLOBAL GROWTH FUND INC DATE OF NAME CHANGE: 19920703 N-CSRS 1 t300533.txt SEMI ANNUAL REPORT 6/30/03 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS 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, NY 10179 ---------------------------------------- -------------------- (Address of principal executive offices) (Zip code) FRANK J. MARESCA. 383 MADISON AVE, NEW YORK, NY ---------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 212-272-3550 ------------ Date of fiscal year end: DECEMBER 31, 2003 ----------------- Date of reporting period: JANUARY 1, 2003 THROUGH JUNE 30, 2003 ------------------------------------- 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. ================================================================================ DIRECTORS AND CORPORATE OFFICERS Ralph W. Bradshaw Chairman of the Board of Directors and President Gary A. Bentz Director, Vice President and Treasurer Thomas H. Lenagh Director Edwin Meese III Director Scott B. Rogers Director Andrew A. Strauss Director Glenn W. Wilcox, Sr. Director Thomas R. Westle Secretary STOCK TRANSFER AGENT AND INVESTMENT MANAGER REGISTRAR Cornerstone Advisors, Inc. American Stock Transfer & One West Pack Square Trust Co. Suite 1650 59 Maiden Asheville, NC 28801 New York, NY 10038 ADMINISTRATOR INDEPENDENT ACCOUNTANTS Bear Stearns Funds Tait, Weller & Baker Management Inc. 1818 Market Street 383 Madison Avenue Suite 2400 New York, NY 10179 Philadelphia, PA 19103 CUSTODIAN LEGAL COUNSEL Custodial Trust Company Spitzer & Feldman P.C. 101 Carnegie Center 405 Park Avenue Princeton, NJ 08540 New York, NY 10022 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. [CLM LOGO] This report, including the financial statements herein, is sent to the shareholders of the Fund for their information. The financial information herein is taken from the records of the Fund without examination by independent 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. ================================================================================ CORNERSTONE STRATEGIC VALUE FUND, INC. SEMI-ANNUAL REPORT JUNE 30, 2003 ================================================================================ CONTENTS Letter to Shareholders 1 Portfolio Summary 3 Schedule of Investments 4 Statement of Assets and Liabilities 8 Statement of Operations 9 Statement of Changes in Net Assets 10 Financial Highlights 11 Notes to Financial Statements 12 Results of Annual Meeting of Stockholders 16 Description of Dividend Reinvestment & Cash Purchase Plan 17 Summary of General Information 19 Shareholder Information 19 Privacy Policy Notice 20 LETTER TO SHAREHOLDERS July 25, 2003 Dear Fellow Shareholders: Our semi-annual report for Cornerstone Strategic Value Fund, Inc. (the "Fund"), covering the six months ended June 30, 2003, follows. At the end of the period, the Fund's net assets were $25.0 million and the Net Asset Value ("NAV") per share was $6.53. The share price closed at $7.35 and the Fund's price discount to NAV improved from a discount of 8.7% at the beginning of the year to a premium of 12.6% at the end of the current period. After reflecting the reinvestment of distributions totaling $0.50 per share, the Fund achieved a total investment return based on market value of 36.26% for the six months ended June 30, 2003. We are gratified by this performance and believe it reflects positive investor support for the direction of the Fund. ECONOMIC AND MARKET SUMMARY Investors welcomed continuation of the recovery that started near the end of 2002, following years of dismal returns in the equity markets. The economy is being deluged with fiscal stimulus as an election year approaches. The Federal Reserve emphasized their commitment to keep rates low for some time. However, even after multiple tax cuts and the lowest interest rates in decades, the results so far are anything but stellar as evidenced by the stubbornly high level of unemployment. In spite of this, consumer confidence remains high. Most equity indices, both domestic and global, finished positive for the period. Following weakness in the first three months of the year, the S&P 500 Index's (the "Index") second quarter represented its best quarterly performance since 1998. Complications from SARS and the war with Iraq kept expectations for second quarter earnings low, but investors anticipate continued recovery in the second half of the year. PORTFOLIO PERFORMANCE Following the protracted equity downturn of recent years, we are pleased to report that the Fund's portfolio made significant progress over the last six months, comparing well with its Index benchmark's return of 11.76%. The portfolio remained broadly diversified and essentially fully invested. We believe that this approach helped dampen the negative influences of the last few years and will serve the Fund well as equity markets face the uncertain future. The Fund profited from its exposure to other domestic closed-end funds. By buying funds with special situations and those at historically wide discounts, their underlying portfolio performance is magnified as the discount narrows. The investment manager attempts to enhance portfolio performance by taking advantage of temporary and occasional pricing inefficiencies in certain securities. The availability and magnitude of such opportunities - -------------------------------------------------------------------------------- 1 LETTER TO SHAREHOLDERS (CONCLUDED) are unpredictable and therefore, their effect on possible portfolio out-performance may vary considerably from year to year. CREATING VALUE Our efforts are focused on creating extra value for our shareholders. This concentration has led to significant change in a number of areas. As illustrated in the financial highlights section of this report, the Fund's shareholders received substantial benefit over the last few years from share repurchases when the Fund traded at a discount. At a premium, the Fund's shares are now trading above the value of their underlying assets. Last year, the Fund's Board established a monthly distribution policy with a fixed payout. Shareholders have the flexibility to receive their distributions in cash or to maintain their holdings in Fund stock by reinvesting in additional shares through the Fund's dividend reinvestment plan. It is expected that, as with those of last year, the bulk of this year's distributions will be classified as tax-deferring return-of-capital shortly after the end of the year. Our efforts to control costs have proven very beneficial for the Fund. An in-depth study of insurance options led to improved pricing, while operating efficiencies have reduced overall printing and legal expenses. The Fund's move to the American Stock Exchange, LLC, while creating a substantial reduction in listing fees, has also been accompanied by higher daily trading volumes. Cornerstone Advisors, Inc, the Fund's investment manager, extended its voluntary agreement to waive a substantial portion of its management fees to the extent that monthly operating expenses exceed 0.10%. These actions together have resulted in a much lower expense ratio than in past years, even in spite of the Fund's relatively small asset size. The Fund's Board of Directors, its officers, and its investment manager are mindful of the trust that the Fund's shareholders have placed in us. We know you have a choice, we appreciate your support, and we look forward to continuing our service to you in the future. Sincerely, /S/ RALPH W. BRADSHAW - --------------------- Ralph W. Bradshaw Chairman IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET, INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. PORTFOLIO SUMMARY - AS OF JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- TOP TEN, BY SECTOR Percent of Sector Net Assets - -------------------------------------------------------------------------------- 1. Financials 19.2 - -------------------------------------------------------------------------------- 2. Information Technology 14.2 - -------------------------------------------------------------------------------- 3. Healthcare 13.9 - -------------------------------------------------------------------------------- 4. Consumer Discretionary 13.0 - -------------------------------------------------------------------------------- 5. Industrials 11.4 - -------------------------------------------------------------------------------- 6. Consumer Staples 8.9 - -------------------------------------------------------------------------------- 7. Energy 5.8 - -------------------------------------------------------------------------------- 8. Closed-End Domestic Funds 4.7 - -------------------------------------------------------------------------------- 9. Telecommunication Services 4.2 - -------------------------------------------------------------------------------- 10. Materials 2.4 - -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER
Persent of Holding Sector Net Assets - ------------------------------------------------------------------------------------------ 1. Microsoft Corp. Information Technology 3.4 - ------------------------------------------------------------------------------------------ 2. General Electric Co. Industrials 3.3 - ------------------------------------------------------------------------------------------ 3. Wal-Mart Stores, Inc. Consumer Discretionary 2.9 - ------------------------------------------------------------------------------------------ 4. Exxon Mobil Corp. Energy 2.7 - ------------------------------------------------------------------------------------------ 5. Pfizer Inc. Healthcare 2.6 - ------------------------------------------------------------------------------------------ 6. Citigroup Inc. Financials 2.5 - ------------------------------------------------------------------------------------------ 7. American International Group, Inc. Financials 2.0 - ------------------------------------------------------------------------------------------ 8. Johnson & Johnson Healthcare 1.9 - ------------------------------------------------------------------------------------------ 9. International Business Machines Corp. Information Technology 1.8 - ------------------------------------------------------------------------------------------ 10. Bank of America Corp. Financials 1.7 - ------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS -- JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.83% CLOSED-END DOMESTIC FUNDS - 4.66% Gabelli Global Multimedia Trust, Inc. 16,000 $ 124,000 General American Investors Co., Inc. 10,500 288,120 Royce Focus Trust, Inc. 39,400 266,738 Salmon Brothers Fund, Inc. (The) 28,200 302,868 Tri-Continental Corp. 12,500 184,750 ---------- 1,166,476 ---------- CONSUMER DISCRETIONARY - 12.95% AOL Time Warner Inc.+ 10,500 168,945 Bed Bath & Beyond Inc.+ 1,000 38,810 Best Buy Co., Inc.+ 1,000 43,920 Carnival Corp. 2,100 68,271 Clear Channel Communications, Inc.+ 2,100 89,019 Comcast Corp., Class A+ 3,882 117,159 Costco Wholesale Corp.+ 1,500 54,900 CVS Corp. 1,500 42,045 Delphi Corp. 2,000 17,260 Ford Motor Co. 6,500 71,435 Fortune Brands, Inc. 1,000 52,200 Gannett Co., Inc. 2,000 153,620 Gap, Inc. (The) 2,700 50,652 General Motors Corp. 1,900 68,400 Goodyear Tire & Rubber Co. (The) 2,500 13,125 Harley-Davidson, Inc. 1,000 39,860 Hilton Hotels Corp. 1,500 19,185 Home Depot, Inc. (The) 7,100 235,152 Kohl's Corp.+ 1,000 51,380 Limited Brands 2,500 38,750 Lowe's Companies, Inc. 2,500 107,375 - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- CONSUMER DISCRETIONARY (CONTINUED) Marriott International, Inc., Class A 1,000 $ 38,420 May Department Stores Co. (The) 1,000 22,260 McDonald's Corp. 4,600 101,476 NIKE, Inc., Class B 1,000 53,490 Omnicom Group Inc. 1,000 71,700 Reebok International Ltd.+ 1,500 50,445 Sears, Roebuck & Co. 1,000 33,640 Staples, Inc.+ 1,500 27,525 Starbucks Corp.+ 1,200 29,424 Target Corp. 3,200 121,088 Viacom Inc., non-voting Class B+ 6,000 261,960 Wal-Mart Stores, Inc. 13,300 713,811 Walt Disney Co. (The) 7,200 142,200 Yum! Brands, Inc.+ 1,000 29,560 ---------- 3,238,462 ---------- CONSUMER STAPLES - 8.86% Albertson's, Inc. 2,500 48,000 Altria Group, Inc. 6,400 290,816 Anheuser-Busch Companies, Inc. 3,200 163,360 Archer-Daniels-Midland Co. 2,415 31,081 Coca-Cola Co. (The) 7,500 348,075 Colgate-Palmolive Co. 2,000 115,900 ConAgra Foods, Inc. 1,900 44,840 General Mills, Inc. 2,500 118,525 Gillette Co. (The) 2,600 82,836 Kimberly-Clark Corp. 1,900 99,066 Kroger Co. (The)+ 3,500 58,380 PepsiCo, Inc. 5,100 226,950 Procter & Gamble Co. (The) 3,800 338,884 Sara Lee Corp. 2,800 52,668 Sysco Corp. 3,300 99,132 Walgreen Co. 3,200 96,320 ---------- 2,214,833 ---------- See accompanying notes to financial statements - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- ENERGY - 5.82% Anadarko Petroleum Corp. 900 $ 40,023 Baker Hughes Inc. 2,500 83,925 CenterPoint Energy, Inc. 2,500 20,375 ChevronTexaco Corp. 3,340 241,148 ConocoPhillips 3,528 193,334 El Paso Corp. 2,500 20,200 Exxon Mobil Corp. 19,000 682,290 Marathon Oil Corp. 2,500 65,875 Reliant Resources, Inc.+ 1,971 12,082 Schlumberger Ltd. 2,000 95,140 ---------- 1,454,392 ---------- FINANCIALS - 19.23% AFLAC Inc. 1,900 58,425 American Express Co. 4,600 192,326 American International Group, Inc. 9,042 498,938 Bank of America Corp. 5,400 426,762 Bank of New York Co., Inc. (The) 2,500 71,875 Bank One Corp. 4,100 152,438 BB&T Corp. 1,600 54,880 Charles Schwab Corp. (The) 5,000 50,450 Citigroup Inc. 14,600 624,880 Fannie Mae 3,700 249,528 Fifth Third Bancorp 2,000 114,680 FleetBoston Financial Corp. 3,900 115,869 Freddie Mac 2,500 126,925 Hartford Financial Services Group, Inc. (The) 2,500 125,900 HSBC Holdings plc ADR 963 56,923 J.P. Morgan Chase & Co. 6,000 205,080 Marsh & McLennan Companies, Inc. 4,000 204,280 - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- FINANCIALS (CONTINUED) MBNA Corp. 4,500 $ 93,780 Mellon Financial Corp. 1,800 49,950 Merrill Lynch & Co., Inc. 3,000 140,040 MetLife, Inc. 2,700 76,464 Morgan Stanley 3,500 149,625 National City Corp. 2,200 71,962 PNC Financial Services Group 1,100 53,691 Prudential Financial, Inc. 2,500 84,125 State Street Corp. 1,000 39,400 SunTrust Banks, Inc. 1,100 65,274 Travelers Property Casualty Corp., Class A 738 11,734 Travelers Property Casualty Corp., Class B 1,517 23,923 U.S. Bancorp 4,200 102,900 Wachovia Corp. 3,600 143,856 Washington Mutual, Inc. 3,150 130,095 Wells Fargo & Co. 4,800 241,920 ---------- 4,808,898 ---------- HEALTHCARE - 13.88% Abbott Laboratories 5,300 231,928 Amgen Inc.+ 3,500 234,430 Baxter International Inc. 2,500 65,000 Boston Scientific Corp.+ 1,500 91,650 Bristol-Myers Squibb Co. 6,000 162,900 Cardinal Health, Inc. 2,500 160,750 Eli Lilly & Co. 4,000 275,880 Genzyme Corp.+ 2,500 104,500 HCA Inc. 2,000 64,080 HEALTHSOUTH Corp.+ 2,500 1,275 See accompanying notes to financial statements - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- HEALTHCARE (CONTINUED) Johnson & Johnson 9,200 $ 475,640 McKesson Corp. 1,000 35,740 Medtronic, Inc. 4,300 206,271 Merck & Co. Inc. 6,000 363,300 Pfizer Inc. 19,000 648,850 Schering-Plough Corp. 2,500 46,500 UnitedHealth Group Inc. 3,000 150,750 Wyeth 3,300 150,315 ---------- 3,469,759 ---------- INDUSTRIALS - 11.41% 3M Co. 1,500 193,470 Automatic Data Processing, Inc. 2,000 67,720 Boeing Co. (The) 6,000 205,920 Caterpillar Inc. 1,300 72,358 Cendant Corp.+ 2,700 49,464 Concord EFS, Inc.+ 2,500 36,800 Emerson Electric Co. 1,500 76,650 FedEx Corp. 1,000 62,030 First Data Corp. 5,000 207,200 General Electric Co. 29,000 831,720 Honeywell International Inc. 2,800 75,180 Illinois Tool Works Inc. 1,000 65,850 Lockheed Martin Corp. 1,500 71,355 Masco Corp. 1,700 40,545 Paychex, Inc. 2,500 73,275 Southwest Airlines Co. 2,700 46,440 Transocean Inc.+ 2,500 54,925 Tyco International Ltd. 9,500 180,310 Union Pacific Corp. 1,000 58,020 United Parcel Service, Inc., Class B 3,500 222,950 United Technologies Corp. 1,700 120,411 Waste Management, Inc. 1,700 40,953 ---------- 2,853,546 ---------- - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY - 14.17% Agere Systems Inc., Class A+ 115 $ 268 Agere Systems Inc., Class B+ 2,830 6,509 Agilent Technologies, Inc.+ 1,800 35,190 Altera Corp.+ 1,500 24,600 Analog Devices, Inc.+ 1,000 34,820 Apple Computer, Inc.+ 2,500 47,800 Applied Materials, Inc.+ 5,400 85,644 Cisco Systems, Inc.+ 21,900 363,321 Computer Associates International, Inc. 2,500 55,700 Corning Inc.+ 3,000 22,170 Dell Computer Corp.+ 8,300 265,268 Electronic Data Systems Corp. 2,500 53,625 EMC Corp.+ 7,000 73,290 Hewlett-Packard Co. 10,300 219,390 Intel Corp. 19,500 405,288 International Business Machines Corp. 5,400 445,500 Linear Technology Corp. 1,000 32,210 Maxim Integrated Products, Inc. 1,000 34,190 Micron Technology, Inc. 2,500 29,075 Microsoft Corp. 32,700 837,447 Motorola, Inc. 6,600 62,238 Oracle Corp.+ 6,300 75,726 QUALCOMM Inc. 2,500 89,375 Sanmina-SCI Corp.+ 2,500 15,775 Siebel Systems, Inc.+ 2,500 23,850 Solectron Corp.+ 3,000 11,220 Sun Microsystems, Inc.+ 10,000 46,000 Texas Instruments Inc. 4,900 86,240 Yahoo! Inc.+ 1,900 62,244 ---------- 3,543,973 ---------- MATERIALS - 2.37% Air Products & Chemicals, Inc. 1,000 41,600 Alcoa Inc. 3,100 79,050 Dow Chemical Co. (The) 2,700 83,592 See accompanying notes to financial statements - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONCLUDED) - -------------------------------------------------------------------------------- No. of Value Description Shares (Note A) - -------------------------------------------------------------------------------- MATERIALS (CONTINUED) E .I. du Pont de Nemours & Co. 3,700 $ 154,068 Georgia-Pacific Corp. 1,000 18,950 International Paper Co. 2,000 71,460 Praxair, Inc. 1,500 90,150 Weyerhaeuser Co. 1,000 54,000 ---------- 592,870 ---------- TELECOMMUNICATION SERVICES - 4.16% ALLTEL Corp. 2,500 120,550 AT&T Corp. 2,400 46,200 AT&T Wireless Services Inc.+ 7,022 57,651 BellSouth Corp. 6,500 173,095 Lucent Technologies Inc.+ 10,700 21,721 SBC Communications Inc. 10,400 265,720 Sprint Corp. (FON Group) 3,000 43,200 Verizon Communications Inc. 7,900 311,655 ---------- 1,039,792 ---------- UTILITIES - 2.32% American Electric Power Co., Inc. 1,200 35,796 Dominion Resources, Inc. 1,000 64,270 Duke Energy Corp. 5,600 111,720 Edison International+ 2,500 41,075 FirstEnergy Corp. 2,500 96,125 Scottish Power plc ADR 4,000 97,240 Southern Co. (The) 2,400 74,784 TXU Corp. 1,000 22,450 Xcel Energy, Inc. 2,500 37,600 ---------- 581,060 ---------- TOTAL EQUITY SECURITIES (cost - $25,974,987) 24,964,061 ---------- - -------------------------------------------------------------------------------- Principal Amount Value Description (000's) (Note A) - -------------------------------------------------------------------------------- SHORT-TERM INVESTMENT - 0.22% REPURCHASE AGREEMENT - 0.22% Bear, Stearns & Co. Inc. (Agreement dated 06/30/03 to be repurchased at $56,026), 1.10%, 07/01/03 (cost - $56,024) (Note F) $ 56 $ 56,024 --------- TOTAL INVESTMENTS - 100.05% (cost - $26,031,011) (Notes A, G) 25,020,085 ---------- SECURITIES LENDING COLLATERAL (Note E) - 0.92% 229,702 LIABILITIES IN EXCESS OF OTHER ASSETS - (0.97)% (242,734) ---------- NET ASSETS - 100.00% $ 25,007,053 ============ - ----------- + Non-income producing security. ADR American Depositary Receipts. See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 7
- -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- ASSETS Investments, at value (Cost $26,031,011) (Notes A, G) $ 25,020,085 Cash collateral received for securities loaned (Note E) 229,702 Receivables: Dividends 27,691 Interest 167 Prepaid expenses 8,187 ------------ Total Assets 25,285,832 ------------ LIABILITIES Payables: Upon return of securities loaned (Note E) 229,702 Investment management fees (Note B) 12,962 Other accrued expenses 36,115 ------------ Total Liabilities 278,779 ------------ NET ASSETS (applicable to 3,828,705 shares of common stock outstanding) $ 25,007,053 ============ NET ASSET VALUE PER SHARE ($25,007,053 / 3,828,705) $ 6.53 ============ NET ASSETS CONSISTS OF Capital stock, $0.01 par value; 3,828,705 shares outstanding (25,000,000 shares authorized) $ 38,287 Paid-in capital 55,699,955 Cost of 2,239,440 shares repurchased (26,999,661) Distributions in excess of net investment income (1,813,482) Accumulated net realized loss on investments (907,120) Net unrealized depreciation in value of investments (1,010,926) ------------ Net assets applicable to shares outstanding $ 25,007,053 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 8
- -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED) - -------------------------------------------------------------------------------- INVESTMENT INCOME Income (Note A): Dividends $ 215,852 Interest 1,292 ----------- Total Investment Income 217,144 ----------- Expenses: Investment management fees (Note B) 118,330 Administration fees 24,795 Accounting fees 14,053 Legal and audit fees (Note B) 8,739 Directors' fees 7,354 Transfer agent fees 7,140 Stock exchange listing fees 4,880 Custodian fees 3,859 Insurance 2,764 Printing 655 ----------- Total Expenses 192,569 Less: Management fee waivers (Note B) (42,691) Less: Fees paid indirectly (Note B) (6,784) ----------- Net Expenses 143,094 ----------- Net Investment Income 74,050 ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized loss from investments (322,063) Net change in unrealized depreciation in value of investments 2,612,211 ----------- Net realized and unrealized gain on investments 2,290,148 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,364,198 ===========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 9
- -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- For the Six Months Ended For the Year June 30, 2003 Ended (unaudited) December 31, 2002 ----------- ----------------- INCREASE/(DECREASE) IN NET ASSETS Operations: Net investment income/(loss) $ 74,050 $ (38,781) Net realized loss on investments (322,063) (116,327) Net change in unrealized appreciation/ (depreciation) in value of investments 2,612,211 (8,612,397) ------------ ------------ Net increase/(decrease) in net assets resulting from operations 2,364,198 (8,767,505) ------------ ------------ Dividends and distributions to shareholders (Notes A, G): Net investment income (74,050) -- Return-of-capital (1,813,482) (1,887,643) ------------ ------------ Total dividends and distributions to shareholders (1,887,532) (1,887,643) ------------ ------------ Capital stock transactions (Note D): Proceeds from 25,108 and 33,037 shares newly issued in reinvestment of dividends and distributions, respectively 154,578 194,649 Cost of 62,000 shares repurchased -- (419,744) ------------ ------------ Net increase/(decrease) in net assets resulting from capital stock transactions 154,578 (225,095) ------------ ------------ Total increase/(decrease) in net assets 631,244 (10,880,243) ------------ ------------ NET ASSETS Beginning of period 24,375,809 35,256,052 ------------ ------------ End of period $ 25,007,053 $ 24,375,809 ============ ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 10
- -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for each period indicated. This information has been derived from information provided in the financial statements and market price data for the Fund's shares. For the Years Ended December 31, --------------------------------------------------------------------- For the Six Months Ended June 30, 2003 (unaudited) 2002 2001 2000 1999 1998 ----------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 6.41 $ 9.20 $ 11.31 $ 14.95 $ 14.52 $ 11.53 --------- ---------- ---------- --------- --------- -------- Net investment income/(loss) # 0.02 (0.01) (0.06) (0.94) (0.09) (0.09) Net realized and unrealized gain/(loss) on investments and foreign currency related translations 0.60 (2.29) (2.13) (1.81) 4.04 2.96 --------- ---------- ---------- --------- --------- -------- Net increase/(decrease) in net assets resulting from operations 0.62 (2.30) (2.19) (2.75) 3.95 2.87 --------- ---------- ---------- --------- --------- -------- Dividends and distributions to shareholders: Net investment income (0.02) -- -- -- -- -- Net realized gain on investments and foreign currency related transactions -- -- -- (1.01) (3.87) -- Return-of-capital (0.48) (0.50) -- -- -- -- --------- ---------- ---------- --------- --------- -------- Total dividends and distributions to shareholders (0.50) (0.50) -- (1.01) (3.87) -- --------- ---------- ---------- --------- --------- -------- Capital stock transactions: Anti-dilutive effect due to capital stock repurchased -- 0.02 0.08 0.12 0.35 0.12 Dilutive effect due to shares issued in reinvestment of dividends and distributions -- (0.01) -- -- -- -- --------- ---------- ---------- --------- --------- -------- Total capital stock transactions -- 0.01 0.08 0.12 0.35 0.12 --------- ---------- ---------- --------- --------- -------- Net asset value, end of period $ 6.53 $ 6.41 $ 9.20 $ 11.31 $ 14.95 $ 14.52 ========= ========== ========== ========= ========= ======== Market value, end of period $ 7.35 $ 5.85 $ 8.05 $ 10.59 $ 14.25 $ 12.88 ========= ========== ========== ========= ========= ======== Total investment return (a) (b) 36.26% (20.85)% (23.98)% (19.28)% 40.74% 36.42% ========= ========== ========== ========= ========= ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 25,007 $ 24,376 $ 35,256 $ 45,980 $ 66,204 $ 79,060 Ratio of expenses to average net assets, net of fee waivers, if any 1.21%(c)(e) 1.80%(c) 1.77%(c) 1.72%(c) 1.55%(c) 1.91% Ratio of expenses to average net assets, excluding fee waivers, if any (d) 1.63% (e) 2.17% 2.11% 1.83% 1.64% -- Ratio of expenses to average net assets, net of fee waivers, but excluding fees paid indirectly, if any 1.27%(e) 1.86% 1.95% -- -- -- Ratio of net investment income/(loss) to average net assets 0.63%(e) (0.13)% (0.64)% (1.12)% (0.59)% (0.69)% Portfolio turnover 4.01% 29.63% 59.83% 28.26% 101.54% 50.39% - ------------------------------------------------------------------------------------------------------------------------------------ # 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) For the year ended December 31, 2000, the Fund paid federal taxes on realized long-term capital gains. Total investment return, assuming reinvestment of distributions and federal taxes paid on long-term capital gains, is (13.88)%. (c) Expenses are net of fees paid indirectly. (d) Expenses exclude fees paid indirectly. (e) Annualized.
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 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. As a result of an Annual Meeting of Stockholders held on April 19, 2001, the Fund, formerly known as the Clemente Strategic Value Fund, Inc., changed its name. Its investment objective is to seek long-term capital appreciation through investment in equity securities of companies listed in the United States. 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. The Board of Directors has established general guidelines for calculating fair value of not readily marketable securities. At June 30, 2003, 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 "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. 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 - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- 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. Prior thereto, the Fund distributed at least annually to shareholders, substantially all of its net investment income and net realized short-term capital gains, if any. 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. An additional distribution may be made to the extent necessary to avoid the payment of a 4% U.S. federal excise tax. Dividends and distributions to shareholders are recorded by the Fund on the ex-dividend date. The character of dividends and distributions made during the six months ended June 30, 2003 from net investment income or net realized gains may differ from their ultimate characterization for U.S. federal income tax purposes due to U.S. generally accepted accounting principles/tax differences in the character of income and expense recognition. 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. Cornerstone has voluntarily agreed to waive its management fees from the Fund to the extent that monthly operating expenses exceed 0.10% of average net assets calculated monthly. Cornerstone has voluntarily agreed to continue the undertaking through December 31, 2003. For the six months ended June 30, 2003, Cornerstone earned $118,330 for investment management services, of which it waived $42,691. Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY, are expense offsets of $6,784 arising from credits earned on portfolio transactions executed with a broker, pursuant to a directed brokerage arrangement. The Fund paid or accrued approximately $7,400 for the six months ended June 30, 2003 for legal services to Spitzer & Feldman P.C., counsel to the Fund. Thomas R. Westle, a partner of the firm, serves as secretary of the Fund. At June 30, 2003, pursuant to regulatory filings, separate shareholders owned approximately 7% and 38% of the outstanding shares of the Fund based on Schedule 13D/A and Schedule 13G/A filings with the Securities and Exchange Commission on May 9, 2003 and February 7, 2003, respectively. NOTE C. INVESTMENT IN SECURITIES For the six months ended June 30, 2003, purchases and sales of securities, other than short-term investments, were $951,677 and $2,541,517 respectively. - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) - -------------------------------------------------------------------------------- NOTE D. SHARE REPURCHASE PROGRAM On October 5, 1998, the Fund commenced a share repurchase program for purposes of enhancing shareholder value and reducing the discount at which the Fund's shares traded from their net asset value. The Fund had no repurchases for the six months ended June 30, 2003. For the year ended December 31, 2002, the Fund repurchased 62,000 of its shares for a total cost of $419,744 at a weighted average discount of 12.93% from net asset value. The discount of individual repurchases ranged from 6.11% - 17.42%. The Fund expects to continue to repurchase its outstanding shares at such time and in such amounts as it believes will further the accomplishment of its foregoing objectives, subject to review by the Board of Directors. No limit has been placed on the number of shares to be purchased 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. NOTE E. SECURITIES LENDING To generate additional income, the Fund may lend up to 10% 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 and the related collateral received at June 30, 2003, were $223,675 and $229,702, respectively. Any cash collateral received is reinvested into repurchase agreements, which in turn is collateralized by various U.S. Government and Agency securities. During the six months ended June 30, 2003, the Fund earned $215 in securities lending income which is included under the caption INTEREST in the Statement of Operations. NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT Listed below is the collateral associated with the repurchase agreement with Bear, Stearns & Co. Inc. outstanding at June 30, 2003. PRINCIPAL AMOUNT MARKET ISSUER (000'S) MATURITY VALUE - ------ ------- -------- ----- United States Treasury Bond, (interest only) $130 2/15/20 $59,326 NOTE G. 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. - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED) - -------------------------------------------------------------------------------- The tax characteristic of distributions paid during the year ended December 31, 2002 were a return-of-capital of $1,887,643. 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, 2002, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $585,057 of which $142,060 expires in 2009 and $442,997 expires in 2010. At June 30, 2003, 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 $26,031,011, $2,308,772, $(3,319,698) and $(1,010,926), respectively. - -------------------------------------------------------------------------------- 15 RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED) On April 11, 2003, the Annual Meeting of Stockholders of Cornerstone Strategic Value Fund, Inc. was held and the following matter was voted upon: 1. To elect three Class II Directors until the year 2006 Annual Meeting. NAME OF CLASS II DIRECTORS FOR WITHHOLD - -------------------------- --- -------- Gary A. Bentz 3,138,971 509,379 Thomas H. Lenagh 3,135,187 513,163 Scott B. Rogers 3,138,771 509,579 - -------------------------------------------------------------------------------- 16 DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED) Shareholders who have Shares registered directly in their own names automatically participate in the Fund's Dividend Reinvestment & Cash Purchase Plan (the "Plan"), unless and until an election is made to withdraw from the Plan on behalf of such participating shareholders. Shareholders who do not wish to have distributions automatically reinvested should so notify American Stock Transfer & Trust Co. (the "Agent") at P.O. Box 922, Wall Street Station, New York, NY 10269-0560 or call (877) 248-6416. Under the Plan, all of the Fund's 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 "Dividend" and collectively, "Dividends"), the Agent, on the shareholders' 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) at the sole discretion of the Board of Directors, be authorized to 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 a price equal to the average closing price of the Fund over the five trading days preceding the payment date of such dividend. Registered shareholders who acquire their shares through Open Market Purchases and who do not wish to have their Dividends automatically reinvested should so notify the Fund in writing. If a Shareholder has not elected to receive cash Dividends and the Agent does not receive notice of an election to receive cash Dividends prior to the record date of any dividend, the shareholder will automatically receive such Dividends 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 Dividend 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/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 each Plan participant in non-certificated form in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. Each participant, nevertheless, has the right to receive certificates for whole shares owned. The Agent will distribute all proxy solicitation materials to participating shareholders. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating in the Plan, the Agent will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the Shareholder's name and held for the account of beneficial owners participating in the Plan. There will be no charge to participants for reinvesting Dividends other than their share of brokerage commissions as discussed below. The Agent's fees for administering the Plan and - -------------------------------------------------------------------------------- 17 DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)(CONCLUDED) handling the reinvestment of Dividends will be paid by the Fund. Each participant's account will be charged a pro-rata share of brokerage commissions incurred with respect to the Agent's Open Market Purchases in connection with the reinvestment of Dividends. Brokerage charges for purchasing small amounts of shares for individual accounts through the Plan are expected to be less than the usual brokerage charges for such transactions because the Agent will be purchasing shares for all the participants in blocks and pro-rating the lower commission that may be attainable. The automatic reinvestment of Dividends will not relieve participants of any income tax that may be payable on such Dividends. Participants who receive shares pursuant to the Plan as described above will recognize taxable income in the amount of the fair market value of those shares. In the case of non-U.S. participants whose Dividends are subject to U.S. income tax withholding and in the case of participants subject to 28% federal backup withholding, the Agent will reinvest Dividends after deduction of the amount required to be withheld. The Fund reserves the right to amend or terminate the Plan by written notice to participants. All correspondence concerning the Plan should be directed to the Agent at the address referred to in the first paragraph of this section. - -------------------------------------------------------------------------------- 18 SUMMARY OF GENERAL INFORMATION The Fund - 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 in equity securities of companies listed in the United States. The Fund is managed by Cornerstone Advisors, Inc. SHAREHOLDER INFORMATION Effective February 21, 2003, 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 published under "Closed-End Funds" each Sunday in THE NEW YORK TIMES and each Monday in THE WALL STREET JOURNAL and BARRON'S under the designation "CrnstnStrV." - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 19 PRIVACY POLICY NOTICE 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 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. - -------------------------------------------------------------------------------- 20 CORNERSTONE STRATEGIC VALUE FUND, INC. ITEM 2. CODE OF ETHICS. (a) Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 15, 2003. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 15, 2003. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER DECEMBER 15, 2003. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Form N-CSR disclosure requirement not yet effective with respect to the Registrant. ITEM 6. [Reserved] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR AFTER JULY 1, 2003. ITEM 8. [RESERVED] ITEM 9. CONTROLS AND PROCEDURES. (a) The Principal Executive Officer and Principal Financial Officer concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report. (b) There were no significant changes in the registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. ITEM 10. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a) 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 APPLICABLE. (b) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) SIGNATURES [See General Instruction F] Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) CORNERSTONE STRATEGIC VALUE FUND, INC.. By (Signature and Title)* /S/ RALPH W. BRADSHAW - ------------------------- RALPH W. BRADSHAW, Chairman and President (Principal Executive Officer) Date: September 4, 2003 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, Chairman and President (Principal Executive Officer) Date: September 4, 2003 By (Signature and Title)* /S/ GARY A. BENTZ - ------------------------- GARY A. BENTZ, Vice President and Treasurer (Principal Financial Officer) Date: September 4, 2003 * Print the name and title of each signing officer under his or her signature. ALL CERTIFICATIONS (UNDER THE ACT'S SECTION 302 AND 906) SHOULD BE INCLUDED IN ONE EDGAR EX-99.CERT EXHIBIT DOCUMENT TO FORM N-CSR) EX-31 3 ex31-1.txt 302 CERTIFICATION OF CHAIRMAN AND PRESIDENT CERTIFICATIONS I, Ralph A. Bradshaw, certify that: 1. I have reviewed this report on Form N-CSRS of Cornerstone Strategic Value Fund, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 4, 2003 /s/ Ralph W. Bradshaw - ------------------------ Ralph W. Bradshaw Chairman and President (Principal Executive Officer) EX-31 4 ex31-2.txt 302 CERTIFICATION OF VICE PRESIDENT AND TREASURER CERTIFICATIONS I, Gary A. Bentz, certify that: 1. I have reviewed this report on Form N-CSRS of Cornerstone Strategic Value Fund, Inc. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this report (the "Evaluation Date"); and (c) presented in this report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize, and report financial data and have identified for the registrant's auditors any material weakness in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: September 4, 2003 /s/ Gary A. Bentz - ------------------------ Gary A. Bentz Vice President and Treasurer (Principal Financial Officer) EX-32 5 ex32-1.txt 906 CERTIFICATION OF CHAIRMAN AND PRESIDENT CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. 1350, of the undersigned, being the Principal Executive Officer of Cornerstone Strategic Value Fund, Inc. (the "Registrant"), hereby certifies that the Registrant's report on Form N-CSRS for the period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: September 4, 2003 By: /S/ RALPH W. BRADSHAW - ------------------------- Ralph W. Bradshaw Chairman and President (Principal Executive Officer) This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 6 ex32-2.txt 906 CERTIFICATION OF VICE PRESIDENT AND TREASURER CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. 1350, of the undersigned, being the Principal Financial Officer of Cornerstone Strategic Value Fund, Inc. (the "Registrant"), hereby certifies that the Registrant's report on Form N-CSRS for the period ended June 30, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Dated: September 4, 2003 By: /S/ GARY A. BENTZ -------------------------- Gary A. Bentz Vice President and Treasurer (Principal Financial Officer) This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----