N-CSR 1 t303256.txt ============================================================================== 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 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Jodi Levine 383 Madison Avenue, New York, New York 10179 ------------------------------------------------------------------------------- (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: December 31, 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. ============================================================================== ITEM 1. REPORTS TO STOCKHOLDERS. The report of Cornerstone Strategic Value Fund, Inc. (the "Registrant") to stockholders for the year ended December 31, 2006 follows. ================================================================================ 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, PA 19103 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. ================================================================================ CORNERSTONE STRATEGIC VALUE FUND, INC. ANNUAL REPORT DECEMBER 31, 2006 ================================================================================ CONTENTS Portfolio Summary 1 Summary Schedule of Investments 2 Statement of Assets and Liabilities 4 Statement of Operations 5 Statement of Changes in Net Assets 6 Financial Highlights 7 Notes to Financial Statements 8 Report of Independent Registered Public Accounting Firm 12 Tax Information 13 Additional Information Regarding the Fund's Directors and Corporate Officers 14 Description of Dividend Reinvestment Plan 17 Proxy Voting and Portfolio Holdings Information 19 Privacy Policy Notice 19 Summary of General Information 20 Shareholder Information 20 ================================================================================ -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2006 (UNAUDITED) -------------------------------------------------------------------------------- SECTOR ALLOCATION Percent of Sector Net Assets -------------------------------------------------------------------------------- Financials 21.4 -------------------------------------------------------------------------------- Information Technology 14.9 -------------------------------------------------------------------------------- Healthcare 11.8 -------------------------------------------------------------------------------- Consumer Discretionary 10.9 -------------------------------------------------------------------------------- Industrials 10.7 -------------------------------------------------------------------------------- Energy 9.8 -------------------------------------------------------------------------------- Consumer Staples 9.4 -------------------------------------------------------------------------------- Utilities 3.5 -------------------------------------------------------------------------------- Telecommunication Services 3.1 -------------------------------------------------------------------------------- Materials 2.5 -------------------------------------------------------------------------------- Closed-End Funds 1.1 -------------------------------------------------------------------------------- Other 0.9 -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER Percent of Holding Sector Net Assets -------------------------------------------------------------------------------- 1. Exxon Mobil Corporation Energy 4.1 -------------------------------------------------------------------------------- 2. General Electric Company Industrials 2.9 -------------------------------------------------------------------------------- 3. Microsoft Corporation Information Technology 2.4 -------------------------------------------------------------------------------- 4. Bank of America Corporation Financials 2.3 -------------------------------------------------------------------------------- 5. Citigroup Inc. Financials 2.0 -------------------------------------------------------------------------------- 6. Johnson & Johnson Healthcare 2.0 -------------------------------------------------------------------------------- 7. Procter & Gamble Company (The) Consumer Staples 2.0 -------------------------------------------------------------------------------- 8. EMC Corporation Information Technology 1.9 -------------------------------------------------------------------------------- 9. Cisco Systems, Inc. Information Technology 1.7 -------------------------------------------------------------------------------- 10. American International Group, Inc. Financials 1.5 -------------------------------------------------------------------------------- ================================================================================ 1
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2006 -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.59% CLOSED-END FUNDS - 1.10% Total Closed-End Funds (a) $ 1,497,073 ------------ CONSUMER DISCRETIONARY - 10.94% Comcast Corporation, Special Class A * 19,037 805,836 Home Depot, Inc. (The) 23,100 927,696 Time Warner Inc. ^ 76,000 1,655,280 Other Consumer Discretionary (a) 11,528,546 ------------ 14,917,358 ------------ CONSUMER STAPLES - 9.43% Altria Group, Inc. 22,300 1,913,786 Coca-Cola Company (The) 27,000 1,302,750 PepsiCo, Inc. ^ 21,100 1,319,805 Procter & Gamble Company (The) 41,297 2,654,158 Wal-Mart Stores, Inc. 21,600 997,488 Other Consumer Staples (a) 4,670,519 ------------ 12,858,506 ------------ ENERGY - 9.81% Baker Hughes Incorporated 10,600 791,396 Chevron Corporation 24,532 1,803,838 ConocoPhillips ^ 17,974 1,293,229 Exxon Mobil Corporation 73,500 5,632,305 Occidental Petroleum Corporation 16,000 781,280 Schlumberger Limited 22,000 1,389,520 Other Energy (a) 1,688,207 ------------ 13,379,775 ------------ FINANCIALS - 21.35% American Express Company 19,600 1,189,132 American International Group, Inc. 28,331 2,030,199 Bank of America Corporation ^ 59,138 3,157,378 Citigroup Inc. ^ 49,300 2,746,010 No. of Description Shares Value -------------------------------------------------------------------------------- FINANCIALS (CONTINUED) Goldman Sachs Group, Inc. (The) 7,300 $ 1,455,255 JPMorgan Chase & Co. 40,132 1,938,376 Metlife, Inc. 15,200 896,952 Morgan Stanley 15,500 1,262,165 Prudential Financial, Inc. 10,700 918,702 U.S. Bancorp 28,401 1,027,832 Wachovia Corporation 19,600 1,116,220 Wells Fargo & Company 48,400 1,721,104 Other Financials (a) 9,641,202 ------------ 29,100,527 ------------ HEALTHCARE - 11.80% Abbott Laboratories 28,000 1,363,880 Amgen Inc. * 18,900 1,291,059 Johnson & Johnson 40,900 2,700,218 Medtronic, Inc. 19,000 1,016,690 Merck & Co. Inc. 20,000 872,000 Pfizer Inc. 36,060 933,954 UnitedHealth Group Incorporated 17,000 913,410 WellPoint Inc. * 11,500 904,935 Wyeth 20,200 1,028,584 Other Healthcare (a) 5,063,876 ------------ 16,088,606 ------------ INDUSTRIALS - 10.73% 3M Co. 9,400 732,542 Boeing Company (The) 9,200 817,328 Caterpillar Inc. 11,800 723,694 General Electric Company 105,400 3,921,934 Other Industrials (a) 8,433,156 ------------ 14,628,654 ------------ INFORMATION TECHNOLOGY - 14.93% Cisco Systems, Inc. * 82,900 2,265,657 EMC Corporation * 200,648 2,648,554 Google Inc. ^ * 2,500 1,151,200 Hewlett-Packard Company 19,900 819,681 Intel Corporation 82,500 1,670,625 ================================================================================ See accompanying notes to financial statements 2 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2006 (CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- INFORMATION TECHNOLOGY (CONTINUED) International Business Machines Corporation 12,600 $ 1,224,090 Microsoft Corporation 109,200 3,260,712 Oracle Corporation * 44,272 758,822 Other Information Technology (a) 6,559,429 ------------ 20,358,770 ------------ MATERIALS - 2.46% Total Materials (a) 3,350,348 ------------ REAL ESTATE INVESTMENT TRUST - 0.48% Total Real Estate Investment Trust (a) 658,385 ------------ TELECOMMUNICATION SERVICES - 3.05% AT&T Inc. 31,364 1,121,263 BellSouth Corporation 19,000 895,090 Verizon Communications Inc. 35,600 1,325,744 Other Telecommunication Services (a) 817,045 ------------ 4,159,142 ------------ UTILITIES - 3.51% Total Utilities (a) 4,785,770 ------------ TOTAL EQUITY SECURITIES (cost - $106,625,134) 135,782,914 ------------ Principal Amount Description (000's) Value -------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 2.46% REPURCHASE AGREEMENTS - 2.46% Bear, Stearns & Co. Inc. + (Agreements dated 12/29/2006 to be repurchased at $3,356,577)(b) $ 3,355 $ 3,355,249 ------------ TOTAL SHORT-TERM INVESTMENTS (cost - $3,355,249) 3,355,249 ------------ TOTAL INVESTMENTS - 102.05% (cost - $109,980,383) 139,138,163 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS - (2.05)% (2,793,834) ------------ NET ASSETS - 100.00% $136,344,329 ------------ ---------- * 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 December 31, 2006. (b) At December 29, 2006, the maturity date for all repurchase agreements held was January 2, 2007, with interest rates ranging from 2.6565% to 5.3130% and collateralized by $3,455,445 in U.S. Treasury Bond Strips. ================================================================================ See accompanying notes to financial statements.
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-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2006 -------------------------------------------------------------------------------- ASSETS Investments, at value, including collateral for securities on loan of $2,748,824 (Cost $109,980,383)(1) $ 139,138,163 Receivables: Securities sold 2,313,478 Dividends 174,261 Interest 4,917 Prepaid expenses 2,116 ------------- Total Assets 141,632,935 ------------- LIABILITIES Payables: Upon return of securities loaned 2,748,824 Securities purchased 2,332,902 Investment management fees 103,285 Directors' fees 30,993 Other accrued expenses 67,544 Due to custodian 5,058 ------------- Total Liabilities 5,288,606 ------------- NET ASSETS (applicable to 25,643,074 shares of common stock outstanding) $ 136,344,329 ============= NET ASSET VALUE PER SHARE ($136,344,329 / 25,643,074) $ 5.32 ============= NET ASSETS CONSISTS OF Capital stock, $0.001 par value; 25,643,074 shares issued and outstanding (100,000,000 shares authorized) $ 25,643 Paid-in capital 132,448,640 Cost of 1,060,821 shares repurchased (19,974,127) Accumulated net realized loss on investments (5,313,607) Net unrealized appreciation in value of investments 29,157,780 ------------- Net assets applicable to shares outstanding $ 136,344,329 ============= (1) Includes securities out on loan to brokers with a market value of $2,730,234. ================================================================================ See accompanying notes to financial statements.
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-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2006 -------------------------------------------------------------------------------- INVESTMENT INCOME Income: Dividends $ 2,726,475 Interest 44,799 Securities lending 33,496 ------------ Total Investment Income 2,804,770 ------------ Expenses: Investment management fees 1,352,257 Administration fees 135,224 Directors' fees 109,900 Legal and audit fees 63,577 Printing 51,001 Accounting fees 39,475 Custodian fees 23,190 Transfer agent fees 19,899 Stock exchange listing fees 15,993 Insurance 8,202 Miscellaneous 2,500 ------------ Total Expenses 1,821,218 Less: Management fee waivers (134,059) Less: Fees paid indirectly (33,228) ------------ Net Expenses 1,653,931 ------------ Net Investment Income 1,150,839 ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized loss from investments (61,098) Capital gain distributions from regulated investment companies 39,515 Net change in unrealized appreciation in value of investments 16,725,100 ------------ Net realized and unrealized gain on investments 16,703,517 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,854,356 ============ ================================================================================ See accompanying notes to financial statements
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-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- For the Years Ended December 31, ------------------------------ 2006 2005 ------------- ------------- DECREASE IN NET ASSETS Operations: Net investment income $ 1,150,839 $ 834,753 Net realized gain/(loss) from investments (61,098) 27,008,793 Capital gain distributions from regulated investment companies 39,515 -- Net change in unrealized appreciation in value of investments 16,725,100 (22,438,516) ------------- ------------- Net increase in net assets resulting from operations 17,854,356 5,405,030 ------------- ------------- Dividends and distributions to shareholders: Net investment income (1,150,839) (980,195) Net realized capital gains -- (24,369,995) Return-of-capital (25,065,536) -- ------------- ------------- Total dividends and distributions to shareholders (26,216,375) (25,350,190) ------------- ------------- Capital stock transactions: Proceeds from 932,769 and 832,602 shares newly issued or from treasury in reinvestment of dividends and distributions, respectively 5,000,232 4,961,290 ------------- ------------- Total decrease in net assets (3,361,787) (14,983,870) ------------- ------------- NET ASSETS Beginning of year 139,706,116 154,689,986 ------------- ------------- End of year $ 136,344,329 $ 139,706,116 ============= ============= ================================================================================ See accompanying notes to financial statements.
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-------------------------------------------------------------------------------- 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 year 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, ------------------------------------------------------------ 2006 2005 2004 2003 2002 ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year $ 5.65 $ 6.48 $ 6.90 $ 6.41 $ 9.20 -------- -------- -------- -------- -------- Net investment income/(loss) # 0.05 0.03 0.05 0.04 (0.01) Net realized and unrealized gain/(loss) on investments 0.66 0.18 0.55 1.44 (2.29) -------- -------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations 0.71 0.21 0.60 1.48 (2.30) -------- -------- -------- -------- -------- Dividends and distributions to shareholders: Net investment income (0.04) (0.04) (0.05) (0.04) -- Net realized gain on investments -- (1.00) -- -- -- Return-of-capital (1.00) -- (0.99) (0.95) (0.50) -------- -------- -------- -------- -------- Total dividends and distributions to shareholders (1.04) (1.04) (1.04) (0.99) (0.50) -------- -------- -------- -------- -------- Capital stock transactions: Anti-dilutive effect due to capital stock repurchased -- -- -- -- 0.02 Anti-dilutive/(dilutive) effect due to shares issued in reinvestment of dividends and distributions -- -- 0.02 -- (0.01) -------- -------- -------- -------- -------- Total capital stock transactions -- -- 0.02 -- 0.01 -------- -------- -------- -------- -------- Net asset value, end of year $ 5.32 $ 5.65 $ 6.48 $ 6.90 $ 6.41 ======== ======== ======== ======== ======== Market value, end of year $ 8.45 $ 7.05 $ 8.51 $ 9.00 $ 5.85 ======== ======== ======== ======== ======== Total investment return (a) 45.36% (1.32)% 8.38% 77.69% (20.85)% ======== ======== ======== ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000 omitted) $136,344 $139,706 $154,690 $ 26,565 $ 24,376 Ratio of expenses to average net assets, net of fee waivers, if any (b) 1.22% 1.20% 1.28% 1.20% 1.80% Ratio of expenses to average net assets, excluding fee waivers, if any (c) 1.32% 1.36% 1.50% 1.59% 2.17% Ratio of expenses to average net assets, net of fee waivers, if any (c) 1.25% 1.26% 1.36% 1.25% 1.86% Ratio of net investment income/(loss) to average net assets 0.85% 0.58% 0.73% 0.68% (0.13)% Portfolio turnover rate 10.59% 21.60% 39.05% 11.88% 29.63% ------------------------------------------------------------------------------------------------------------------------- # Based on average shares outstanding. (a) Total investment return at market value is based on the changes in market price of a share during the year 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. See accompanying notes to financial statements.
7 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 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 December 31, 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. In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, the Fund is in the process of reviewing SFAS 157 against its current valuation policies to determine future applicability. 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 ================================================================================ 8 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date. TAXES: No provision is made for U.S. federal income or excise taxes as it is the Fund's intention to continue to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes. In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes. FIN 48 is effective for financial statements issued for fiscal years beginning after December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The Fund does not expect the FASB's issuance of FIN 48 to materially impact the Fund's financial condition or results of operations. DISTRIBUTIONS TO SHAREHOLDERS: Effective June 25, 2002, the Fund initiated a fixed, monthly distribution to shareholders. On November 29, 2006, this distribution policy was updated to provide for the annual resetting of the monthly distribution amount per share, beginning in 2007, based on the Fund's net asset value on the last business day in each October. The terms of the distribution policy will be reviewed and approved at least annually by the Fund's Board of Directors and can be modified at their discretion. To the extent that these distributions exceed the current earnings of the Fund, the balance will be generated from sales of portfolio securities held by the Fund, which will either be short-term or long-term capital gains or a tax-free return-of-capital. To the extent these distributions are not represented by net investment income and capital gains, they will not represent yield or investment return on the Fund's investment portfolio. The Fund plans to maintain this distribution policy even if regulatory requirements would make part of a return-of-capital, necessary to maintain the distribution, taxable to shareholders and to disclose that portion of the distribution that is classified as ordinary income. Although it has no current intention to do so, the Board may terminate this distribution policy at any time and such termination may have an adverse effect on the market price for the Fund's common shares. The Fund determines annually whether to distribute any net realized long-term capital gains in excess of net realized short-term capital losses, including capital loss carryovers, if any. To the extent that the Fund's taxable income in any calendar year exceeds the aggregate amount distributed pursuant to this distribution policy, an additional distribution may be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent that the aggregate amount distributed in any calendar year exceeds the Fund's taxable income, the amount of that excess may 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. ================================================================================ 9 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- 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. During the year ended December 31, 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 year ended December 31, 2006, Cornerstone earned $1,352,257 for investment management services, of which it waived $134,059. 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 $33,228 arising from credits earned on portfolio transactions executed with a broker, pursuant to a directed brokerage arrangement. The Fund paid or accrued approximately $44,878 for the year ended December 31, 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 year ended December 31, 2006, purchases and sales of securities, other than short-term investments, were $14,329,537 and $34,033,824 respectively. 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 December 31, 2006, was $2,730,234. During the year ended December 31, 2006, the Fund earned $33,496 in securities lending income which is included under the caption SECURITIES LENDING in the Statement of Operations. 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 were as follows: ORDINARY INCOME RETURN-OF-CAPITAL --------------- ----------------- 2006 2005 2006 2005 ---- ---- ---- ---- $1,150,839 $980,195 $25,065,536 -- LONG-TERM CAPITAL GAINS ----------------------- 2006 2005 ---- ---- -- $24,369,995 ================================================================================ 10 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONCLUDED) -------------------------------------------------------------------------------- At December 31, 2006 the components of distributable earnings on a tax basis, for the Fund were as follows: Accumulated net realized loss $ (5,257,673) Unrealized appreciation 29,101,846 ------------ Total distributable earnings $ 23,844,173 ============ Under current tax law, certain capital losses realized after October 31 within a taxable year may be deferred and treated as occurring on the first day of the following tax year ("Post-October losses"). For the tax period ended December 31, 2006, the Fund did not incur Post-October losses. At December 31, 2006, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $5,257,673 of which $2,513,030 expires in 2008, $1,281,365 expires in 2009, $693,207 expires in 2010, $635,700 expires in 2011, and $134,371 expires in 2012. At December 31, 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 $110,036,317, $30,273,165, $1,171,319 and $29,101,846, respectively. ================================================================================ 11 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors Cornerstone Strategic Value Fund, Inc. New York, New York We have audited the accompanying statement of assets and liabilities of Cornerstone Strategic Value Fund, Inc., including the schedule of investments as of December 31, 2006, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Cornerstone Strategic Value Fund, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. TAIT, WELLER & BAKER LLP Philadelphia, Pennsylvania February 7, 2007 ================================================================================ 12 2006 TAX INFORMATION (UNAUDITED) Cornerstone Strategic Value Fund, Inc. (the "Fund") is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of the Fund's year end (December 31, 2006) as to the U.S. federal tax status of the dividends and distributions received by the Fund's shareholders in respect of such fiscal year. As indicated in this notice, significant portions of the Fund's distributions for 2006 were comprised of a return-of-capital; accordingly these distributions do NOT represent yield or investment return on the Fund's portfolio. During the year ended December 31, 2006 the following dividends and distributions per share were paid by the Fund:
SOURCES OF DIVIDENDS AND DISTRIBUTIONS (PER SHARE AMOUNTS) PAYMENT DATES: 1/31/06 2/28/06 3/31/06 4/28/06 5/31/06 6/30/06 -------- -------- -------- -------- -------- -------- Ordinary Income(1) $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 Return-of-Capital(2) $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 -------- -------- -------- -------- -------- -------- Total: $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 ======== ======== ======== ======== ======== ======== PAYMENT DATES: 7/31/06 8/31/06 9/29/06 10/31/06 11/30/06 12/29/06 -------- -------- -------- -------- -------- -------- Ordinary Income(1) $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 Return-of-Capital(2) $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 -------- -------- -------- -------- -------- -------- Total: $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 ======== ======== ======== ======== ======== ======== ---------------------------------------------------------------------------------------------------------- (1) ORDINARY INCOME DIVIDENDS - This is the total per share amount of ordinary income dividends and short-term capital gain distributions (if applicable) included in the amount reported in Box 1a on Form 1099-DIV. (2) RETURN-OF-CAPITAL - This is the per share amount of return-of-capital, or sometimes called nontaxable distributions reported in Box 3 - under the title "Nondividend distributions" - on Form 1099-DIV. This amount should NOT be reported as taxable income on your current return. Rather, it should be treated as a reduction in the original cost basis of your investment in the Fund.
The Fund has met the requirements to pass through all of its (100%) ordinary income dividends as qualified dividends, which are subject to a maximum federal tax rate of 15%. This is reported in Box 1b on Form 1099-DIV. Ordinary income dividends should be reported as dividend income on Form 1040. Please note that to utilize the lower tax rate for qualifying dividend income, shareholders generally must have held their shares in the Fund for at least 61 days during the 121 day period beginning 60 days before the ex-dividend date. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of the actual ordinary income dividend paid by the Fund. In general, distributions received by tax-exempt recipients (e.g., IRA's and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. ================================================================================ 13 ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND CORPORATE OFFICERS (UNAUDITED)
NUMBER OF PORTFOLIOS IN NAME AND POSITION FUND COMPLEX ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY (BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE DIRECTORS ------------------------------------------------------------------------------------------------------------------- Ralph W. Chairman of the President, Cornerstone Advisors, Inc.; 1998 2 Bradshaw** Board of Financial Consultant; President and (Dec. 1950) Directors and Director of Cornerstone Total Return President Fund, Inc. William A. Director and Vice Director and Stockholder of Cornerstone 2004 2 Clark** President Advisors, Inc.; Director and Vice (Oct. 1945) President of Cornerstone Total Return Fund, Inc.; former financial consultant of Deep Discount Advisors, Inc. Glenn W. Director; Audit Chairman of the Board and Chief 2000 2 Wilcox, Sr. Committee Executive Officer of Wilcox Travel (Dec. 1931) Chairman, Agency, Inc.; Director of Cornerstone Nominating and Total Return Fund, Inc. Corporate Governance Committee Member Thomas H. Director; Audit, Independent Financial Adviser; Director 1987 2 Lenagh Nominating and of Photonics Products Group; Director (Nov. 1924) Corporate of Cornerstone Total Return Fund, Inc.; Governance Director of Adams Express and Committee Petroleum and Resources; Retired Member Treasurer and Investment Manager of Ford Foundation. Edwin Director; Audit, Distinguished Fellow, The Heritage 2001 2 Meese III Nominating and Foundation Washington D.C.; (Dec. 1931) Corporate Distinguished Visiting Fellow at the Governance Hoover Institution, Stanford University; Committee Senior Adviser, Revelation L.P.; formerly Member U.S. Attorney General under President Ronald Reagan; Director of Cornerstone Total Return Fund, Inc.
================================================================================ 14 ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND CORPORATE OFFICERS (UNAUDITED) (CONTINUED)
NUMBER OF PORTFOLIOS IN NAME AND POSITION FUND COMPLEX ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY (BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE DIRECTORS ------------------------------------------------------------------------------------------------------------------- Scott B. Rogers Director; Audit, Chairman, Board of Health Partners, 2000 2 (July 1955) Nominating and Inc.; Chief Executive Officer, Asheville Corporate Buncombe Community Christian Governance Ministry; and President, ABCCM Committee Doctor's Medical Clinic; Appointee, NC Member Governor's Commission on Welfare to Work; Director of Cornerstone Total Return Fund, Inc. Andrew A. Director; Attorney and senior member of Strauss 2000 2 Strauss Chairman of & Associates, P.A., Attorneys, Asheville (Nov. 1953) Nominating and and Hendersonville, NC; previous Corporate President of White Knight Healthcare, Governance Inc. and LMV Leasing, Inc., a wholly Committee and owned subsidiary of Xerox Credit Audit Committee Corporation; Director of Cornerstone Member Total Return Fund, Inc.
================================================================================ 15 ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND CORPORATE OFFICERS (UNAUDITED) (CONCLUDED)
NAME AND POSITION ADDRESS* POSITION PRINCIPAL OCCUPATION WITH FUND (BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE -------------------------------------------------------------------------------------------------------------- Gary A. Bentz Chief Compliance Chairman and Chief Financial Officer of 2004 (June 1956) Officer Cornerstone Advisors, Inc.; previous Director, Vice President and Treasurer of the Fund and Cornerstone Total Return Fund, Inc.; Financial Consultant, C.P.A., Chief Compliance Officer of Cornerstone Total Return Fund, Inc. Thomas R. Westle Secretary Partner, Blank Rome LLP, a law firm; 2000 405 Lexington Avenue previous partner, Spitzer & Feldman P.C., New York, NY 10174 a law firm; Secretary of Cornerstone (Dec. 1953) Total Return Fund, Inc. Jodi B. Levine Treasurer Associate Director, Bear, Stearns & Co. Inc.; 2004 (Aug. 1969) Treasurer of Cornerstone Total Return Fund, Inc. ------------------------------------------------------------------------------------------------------------------ * The mailing address of each Director and/or Officer with respect to the Fund's operation is 383 Madison Ave. -23rd Floor, New York, NY 10179 unless otherwise indicated. ** Designates a director who is an "interested person" of the Fund as defined by the Investment Company Act of 1940, as amended. Messrs. Bradshaw and Clark are interested persons of the Fund by virtue of their current positions with the Investment Manager of the Fund.
================================================================================ 16 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) Cornerstone Strategic Value Fund, Inc. operates a Dividend Reinvestment Plan (the "Plan"), sponsored and administered by American Stock Transfer & Trust Company (the "Agent"), pursuant to which the Fund's income dividends or capital gains or other distributions (each, a "Distribution" and collectively, "Distributions"), net of any applicable U.S. withholding tax, are reinvested in shares of the Fund. American Stock Transfer & Trust Company serves as the Agent that administers the Plan for the shareholders in the Plan. Shareholders automatically participate in the Fund's Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating 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. Under the Plan, the Fund's Distributions to shareholders are reinvested in full and fractional shares as described below. When the Fund declares a Distribution the Agent, on the shareholder's behalf, will (i) receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock ("Newly Issued Shares") or (ii) purchase outstanding shares on the open market, on the American Stock Exchange, LLC or elsewhere, with cash allocated to it by the Fund ("Open Market Purchases"). The method for determining the number of shares to be received when Distributions are reinvested will vary depending upon whether the net asset value of the Fund's shares is higher or lower than its market price. If the net asset value of the Fund's shares is lower than its market price, the number of Newly Issued Shares received will be determined by dividing the amount of the Distribution either by the Fund's net asset value per share or by 95% of its market price, whichever is higher. If the net asset value of the Fund's shares is higher than its market price, shares acquired by the Agent in Open Market Purchases will be allocated to the reinvesting shareholders based on the average cost of such Open Market Purchases. Whenever the Fund declares a Distribution and the net asset value of the Fund's shares is higher than its market price, the Agent will apply the amount of such Distribution payable to Plan participants of the Fund in Fund shares (less such Plan participant's pro rata share of brokerage commissions incurred with respect to Open Market Purchases in connection with the reinvestment of such Distribution) to the purchase on the open market of Fund shares for such Plan participant's account. Such purchases will be made on or after the payable date for such Distribution, and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities laws. The Agent may aggregate a Plan participant's purchases with the purchases of other Plan participants, and the average price (including brokerage commissions) of all shares purchased by the Agent shall be the price per share allocable to each Plan participant. Registered shareholders who do not wish to have their Distributions automatically reinvested should so notify the Fund in writing. If a shareholder has not elected to receive cash Distributions and the Agent does not receive notice of an election to receive cash Distributions prior to the record date of any Distribution, the shareholder will automatically receive such Distributions in additional shares. Participants in the Plan may withdraw from the Plan by providing written notice to the Agent at least 30 days prior to the applicable Distribution payment date. When a Participant withdraws from the Plan, or upon suspension or termination of the Plan at the sole discretion of the Fund's Board of Directors, certificates for whole shares credited to his or her account under the Plan will, upon request, be issued. Whether or not a participant requests that certificates for whole shares be issued, a cash payment will be made for any fraction of a share credited to such account. The Agent will maintain all shareholder accounts in the Plan and furnish written confirmations of all transactions in the accounts, including information needed by shareholders for personal and tax records. ================================================================================ 17 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED) The Agent will hold shares in the account of the Plan participant in non-certificated form in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. Each participant, nevertheless, has the right to receive certificates for whole shares owned. The Agent will distribute all proxy solicitation materials to participating shareholders. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating in the Plan, the Agent will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the shareholder's name and held for the account of beneficial owners participating in the Plan. Neither the Agent nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without limitation, failure to terminate a participants account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participants account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws. All correspondence concerning the Plan should be directed to the Agent at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Certain transactions can be performed online at www.amstock.com or by calling the toll free number 877-864-4833. ================================================================================ 18 PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED) Information regarding how the Cornerstone Strategic Value Fund, Inc. (the "Fund") voted proxies related to its portfolio securities during the 12-month period ended June 30 of each year as well as the policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available by calling (212) 272-3550 or on the website of the Securities and Exchange Commission, http://www.sec.gov. This report incorporates a Summary Schedule of Investments for the Fund. A complete Schedule of Investments for the Fund may be obtained free of charge by contacting the Fund at (212) 272-3550. The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling (202) 551-8090. PRIVACY POLICY NOTICE (UNAUDITED) The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the "Fund") policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of the financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties. CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following nonpublic personal information about you: 1. Information from the Consumer: this category includes information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address phone number, social security number, assets, income and date of birth); and 2. Information about the Consumer's transactions: this category includes information about your trans- actions with the Fund, its affiliates, or others (such as your account number and balance, payment history, parties to transactions, cost basis information, and other financial information). CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any nonpublic personal information about their current or former shareholders to unaffiliated third parties, except as required or permitted by law. The Fund is permitted by law to disclose all of the information it collects, as described above, to its service providers (such as the Fund's custodian, administrator and transfer agent) to process your transactions and otherwise provide services to you. CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic personal information to those persons who require such information to provide products or services to you. The Fund maintains physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information. ================================================================================ 19 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. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. -------------------------------------------------------------------------------- ================================================================================ 20 CORNERSTONE STRATEGIC VALUE FUND, INC. ITEM 2. CODE OF ETHICS. (a) As of the end of the period covered by this report, the Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal accounting officer, and persons performing similar functions. (c) and (d). During the period covered by this report, there was no amendment to, and no waiver granted from, any provision of the code of ethics that applies to the Registrant's principal executive officer, principal accounting officer, and persons performing similar functions. (f)(1) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit (EX-99.CODE ETH) a copy of its code of ethics that applies to its principal executive officer, principal financial officer, and persons performing similar functions. (f)(3) The Registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics. This can be accomplished by calling the Registrant at (212)272-3550. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant's board of directors has determined that it does not have an audit committee financial expert serving on its audit committee. (a)(2) Not applicable (a)(3) At this time, the registrant believes that the experience provided by each member of the audit committee together offer the registrant adequate oversight for the registrant's level of financial complexity. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) through (d). The information in the table below is provided for services rendered to the registrant by its independent registered public accounting firm, Tait, Weller & Baker LLP for the Registrant's fiscal years ended December 31, 2006 and December 31, 2005. 2006 2005 ------- ------- Audit Fees $16,400 $15,600 Audit-related Fees -- -- Tax Fees (1) $ 3,300 $ 3,100 All Other Fees -- -- ------- ------- Total $19,700 $18,700 ======= ======= (1) Tax services in connection with the registrant's excise tax calculations and review of the registrant's applicable tax returns. (e)(1) Audit Committee Pre-Approval Policies and Procedures. Before the auditor is (i) engaged by the Registrant to render audit, audit related or permissible non-audit services to the Registrant or (ii) with respect to non-audit services to be provided by the auditor to the Registrant's investment adviser or any entity in the investment Registrant complex, if the nature of the services provided relate directly to the operations or financial reporting of the Registrant, either: (a) the Audit Committee shall pre-approve such engagement; or (b) such engagement shall be entered into pursuant to pre-approval policies and procedures established by the Audit Committee. Any such policies and procedures must be detailed as to the particular service and not involve any delegation of the Audit Committee's responsibilities to the Registrant's investment adviser. The Audit Committee may delegate to one or more of its members the authority to grant pre-approvals. The pre-approval policies and procedures shall include the requirement that the decisions of any member to whom authority is delegated under this provision shall be presented to the full Audit Committee at its next scheduled meeting. Under certain limited circumstances, pre-approvals are not required if certain de minimis thresholds are not exceeded, as such thresholds are set forth by the Audit Committee and in accordance with applicable SEC rules and regulations. (e)(2) None of the services provided to the Registrant described in paragraphs (b)-(d) of Item 4 were pre-approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X. (f) No disclosures are required by this Item 4(f). (g) There were no non-audit fees billed by Tait, Weller & Baker LLP for services rendered to the Registrant, the Registrant's investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor) or any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the Registrant for the Registrant's last two fiscal years (December 31, 2005 and December 31, 2006). (h) No disclosures are required by this Item 4(h). ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934, as amended. Glenn Wilcox (Chair), Edwin Meese, Thomas Lenagh, Andy Strauss and Scott Rogers are the members of the Registrant's audit committee. (b) Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS. -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006 -------------------------------------------------------------------------------- NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.59% CLOSED-END FUNDS - 1.10% Adams Express Company 49,500 $ 686,565 General American Investors Company 3,000 111,360 Liberty All-Star Equity Fund 67,300 557,917 Liberty All-Star Growth Fund, Inc. 26,300 141,231 ----------- 1,497,073 ----------- CONSUMER DISCRETIONARY - 10.94% Amazon.com, Inc. * 5,500 217,030 Bed Bath & Beyond Inc. ^ * 4,200 160,020 Best Buy Co., Inc. ^ 3,625 178,314 Black & Decker Corporation (The) 3,000 239,910 Carnival Corporation 11,800 578,790 Clear Channel Communications, Inc. ^ 6,300 223,902 Coach, Inc. * 3,500 150,360 Comcast Corporation, Special Class A * 19,037 805,836 D.R. Horton, Inc. 7,000 185,430 Federated Department Stores, Inc. 11,052 421,413 Fortune Brands, Inc. ^ 3,500 298,865 Gannett Co., Inc. 3,500 211,610 Gap, Inc. (The) 12,200 237,900 Goodyear Tire & Rubber Company (The) * 4,500 94,455 Harley-Davidson, Inc. 4,400 310,068 Hilton Hotels Corporation 6,200 216,380 Home Depot, Inc. (The) 23,100 927,696 J.C. Penney Company, Inc. 4,500 348,120 Johnson Controls, Inc. 2,500 214,800 Kohl's Corporation * 2,500 171,075 Lowe's Companies, Inc. 22,400 697,760 Marriott International, Inc., Class A 4,200 200,424 Mattel, Inc. 5,500 124,630 McDonald's Corporation 15,100 669,383 News Corporation, Class A 23,000 494,040 NIKE, Inc., Class B 7,300 722,919 Omnicom Group Inc. ^ 4,100 428,614 Sears Holdings Corporation * 503 84,469 Staples, Inc. 10,800 288,360 Starbucks Corporation * 10,800 382,536 Target Corporation 11,800 673,190 Time Warner Inc. ^ 76,000 1,655,280 TJX Companies, Inc. (The) 3,000 85,440 Toyota Motor Corporation ADR 2,500 335,775 Univision Communications Inc., Class A * 7,000 247,940 Viacom Inc., Class B * 11,950 490,308 1 NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- Walt Disney Company (The) 20,200 692,254 Wyndham Worldwide Corp * 3,100 99,262 Yum! Brands, Inc. 6,000 352,800 ----------- 14,917,358 ----------- CONSUMER STAPLES - 9.43% Altria Group, Inc. 22,300 1,913,786 Anheuser-Busch Companies, Inc. 6,200 305,040 Archer-Daniels-Midland Company 9,460 302,342 Campbell Soup Company 2,000 77,780 Coca-Cola Company (The) 27,000 1,302,750 Colgate-Palmolive Company 5,900 384,916 ConAgra Foods, Inc. 4,400 118,800 Costco Wholesale Corporation 6,500 343,655 CVS Corporation 14,000 432,740 General Mills, Inc. 12,000 691,200 H.J. Heinz Company 4,000 180,040 Kimberly-Clark Corporation 5,500 373,725 Kroger Co. (The) 13,800 318,366 PepsiCo, Inc. ^ 21,100 1,319,805 Procter & Gamble Company (The) 41,297 2,654,158 Sara Lee Corporation 16,000 272,480 Sysco Corporation ^ 5,800 213,208 Walgreen Co. 14,300 656,227 Wal-Mart Stores, Inc. 21,600 997,488 ----------- 12,858,506 ----------- ENERGY - 9.81% Anadarko Petroleum Corp. 2,600 113,152 Baker Hughes Incorporated 10,600 791,396 BJ Services Company 3,500 102,620 Chevron Corporation 24,532 1,803,838 ConocoPhillips ^ 17,974 1,293,229 Devon Energy Corporation 5,000 335,400 Exxon Mobil Corporation 73,500 5,632,305 Halliburton Company 6,700 208,035 Marathon Oil Corp. 7,500 693,750 Occidental Petroleum Corporation 16,000 781,280 Schlumberger Limited 22,000 1,389,520 XTO Energy, Inc. 5,000 235,250 ----------- 13,379,775 ----------- FINANCIALS - 21.35% AFLAC Incorporated 7,000 322,000 Allstate Corporation (The) 9,300 605,523 American Express Company 19,600 1,189,132 American International Group, Inc. 28,331 2,030,199 Aon Corporation 4,900 173,166 Bank of America Corporation ^ 59,138 3,157,378 Bank of New York Company, Inc. (The) 11,400 448,818 BB&T Corporation 4,000 175,720 2 NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- Bear Stearns Companies, Inc. (The) 2,500 406,950 Charles Schwab Corporation (The) 6,000 116,040 Chubb Corporation (The) 4,100 216,931 Citigroup Inc. ^ 49,300 2,746,010 Fannie Mae 9,300 552,327 Franklin Resources, Inc. 3,700 407,629 Freddie Mac 10,400 706,160 Goldman Sachs Group, Inc. (The) 7,300 1,455,255 Hartford Financial Services Group, Inc. (The) 6,000 559,860 JPMorgan Chase & Co. 40,132 1,938,376 Lehman Brothers Holdings Inc. 7,200 562,464 Marsh & McLennan Companies, Inc. ^ 6,000 183,960 Merrill Lynch & Co., Inc. 7,200 670,320 Metlife, Inc. 15,200 896,952 Morgan Stanley 15,500 1,262,165 National City Corporation 12,700 464,312 PNC Financial Services Group, Inc. 4,600 340,584 Prudential Financial, Inc. 10,700 918,702 Realogy Corporation * 7,000 212,240 St. Paul Travelers Companies, Inc. (The) 9,476 508,766 State Street Corporation 3,500 236,040 SunTrust Banks, Inc. 7,600 641,820 U.S. Bancorp 28,401 1,027,832 UnumProvident Corporation 8,100 168,318 Wachovia Corporation 19,600 1,116,220 Washington Mutual, Inc. 15,550 707,370 Wells Fargo & Company 48,400 1,721,104 Western Union Company ^ 11,324 253,884 ----------- 29,100,527 ----------- HEALTHCARE - 11.80% Abbott Laboratories 28,000 1,363,880 Aetna Inc. ^ 6,000 259,080 Amgen Inc. * 18,900 1,291,059 Applera Corporation 8,000 293,520 Baxter International Inc. 5,000 231,950 Becton, Dickinson and Company 6,900 484,035 Biogen Idec Inc. * 5,500 270,545 Boston Scientific Corporation * 15,551 267,166 Bristol-Myers Squibb Company 25,500 671,160 Cardinal Health, Inc. 5,450 351,144 Caremark Rx, Inc. 9,000 513,990 Eli Lilly and Company 4,700 244,870 Gilead Sciences, Inc. * 3,500 227,255 Hospira, Inc. * 3,700 124,246 IMS Health Incorporated 7,400 203,352 Johnson & Johnson 40,900 2,700,218 McKesson Corporation 5,300 268,710 Medco Health Solutions, Inc. ^ * 6,687 357,353 Medtronic, Inc. 19,000 1,016,690 3 NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- Merck & Co. Inc. 20,000 872,000 Pfizer Inc. 36,060 933,954 Schering-Plough Corporation ^ 12,500 295,500 UnitedHealth Group Incorporated 17,000 913,410 WellPoint Inc. * 11,500 904,935 Wyeth 20,200 1,028,584 ----------- 16,088,606 ----------- INDUSTRIALS - 10.73% 3M Co. 9,400 732,542 Boeing Company (The) 9,200 817,328 Burlington Northern Santa Fe Corporation 2,900 214,049 Caterpillar Inc. 11,800 723,694 CSX Corporation 14,300 492,349 Danaher Corporation ^ 3,500 253,540 Emerson Electric Co. 12,000 528,840 FedEx Corp. 4,500 488,790 General Dynamics Corporation 6,200 460,970 General Electric Company 105,400 3,921,934 Honeywell International Inc. 12,500 565,500 Illinois Tool Works Inc. 13,300 614,327 Ingersoll-Rand Company Ltd. Class A 7,000 273,910 Lockheed Martin Corporation 4,000 368,280 Masco Corporation ^ 4,200 125,454 Norfolk Southern Corporation 10,000 502,900 Northrop Grumman Corporation 5,000 338,500 Rockwell Automation, Inc. 2,500 152,700 Southwest Airlines Co. 5,700 87,324 Textron Inc. 4,500 421,965 Tyco International Ltd. 10,397 316,069 Union Pacific Corporation 2,000 184,040 United Parcel Service, Inc., Class B 9,600 719,808 United Technologies Corporation ^ 11,000 687,720 Waste Management, Inc. 17,300 636,121 ----------- 14,628,654 ----------- INFORMATION TECHNOLOGY - 14.93% Adobe Systems Incorporated * 6,700 275,504 Agilent Technologies Inc. * 4,500 156,825 Analog Devices, Inc. 3,500 115,045 Apple Computer, Inc. * 3,000 254,520 Applied Materials, Inc. ^ 33,800 623,610 Automatic Data Processing, Inc. 12,400 610,700 Cisco Systems, Inc. * 82,900 2,265,657 Corning Incorporated * 8,000 149,680 Dell Inc. * 4,700 117,923 eBay Inc. * 17,000 511,190 Electronic Arts Inc. * 5,000 251,800 Electronic Data Systems Corporation 5,000 137,750 EMC Corporation * 200,648 2,648,554 First Data Corporation 15,824 403,828 4 NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- Google Inc., Class A ^ * 2,500 1,151,200 Hewlett-Packard Company 19,900 819,681 Intel Corporation 82,500 1,670,625 International Business Machines Corporation 12,600 1,224,090 Linear Technology Corporation ^ 4,000 121,280 Micron Technology, Inc. * 11,500 160,540 Microsoft Corporation 109,200 3,260,712 Motorola, Inc. 34,700 713,432 Oracle Corporation * 44,272 758,822 QUALCOMM Inc. 17,000 642,430 Sun Microsystems, Inc. * 7,500 40,650 Symantec Corporation * 5,000 104,250 Texas Instruments Incorporated 23,900 688,320 Yahoo! Inc. * 18,800 480,152 ----------- 20,358,770 ----------- MATERIALS - 2.46% Air Products & Chemicals, Inc. 1,000 70,280 Alcoa Inc. 16,900 507,169 Dow Chemical Company (The) 15,400 615,076 E. I. du Pont de Nemours and Company 14,800 720,908 International Paper Company 10,500 358,050 Monsanto Company 10,160 533,705 Newmont Mining Corporation 7,000 316,050 Praxair, Inc. 3,000 177,990 Rohm and Hass Company 1,000 51,120 ----------- 3,350,348 ----------- REAL ESTATE INVESTMENT TRUST - 0.48% Simon Property Group, Inc. ^ 6,500 658,385 ----------- 658,385 ----------- TELECOMMUNICATIONS SERVICES - 3.05% ALLTEL Corporation 4,000 241,920 AT&T Inc. 31,364 1,121,263 BellSouth Corporation 19,000 895,090 Sprint Nextel Corporation ^ 30,446 575,125 Verizon Communications Inc. 35,600 1,325,744 ----------- 4,159,142 ----------- UTILITIES - 3.51% American Electric Power Company, Inc. 5,500 234,190 CenterPoint Energy, Inc. 10,000 165,800 Dominion Resources, Inc. 4,600 385,664 Duke Energy Corporation ^ 15,800 524,718 Edison International ^ 6,500 295,620 Exelon Corporation 6,000 371,340 FirstEnergy Corp. 5,000 301,050 FPL Group, Inc. 4,000 217,680 PG&E Corporation ^ 9,000 425,970 Progress Energy, Inc. ^ 3,500 171,780 Public Service Enterprise Group Incorporated 6,000 398,280 5 NO. OF DESCRIPTION SHARES VALUE -------------------------------------------------------------------------------- Southern Company (The) 11,900 438,634 TXU Corp. 12,400 672,204 Williams Companies, Inc. (The) 7,000 182,840 ----------- 4,785,770 ----------- TOTAL EQUITY SECURITIES (cost - $106,625,134) 135,782,914 ----------- PRINCIPAL AMOUNT (000'S) SHORT-TERM INVESTMENTS - 2.46% REPURCHASE AGREEMENTS - 2.46% Bear, Stearns and Co., Inc. + ++ (Agreement dated 12/29/2006 to be repurchased at $2,107,246), 2.6565%, 1/2/2007, collateralized by $2,169,076 in U.S. Treasury Bond Strips) $ 2,107 2,106,624 Bear, Stearns and Co., Inc. + ++ (Agreement dated 12/29/2006 to be repurchased at $642,579), 5.3130%, 1/2/2007, collateralized by $661,422 in U.S. Treasury Bond Strips) 642 642,200 Bear, Stearns and Co., Inc. (Agreement dated 12/29/2006 to be repurchased at $606,752), 4.8500%, 1/2/2007, collateralized by $624,947 in U.S. Treasury Bond Strips) 606 606,425 ------------ 3,355,249 ------------ TOTAL SHORT-TERM INVESTMENTS (cost - $3,355,249) 3,355,249 ------------ TOTAL INVESTMENTS - 102.05% 139,138,163 (cost - $109,980,383) 139,138,163 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS - (2.05)% (2,793,834) ------------ NET ASSETS - 100.00% $136,344,329 ============ -------------- ADR American Depositary Receipt * Non-income producing security. + Stated interest rate, before rebate earned by borrower of securities on loan. ++ Represents investment purchased with collateral received for securities on loan. ^ Security or a portion thereof is out on loan. 6 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS CORNERSTONE STRATEGIC VALUE FUND, INC. NEW YORK, NEW YORK We have audited the accompanying statement of assets and liabilities of Cornerstone Strategic Value Fund, Inc., including the schedule of investments as of December 31, 2006, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2006, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Cornerstone Strategic Value Fund, Inc. as of December 31, 2006, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of investments in securities as of December 31, 2006 appearing in Item 6 of this Form N-CSR is presented for the purpose of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the Fund's management. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. TAIT, WELLER & BAKER LLP PHILADELPHIA, PENNSYLVANIA FEBRUARY 7, 2007 ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. The Registrant and Cornerstone Advisors, Inc. share the same Proxy Voting Policies and Procedures. The respective Proxy Voting Policies and Procedures of the Registrant and Adviser are attached as EXHIBIT99.VOTEREG ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a)(1) All information contained in this item and its subparts is as of the date of this filing, unless otherwise noted. Ralph W. Bradshaw and William A. Clark are employees of Cornerstone Advisors, Inc. (the Investment Manager) and portfolio managers of the Fund. Mr. Bradshaw has acted as the portfolio manager since 2001. Mr. Clark has acted as the portfolio manager since 2003. Ralph W. Bradshaw's occupation for the last five years is President of Cornerstone Advisors, Inc. and a Financial Consultant. William A. Clark's occupation for the last five years is Director and Stockholder of Cornerstone Advisors, Inc. and a former financial consultant of Deep Discount Advisors, Inc. (a)(2)(i) Ralph W. Bradshaw and William A. Clark (a)(2)(ii)(A) Registered Investment Companies - Ralph W. Bradshaw and William A. Clark each manage one other registered closed-end fund (Cornerstone Total Return Fund, Inc.) As of December 31, 2006, the total assets of Cornerstone Total Return Fund, Inc. was $53.4 million. (a)(2)(ii)(B) Not applicable (a)(2)(ii)(C) Not applicable (a)(2)(iii) None. Ralph W. Bradshaw and William A. Clark manage no accounts where the Advisory Fee is based on the performance of the account. (a)(2)(iv) None. (a)(3) As of the most recent fiscal year end December 31, 2006, the compensation paid to both Ralph W. Bradshaw and William A. Clark was fixed. (a)(4) The dollar range of equity securities owned in the registrant beneficially by each portfolio manager is as follows: for Ralph W. Bradshaw it is in the range of $50,001-$100,000 and for William A. Clark it is over $100,000. (b) None. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY 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) Code of Ethics attached as EX-99.CODE ETH. (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. (99) Proxy Voting Policies of the Registrant and Adviser attached as EX-99.VOTEREG. 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. By: /S/ RALPH W. BRADSHAW ------------------------- Name: Ralph W. Bradshaw Title: Principal Executive Officer Date: March 9, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Cornerstone Strategic Value Fund, Inc. By: /S/ RALPH W. BRADSHAW ------------------------- Name: Ralph W. Bradshaw Title: Principal Executive Officer Date: March 9, 2007 By: /S/ JODI B. LEVINE ---------------------- Name: Jodi B. Levine Title: Principal Financial Officer Date: March 9, 2007