N-CSRS 1 t304534.txt CLM ================================================================================ 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) Kayadti A. Madison 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, 2008 Date of reporting period: June 30, 2008 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 semi-annual period ended June 30, 2008 follows. ================================================================================ CORNERSTONE STRATEGIC VALUE FUND, INC. SEMI-ANNUAL REPORT JUNE 30, 2008 ================================================================================ CONTENTS Portfolio Summary 1 Summary Schedule of Investments 2 Statement of Assets and Liabilities 4 Statement of Operations 5 Statement of Changes in Net Assets 6 Financial Highlights 7 Notes to Financial Statements 8 Result of Annual Meeting of Stockholders 13 Description of Dividend Reinvestment Plan 14 Investment Management Agreement Approval Disclosure 16 Proxy Voting and Portfolio Holdings Information 17 Privacy Policy Notice 17 Summary of General Information 18 Shareholder Information 18 ================================================================================ -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. PORTFOLIO SUMMARY - AS OF JUNE 30, 2008 (UNAUDITED) -------------------------------------------------------------------------------- SECTOR ALLOCATION Percent of Sector Net Assets -------------------------------------------------------------------------------- Information Technology 16.5 -------------------------------------------------------------------------------- Energy 16.3 -------------------------------------------------------------------------------- Financials 11.7 -------------------------------------------------------------------------------- Healthcare 11.6 -------------------------------------------------------------------------------- Industrials 11.6 -------------------------------------------------------------------------------- Consumer Staples 11.0 -------------------------------------------------------------------------------- Consumer Discretionary 8.0 -------------------------------------------------------------------------------- Materials 4.2 -------------------------------------------------------------------------------- Utilities 3.8 -------------------------------------------------------------------------------- Telecommunication Services 2.8 -------------------------------------------------------------------------------- Closed-End Funds 1.6 -------------------------------------------------------------------------------- Other 0.9 -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER Percent of Holding Sector Net Assets -------------------------------------------------------------------------------- 1. Exxon Mobil Corporation Energy 6.1 -------------------------------------------------------------------------------- 2. Google Inc. Information Technology 3.1 -------------------------------------------------------------------------------- 3. Chevron Corporation Energy 2.9 -------------------------------------------------------------------------------- 4. Johnson & Johnson Healthcare 2.8 -------------------------------------------------------------------------------- 5. Procter & Gamble Company (The) Consumer Staples 2.4 -------------------------------------------------------------------------------- 6. Coca-Cola Company (The) Consumer Staples 2.3 -------------------------------------------------------------------------------- 7. General Electric Company Industrials 2.1 -------------------------------------------------------------------------------- 8. AT&T Inc. Telecommunication Services 2.0 -------------------------------------------------------------------------------- 9. Microsoft Corporation Information Technology 1.9 -------------------------------------------------------------------------------- 10. Walt Disney Company (The) Consumer Discretionary 1.8 -------------------------------------------------------------------------------- ================================================================================ 1
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2008 (UNAUDITED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.48% CLOSED-END FUNDS - 1.55% Adams Express Company (a) 49,500 $ 586,575 Other Closed-End Funds (b) 884,983 ----------- 1,471,558 ----------- CONSUMER DISCRETIONARY - 8.00% McDonald's Corporation 18,600 1,045,692 Walt Disney Company (The) 53,700 1,675,440 Other Consumer Discretionary (b) 4,850,683 ----------- 7,571,815 ----------- CONSUMER STAPLES - 11.03% Coca-Cola Company (The) 41,000 2,131,180 Colgate-Palmolive Company 8,900 614,990 Procter & Gamble Company (The) 37,797 2,298,436 Wal-Mart Stores, Inc. 23,600 1,326,320 Other Consumer Staples (b) 4,069,457 ----------- 10,440,383 ----------- ENERGY - 16.32% Baker Hughes Incorporated 10,600 925,804 Chevron Corporation 28,032 2,778,812 ConocoPhillips 10,474 988,641 Exxon Mobil Corporation ^ 66,000 5,816,581 Halliburton Company ^ 13,200 700,524 Marathon Oil Corp. 15,000 778,050 Occidental Petroleum Corporation 10,500 943,530 Schlumberger Limited ^ 11,500 1,235,445 Other Energy (b) 1,285,203 ----------- 15,452,590 ----------- FINANCIALS - 11.68% Bank of America Corporation 31,138 743,264 JPMorgan Chase & Co. 45,132 1,548,479 Metlife, Inc. ^ 15,200 802,104 Wells Fargo & Company 39,900 947,625 Other Financials (b) 7,020,377 ----------- 11,061,849 ----------- No. of Description Shares Value -------------------------------------------------------------------------------- HEALTHCARE - 11.62% Abbott Laboratories 11,200 $ 593,264 Johnson & Johnson 40,900 2,631,506 Medtronic, Inc. 14,500 750,375 Merck & Co. Inc. ^ 17,500 659,575 Pfizer Inc. ^ 43,560 760,993 UnitedHealth Group Incorporated 22,000 577,500 Wyeth 20,200 968,792 Other Healthcare (b) 4,057,346 ----------- 10,999,351 ----------- INDUSTRIALS - 11.58% 3M Co. 9,400 654,146 Deere & Company ^ 8,000 577,040 Emerson Electric Co. 12,000 593,400 General Electric Company 73,900 1,972,391 Honeywell International Inc. 12,500 628,500 Illinois Tool Works Inc. 13,300 631,883 Raytheon Company 11,000 619,080 Other Industrials (b) 5,291,066 ----------- 10,967,506 ----------- INFORMATION TECHNOLOGY - 16.53% Apple Computer, Inc. ^ * 8,500 1,423,240 Cisco Systems, Inc. * 47,900 1,114,154 Corning Incorporated 16,500 380,325 EMC Corporation * 72,648 1,067,199 Google Inc. * 5,500 2,895,310 Hewlett-Packard Company 19,900 879,779 Intel Corporation 60,500 1,299,540 International Business Machines Corporation 12,600 1,493,478 Microsoft Corporation 65,200 1,793,652 Oracle Corporation * 48,272 1,013,712 QUALCOMM Inc. 13,000 576,810 Other Information Technology (b) 1,711,658 ----------- 15,648,857 ----------- ================================================================================ See accompanying notes to financial statements. 2 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2008 (UNAUDITED)(CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- MATERIALS - 4.15% Alcoa Inc. ^ 20,400 $ 726,648 E. I. du Pont de Nemours and Company 17,300 741,997 Freeport-McMoRan Copper & Gold, Inc. 7,500 878,925 Monsanto Company 5,660 715,650 Other Materials (b) 869,934 ----------- 3,933,154 ----------- REAL ESTATE INVESTMENT TRUST - 0 .38% Total Real Estate Investment Trust (b) 359,560 ----------- TELECOMMUNICATION SERVICES - 2.83% AT&T Inc. 56,539 1,904,799 Verizon Communications Inc. 20,300 718,620 Other Telecommunication Services (b) 56,395 ----------- 2,679,814 ----------- UTILITIES - 3.81% Dominion Resources, Inc. 14,200 674,358 Other Utilities (b) 2,938,222 ----------- 3,612,580 ----------- TOTAL EQUITY SECURITIES (cost - $80,773,544) 94,199,017 ----------- SHORT-TERM INVESTMENTS - 11.86% MONEY MARKET SECURITY - 0.56% JPMorgan U.S. Government Money Market Fund 529,788 529,788 ----------- Principal Amount Description (000's) Value -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS - 11.30% Bear, Stearns & Co. Inc. + (Agreements dated 6/30/2008 to be repurchased at $10,703,407) (c) $10,703 $ 10,702,718 ------------ TOTAL SHORT-TERM INVESTMENTS (cost - $11,232,506) 11,232,506 ------------ TOTAL INVESTMENTS - 111.34% (cost - $92,006,050) 105,431,523 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS - (11.34)% (10,737,000) ------------ NET ASSETS - 100.00% $ 94,694,523 ============ ----------- ^ Security or a portion thereof is out on loan. * Non-income producing security. + Includes investment purchased with collateral received for securities on loan. (a) Affiliated investment. The Fund holds 0.62% (based on net assets) of Adams Express Company. A director of the Fund also serves as a director to such company. During the six months ended June 30, 2008 there were no purchases or sales of this security. (b) Represents issues not identified as a top 50 holding in terms of market value and issues or issuers not exceeding 1% of net assets individually or in the aggregate, respectively, as of June 30, 2008. (c) At June 30, 2008, the maturity date for all repurchase agreements held was July 1, 2008, with interest rates ranging from 1.25% to 2.50% and collateralized by $11,011,813 in U.S. Treasury Bonds maturing April 15, 2028. ================================================================================ See accompanying notes to financial statements. 3
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2008 (UNAUDITED) -------------------------------------------------------------------------------- ASSETS Investments, at value, including collateral for securities on loan of $10,702,718: Unaffiliated issuers (cost - $91,400,228)(1) $ 104,844,948 Affiliated issuer (cost - $605,822) 586,575 ------------- Total investments (cost - $92,006,050) 105,431,523 Receivables: Dividends 117,743 Interest 1,932 Prepaid expenses 9,278 ------------- Total Assets 105,560,476 ------------- LIABILITIES Payables: Due to custodian 1,860 Upon return of securities loaned 10,702,718 Investment management fees (net of fee waivers) 78,833 Directors' fees 28,766 Other accrued expenses 53,776 ------------- Total Liabilities 10,865,953 ------------- NET ASSETS (applicable to 27,030,066 shares of common stock outstanding) $ 94,694,523 ============= NET ASSET VALUE PER SHARE ($94,694,523/27,030,066) $ 3.50 ============= NET ASSETS CONSISTS OF Capital stock, $0.001 par value; 27,030,066 shares issued and outstanding (100,000,000 shares authorized) $ 27,030 Paid-in capital 85,693,816 Accumulated net realized loss on investments (4,451,796) Net unrealized appreciation in value of investments 13,425,473 ------------- Net assets applicable to shares outstanding $ 94,694,523 ============= ------------- (1) Includes securities out on loan to brokers with a market value of $10,499,385. ================================================================================ See accompanying notes to financial statements. 4
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2008 (UNAUDITED) -------------------------------------------------------------------------------- INVESTMENT INCOME Income: Dividends (including $3,960 earned from affiliated issuer) $ 1,143,263 Interest 8,963 Securities lending 9,421 ------------ Total Investment Income 1,161,647 ------------ Expenses: Investment management fees 518,961 Directors' fees 53,724 Administration fees 52,415 Printing 30,444 Legal and audit fees 23,101 Accounting fees 18,182 Custodian fees 11,669 Transfer agent fees 10,526 Stock exchange listing fees 4,526 Insurance 3,690 Miscellaneous 1,543 ------------ Total Expenses 728,781 Less: Management fee waivers (30,681) Less: Fees paid indirectly (20,607) ------------ Net Expenses 677,493 ------------ Net Investment Income 484,154 ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized loss from investments (1,403,372) Capital gain distributions from regulated investment companies 1,618 Net change in unrealized appreciation in value of investments (13,279,574) ------------ Net realized and unrealized loss on investments (14,681,328) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(14,197,174) ============ ================================================================================ See accompanying notes to financial statements. 5
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF CHANGES IN NET ASSETS -------------------------------------------------------------------------------- For the Six Months Ended June 30, 2008 For the Year Ended (unaudited) December 31, 2007 ----------- ----------------- DECREASE IN NET ASSETS Operations: Net investment income $ 484,154 $ 1,120,928 Net realized gain/(loss) from investments (1,403,372) 8,478,941 Capital gain distributions from regulated investment companies 1,618 50,393 Net change in unrealized appreciation in value of investments (13,279,574) (2,452,733) ------------- ------------- Net increase/(decrease) in net assets resulting from operations (14,197,174) 7,197,529 ------------- ------------- Dividends and distributions to shareholders: Net investment income (484,154) (1,120,928) Net realized capital gains -- (8,509,935) Return-of-capital (13,435,601) (19,451,697) ------------- ------------- Total dividends and distributions to shareholders (13,919,755) (29,082,560) ------------- ------------- Capital stock transactions: Proceeds from 473,375 and 913,617 shares newly issued and/or from treasury in reinvestment of dividends and distributions, respectively 2,543,404 5,808,750 ------------- ------------- Total decrease in net assets (25,573,525) (16,076,281) ------------- ------------- NET ASSETS Beginning of period 120,268,048 136,344,329 ------------- ------------- End of period $ 94,694,523 $ 120,268,048 ============= ============= ================================================================================ See accompanying notes to financial statements. 6
-------------------------------------------------------------------------------- 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 Six Months Ended For the Years Ended December 31, June 30, 2008 ----------------------------------------------------------------------- (unaudited) 2007 2006 2005 2004 2003 ------------- --------- --------- --------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 4.53 $ 5.32 $ 5.65 $ 6.48 $ 6.90 $ 6.41 -------- --------- --------- --------- -------- -------- Net investment income # 0.02 0.04 0.05 0.03 0.05 0.04 Net realized and unrealized gain/(loss) on investments (0.56) 0.24 0.66 0.18 0.55 1.44 -------- --------- --------- --------- -------- -------- Net increase/(decrease) in net assets resulting from operations (0.54) 0.28 0.71 0.21 0.60 1.48 -------- --------- --------- --------- -------- -------- Dividends and distributions to shareholders: Net investment income (0.02) (0.04) (0.04) (0.04) (0.05) (0.04) Net realized capital gains -- (0.33) -- (1.00) -- -- Return-of-capital (0.50) (0.75) (1.00) -- (0.99) (0.95) -------- --------- --------- --------- -------- -------- Total dividends and distributions to shareholders (0.52) (1.12) (1.04) (1.04) (1.04) (0.99) -------- --------- --------- --------- -------- -------- Capital stock transactions: Anti-dilutive effect due to shares issued in reinvestment of dividends and distributions 0.03 0.05 -- -- 0.02 -- -------- --------- --------- --------- -------- -------- Net asset value, end of period $ 3.50 $ 4.53 $ 5.32 $ 5.65 $ 6.48 $ 6.90 ======== ========= ========= ========= ======== ======== Market value, end of period $ 5.45 $ 5.05 $ 8.45 $ 7.05 $ 8.51 $ 9.00 ======== ========= ========= ========= ======== ======== Total investment return (a) 18.82% (29.04)% 45.36% (1.32)% 8.38% 77.69% ======== ========= ========= ========= ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $ 94,695 $ 120,268 $ 136,344 $ 139,706 $ 154,690 $ 26,565 Ratio of expenses to average net assets, net of fee waivers, if any (b) 1.29%(d) 1.23% 1.22% 1.20% 1.28% 1.20% Ratio of expenses to average net assets, excluding fee waivers, if any (c) 1.39%(d) 1.35% 1.32% 1.36% 1.50% 1.59% Ratio of expenses to average net assets, net of fee waivers, if any (c) 1.33%(d) 1.25% 1.25% 1.26% 1.36% 1.25% Ratio of net investment income to average net assets 0.92%(d) 0.86% 0.85% 0.58% 0.73% 0.68% Portfolio turnover rate 5.56% 10.38% 10.59% 21.60% 39.05% 11.88% --------------------------------------------------------------------------------------------------------------------------- # Based on average shares outstanding. (a) Total investment return at market value is based on the changes in market price of a share during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund's dividend reinvestment plan. Total investment return does not reflect brokerage commissions. (b) Expenses are net of fees paid indirectly. (c) Expenses exclude the reduction for fees paid indirectly. (d) Annualized ================================================================================ See accompanying notes to financial statements. 7
-------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) -------------------------------------------------------------------------------- NOTE A. ORGANIZATION Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland on May 1, 1987 and commenced investment operations on June 30, 1987. Its investment objective is to seek long-term capital appreciation through investment primarily in equity securities of U.S. and non-U.S. companies. The Fund is registered under the Investment Company Act of 1940, as amended, as a closed-end, diversified management investment company. NOTE B. SIGNIFICANT ACCOUNTING POLICIES MANAGEMENT ESTIMATES: The preparation of financial statements in 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. Readily marketable portfolio securities listed on the NYSE are valued, except as indicated below, at the last sale price reflected on the consolidated tape at the close of the NYSE on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the closing bid and asked prices on such day. If no bid or asked prices are quoted on such day or if market prices may be unreliable because of events occurring after the close of trading, then the security is valued by such method as the Board of Directors shall determine in good faith to reflect its fair market value. Readily marketable securities not listed on the NYSE but listed on other domestic or foreign securities exchanges are valued in a like manner. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined as reflected on the consolidated tape at the close of the exchange representing the principal market for such securities. Securities trading on the Nasdaq Stock Market, Inc. ("NASDAQ") are valued at the closing price. Readily marketable securities traded in the over-the counter market, including listed securities whose primary market is believed by Cornerstone Advisors, Inc. (the "Investment Adviser" or "Cornerstone") to be over-the-counter, are valued at the mean of the current bid and asked prices as reported by the NASDAQ or, in the case of securities not reported by the NASDAQ or a comparable source, as the Board of Directors deem appropriate to reflect their fair market value. Where securities are traded on more than one exchange and also over-the-counter, the securities will generally be valued using the quotations the Board of Directors believes reflect most closely the value of such securities. At June 30, 2008, the Fund held no securities valued in good faith by the Board of Directors. The net asset value per share of the Fund is calculated weekly and on the last business day of the month with the exception of those days on which the American Stock Exchange, LLC is closed. On March 19, 2008, Financial Accounting Standards Board released Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative instruments and Hedging Activities" ("FAS 161"). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The application of FAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 161 and its impact on the financial statements has not yet been determined. REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom the Fund enters into repurchase agreements are banks and broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Investment Manager" or ================================================================================ 8 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- "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 the mark-to-market of the value of the collateral, and, if necessary, requires the seller to maintain additional securities, so that the value of the collateral is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on an accrual basis; dividend income is recorded on the ex-dividend date. TAXES: No provision is made for U.S. federal income or excise taxes as it is the Fund's intention to continue to qualify as a regulated investment company and to make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes. In July 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes ("FIN 48"), an interpretation of FASB Statement No. 109. FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the accounting and disclosure of tax positions taken or expected to be taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more likely than not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more likely than not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is effective during the first required financial reporting period for fiscal years beginning after December 15, 2006. Management adopted FIN 48 on June 29, 2007 and reviewed any uncertain tax positions for open tax years 2004 through 2007. The Fund has initiated discussions with the Internal Revenue Service's National Office regarding a technical tax issue relating to whether the Fund's historic dividend reinvestment plan may have resulted in a violation of certain Sub-Chapter M requirements of the Internal Revenue Code for certain prior tax years. The outcome of this matter is currently uncertain including, whether ultimately it might negatively affect the tax status of the Fund. The Fund will continue to monitor this matter closely and is pursuing a potential resolution with the Internal Revenue Service that, if successful, will avoid a material negative tax impact to the Fund. There was no material impact to the financial statements or, other than as described herein, the disclosures thereto as a result of the adoption of this pronouncement. DISTRIBUTIONS TO SHAREHOLDERS: Effective June 25, 2002, the Fund initiated a fixed, monthly distribution to shareholders. On November 29, 2006, this distribution policy was updated to provide for the annual resetting of the monthly distribution amount per share 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 ================================================================================ 9 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- 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. NOTE C. FAIR VALUE The Fund adopted Financial Accounting Standards Board Statement of Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"), effective January 1, 2008. In accordance with FAS 157, fair value is defined as the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. FAS 157 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below. o Level 1 - quoted prices in active markets for identical investments o Level 2 - other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) o Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) The inputs or methodology used in valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used as of June 30, 2008 in valuing the Fund's investments carried at value: INVESTMENTS IN OTHER FINANCIAL VALUATION INPUTS SECURITIES INSTRUMENTS* -------------------------------------------------------------------------------- Level 1 - Quoted Prices $ 94,199,017 -- Level 2 - Other Significant Observable Inputs 11,232,506 -- Level 3 - Significant Unobservable Inputs -- -- ------------ ----------- Total $105,431,523 -- ============ =========== ------ * Other financial instruments include futures, forwards and swap contracts. The Fund did not have any assets or liabilities that were measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2008. ================================================================================ 10 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- NOTE D. 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 six months ended June 30, 2008, 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) exceeded an annual rate of 0.10% and 0.11% of average annual weekly net assets through February 29, 2008, and thereafter, respectively. For the six months ended June 30, 2008, Cornerstone earned $518,961 for investment management services, of which it waived $30,681. 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 $20,607 arising from credits earned on portfolio transactions executed with a broker, pursuant to a directed brokerage arrangement. The Fund paid or accrued approximately $12,550 for the six months ended June 30, 2008 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas R. Westle, partner of Blank, served as Secretary of the Fund until February 15, 2008. NOTE E. INVESTMENT IN SECURITIES For the six months ended June 30, 2008, purchases and sales of securities, other than short-term investments, were $5,884,083 and $16,168,459 respectively. NOTE F. SHARES OF COMMON STOCK The Fund has 100,000,000 shares of common stock authorized and 27,030,066 shares outstanding at June 30, 2008. As of that date, three individuals that control Cornerstone owned 82,691 shares in the Fund. Transactions in common stock for the period ended June 30, 2008 were as follows: Shares at beginning of period 26,556,691 Shares newly issued in reinvestment of dividends and distributions 473,375 ---------- Shares at end of period 27,030,066 ========== NOTE G. SHARE REPURCHASE PROGRAM As has been done in the past to enhance shareholder value, pursuant to Section 23 of the Investment Company Act of 1940, as amended, the Fund may again in the future purchase shares of its common stock on the open market from time to time, at such times, and in such amounts as may be deemed advantageous to the Fund. Nothing herein shall be considered a commitment to purchase such shares. The Fund had no repurchases during the six months ended June 30, 2008. No limit has been placed on the number of shares to be repurchased by the Fund other than those imposed by federal securities laws. All purchases are made in accordance with federal securities laws, with shares repurchased held in treasury effective January 1, 2002, for future use by the Fund. NOTE H. 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 ================================================================================ 11 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- maintained by the lender is insufficient to cover the value of loaned securities, the borrower is obligated to pay the amount of the shortfall (and interest thereon) to the Fund. However, there can be no assurance the Fund can recover this amount. The value of securities on loan to brokers at June 30, 2008, was $10,499,385. During the six months ended June 30, 2008, the Fund earned $9,421 in securities lending income which is included under the caption SECURITIES LENDING in the Statement of Operations. NOTE I. 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 LONG-TERM CAPITAL GAINS --------------- ----------------------- 2007 2006 2007 2006 ---- ---- ---- ---- $3,365,187 $1,150,839 $6,265,676 -- RETURN-OF-CAPITAL ----------------- 2007 2006 ---- ---- $19,451,697 $25,065,536 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, 2007, the Fund did not incur Post-October losses. At December 31, 2007, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $3,013,507 of which $1,139,305 expires in 2008, $1,139,305 expires in 2009, $250,210 expires in 2010, and $484,687 expires in 2011. These capital loss carryforwards are subject to an annual limitation of $1,139,305 during the next three years. At June 30, 2008, 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 $92,017,047, $19,823,359, $(6,408,883) and $13,414,476, respectively. ================================================================================ 12 RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED) On April 15, 2008, the Annual Meeting of Stockholders of Cornerstone Strategic Value Fund, Inc. was held and the following matter was voted upon based on 26,643,986 shares of common stock outstanding on February 19, 2008: (1) To approve the re-election of two Class I Directors until the 2011 Annual Meeting. NAME OF CLASS I DIRECTORS FOR WITHHOLD ------------------------- --- -------- Ralph W. Bradshaw 22,700,955 594,472 Edwin Meese III 22,631,464 663,963 ================================================================================ 13 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) Cornerstone Strategic Value Fund, Inc. (the "Fund") operates a Dividend Reinvestment Plan (the "Plan"), sponsored and administered by American Stock Transfer & Trust Company (the "Agent"), pursuant to which the Fund's income dividends or capital gains or other distributions (each, a "Distribution" and collectively, "Distributions"), net of any applicable U.S. withholding tax, are reinvested in shares of the Fund. Shareholders automatically participate in the Fund's Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating shareholder. Shareholders who do not wish to have Distributions automatically reinvested should so notify their broker, or if a registered shareholder, the Agent in writing at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Such written notice must be received by the Agent prior to the record date of the Distribution or the shareholder will receive such Distribution in shares through the Plan. Under the Plan, the Fund's Distributions to shareholders are reinvested in full and fractional shares as described below. When the Fund declares a Distribution the Agent, on the shareholder's behalf, will (i) receive additional authorized shares from the Fund either newly issued or repurchased from shareholders by the Fund and held as treasury stock ("Newly Issued Shares") or (ii) purchase outstanding shares on the open market, on the 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. Participants in the Plan may withdraw from the Plan by providing written notice to the Agent at least 30 days prior to the applicable Distribution payment date. When a Participant withdraws from the Plan, or upon suspension or termination of the Plan at the sole discretion of the Fund's Board of Directors, certificates for whole shares credited to his or her account under the Plan will, upon request, be issued. Whether or not a participant requests that certificates for whole shares be issued, a cash payment will be made for any fraction of a share credited to such account. The Agent will maintain all shareholder accounts in the Plan and furnish written confirmations of all transactions in the accounts, including information needed by shareholders for personal and tax records. The Agent will hold shares in the account of the Plan participant in non-certificated form in the name of the participant, and each shareholder's proxy will include those shares purchased pursuant to the Plan. Each participant, nevertheless, has the right to receive certificates for whole shares owned. ================================================================================ 14 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED) The Agent will distribute all proxy solicitation materials to participating shareholders. In the case of shareholders, such as banks, brokers or nominees, that hold shares for others who are beneficial owners participating in the Plan, the Agent will administer the Plan on the basis of the number of shares certified from time to time by the record shareholder as representing the total amount of shares registered in the shareholder's name and held for the account of beneficial owners participating in the Plan. Neither the Agent nor the Fund shall have any responsibility or liability beyond the exercise of ordinary care for any action taken or omitted pursuant to the Plan, nor shall they have any duties, responsibilities or liabilities except such as expressly set forth herein. Neither shall they be liable hereunder for any act done in good faith or for any good faith omissions to act, including, without limitation, failure to terminate a participants account prior to receipt of written notice of his or her death or with respect to prices at which shares are purchased or sold for the participants account and the terms on which such purchases and sales are made, subject to applicable provisions of the federal securities laws. The automatic reinvestment of Distributions will not relieve participants of any federal, state or local income tax that may be payable (or required to be withheld) on such Distributions. The Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan. All correspondence concerning the Plan should be directed to the Agent at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Certain transactions can be performed online at www.amstock.com or by calling the toll free number 877-864-4833. ================================================================================ 15 INVESTMENT MANAGEMENT AGREEMENT APPROVAL DISCLOSURE (UNAUDITED) The Board of Directors including, the Independent Directors, (the "Board") of Cornerstone Strategic Value Fund, Inc.(the "Fund") considers the approval of the Investment Management Agreement (the "Agreement") between Cornerstone Advisors, Inc. (the "Investment Manager") and the Fund on an annual basis. The most recent approval of the Agreement occurred at a meeting of the Board held on February 15, 2008. In determining whether to approve the Agreement, the Board requested and received extensive materials and information from the Investment Manager to assist them in considering the approval of the continuance of the Agreement. Based on their review of the information requested and provided, and the discussions with management of the Investment Manager, the Board determined that the approval of the Agreement was consistent with the best interests of the Fund and its shareholders, and would enable the Fund to continue to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. The Board made these determinations on the basis of the following factors, among others: (1) the nature and quality of the services provided by the Investment Manager; (2) the cost to the Investment Manager for providing such services, with special attention to the Investment Manager's profitability (and whether the Investment Manager realizes any economies of scale); (3) the direct and indirect benefits received by the Investment Manager from its relationship with the Fund and the other investment companies advised by the Investment Manager; and (4) comparative information as to the management fees, expense ratios and performance of other similarly situated closed-end investment companies. The materials provided by the Investment Manager to the Board described the services provided by the Investment Manager to the Fund and included an overview of the Investment Manager's investment philosophy, management style and plan, including the Investment Manager's extensive knowledge and experience in the closed-end fund industry. The Board also discussed the knowledge of the Investment Manager with respect to managing the Fund's monthly distribution policy and the extent to which such policy contributes to the market's positive valuation of the Fund. The Board also favorably received the Investment Manager's continued commitment to voluntarily waive its management fees from the Fund to the extent that monthly operating expenses exceed 0.11% of average net assets calculated monthly (including basic legal fees but excluding other legal and extraordinary expenses). The Board also reviewed and discussed a comparison of the Fund's performance with comparable closed-end funds and a comparison of the Fund's expense ratios and management fees with those comparable funds. Additionally, the Investment Manager presented an analysis of its profitability based on its contractual relationship with the Fund and the other investment companies advised by the Investment Manager. The Board carefully evaluated this information, taking into consideration many factors including, the overall high quality of the personnel, operations, financial condition, investment management capabilities, methodologies, and performance of the Investment Manager, and was advised by independent legal counsel with respect to its deliberations. Based on its review of the information requested and provided, the Board determined that the management fees payable to the Investment Manager under the Agreement are fair and reasonable in light of the services to be provided, the performance of the Fund, the profitability of the Investment Manager's relationship with the Fund, the comparability of the proposed fee to fees paid by comparable closed-end funds, and the level of quality of investment management personnel. The Board determined that the Agreement is consistent with the best interests of the Fund and its shareholders, and enables the Fund to receive high quality services at a cost that is appropriate, reasonable, and in the best interests of the Fund and its shareholders. Accordingly, in light of the above considerations and such other factors and information it considered relevant, the Board by a unanimous vote of those present at the meeting (including a separate vote of the Independent Directors present in person at the meeting) approved the continuance of the Agreement with respect to the Fund. ================================================================================ 16 PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED) Information regarding how Cornerstone Strategic Value Fund, Inc. (the "Fund") voted proxies related to its portfolio securities during the 12-month period ended June 30 of each year as well as the policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available by calling (212) 272-3550 or on the website of the Securities and Exchange Commission, http://www.sec.gov. This report incorporates a Summary Schedule of Investments for the Fund. A complete Schedule of Investments for the Fund may be obtained free of charge by contacting the Fund at (212) 272-3550. The Fund files a complete schedule of its portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling (202) 551-8090. PRIVACY POLICY NOTICE (UNAUDITED) The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the "Fund") policies regarding disclosure of nonpublic personal information that you provide to the Fund or that the Fund collects from other sources. In the event that you hold shares of the Fund through a broker-dealer or other financial intermediary, the privacy policy of the financial intermediary would govern how your nonpublic personal information would be shared with unaffiliated third parties. CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following nonpublic personal information about you: 1. Information from the Consumer: this category includes information the Fund receives from you on or in applications or other forms, correspondence, or conversations (such as your name, address phone number, social security number, assets, income and date of birth); and 2. Information about the Consumer's transactions: this category includes information about your 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. ================================================================================ 17 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 previous week's net asset value per share, market price, and related premium or discount are published each Monday in THE WALL STREET JOURNAL under the designation "CornstnStrat" and BARRON'S under the designation "Cornerstone Str Val". Such information is available weekly and may be obtained by contacting the Fund at the general inquiry phone number. -------------------------------------------------------------------------------- NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- This report, including the financial statements herein, is sent to the shareholders of the Fund for their information. The financial information from the records of the Fund without examination by independent registered public accountants who do not express an opinion thereon. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in the report. -------------------------------------------------------------------------------- ================================================================================ 18 This page intentionally left blank. This page intentionally left blank. CORNERSTONE STRATEGIC VALUE FUND, INC. ================================================================================ DIRECTORS AND CORPORATE OFFICERS Ralph W. Bradshaw Chairman of the Board of Directors and President 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 and Secretary William A. Clark Vice President Kayadti A. Madison 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 ADMINISTRATOR INDEPENDENT REGISTERED Bear Stearns Funds PUBLIC ACCOUNTING FIRM Management Inc., Tait, Weller & Baker LLP a J.P. Morgan Company 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. AMERICAN STOCK EXCHANGE(r) LISTED CLM ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not applicable. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. INVESTMENTS. (a)
================================================================================ CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS -- JUNE 30, 2008 (UNAUDITED) ================================================================================ No. of Description Shares Value ------------------------------------------------------- --------- ------------ EQUITY SECURITIES - 99.48% CLOSED-END FUNDS - 1.55% Adams Express Company (a) 49,500 $ 586,575 Boulder Growth & Income Fund Inc. 4,600 33,856 Dreman/Claymore Dividend & Income Fund 4,300 54,610 General American Investors Company 3,000 97,080 Liberty All-Star Equity Fund 96,330 565,457 Zweig Fund, Inc. ^ 29,000 133,980 ----------- 1,471,558 ----------- CONSUMER DISCRETIONARY - 8.00% Amazon.com, Inc. * 5,500 403,315 Carnival Corporation ^ 2,500 82,400 Clear Channel Communications, Inc. 3,300 116,160 Comcast Corporation, Class A ^ 28,555 541,688 Gap, Inc. (The) 12,200 203,374 Home Depot, Inc. (The) 8,100 189,702 J.C. Penney Company, Inc. 4,500 163,305 Johnson Controls, Inc. ^ 7,500 215,100 Lowe's Companies, Inc. ^ 11,900 246,925 McDonald's Corporation 18,600 1,045,692 News Corporation, Class A 23,000 345,920 NIKE, Inc., Class B 6,100 363,621 Omnicom Group Inc. ^ 6,200 278,256 Staples, Inc. 10,800 256,500 Starbucks Corporation * 2,800 44,072 Target Corporation 6,800 316,132 Time Warner Inc. ^ 31,500 466,200 TJX Companies, Inc. (The) 3,000 94,410 Toyota Motor Corporation ^ ADR 2,500 235,000 Viacom Inc., Class B * 9,450 288,603 Walt Disney Company (The) 53,700 1,675,440 ----------- 7,571,815 ----------- CONSUMER STAPLES - 11.03% Altria Group, Inc. 13,300 273,448 Anheuser-Busch Companies, Inc. 6,200 385,144 Archer-Daniels-Midland Company ^ 3,960 133,650 Coca-Cola Company (The) 41,000 2,131,180 Colgate-Palmolive Company 8,900 614,990 ConAgra Foods, Inc. 10,900 210,152 CVS Corporation 10,430 412,715 General Mills, Inc. 2,500 151,925 H.J. Heinz Company 4,000 191,400 Kimberly-Clark Corporation 5,000 298,900 Kraft Foods Inc, Class A 10,932 311,015 Kroger Co. (The) 13,800 398,406 PepsiCo, Inc. 7,100 451,489 Philip Morris International Inc. 7,300 360,547 Procter & Gamble Company (The) 37,797 2,298,436 Sysco Corporation ^ 9,800 269,598 Walgreen Co. 6,800 221,068 Wal-Mart Stores, Inc. 23,600 1,326,320 ----------- 10,440,383 ----------- ENERGY - 16.32% Baker Hughes Incorporated 10,600 925,804 BJ Services Company ^ 3,500 111,790 Chevron Corporation 28,032 2,778,812 ConocoPhillips 10,474 988,641 ENSCO International Incorporated 2,500 201,850 Exxon Mobil Corporation ^ 66,000 5,816,581 Halliburton Company ^ 13,200 700,524 Marathon Oil Corp. 15,000 778,050 Noble Corporation ^ 2,500 162,400 Occidental Petroleum Corporation 10,500 943,530 Schlumberger Limited ^ 11,500 1,235,445 Transocean Inc. ^ 2,500 380,975 XTO Energy, Inc. 6,250 428,188 ----------- 15,452,590 ----------- FINANCIALS - 11.68% AFLAC Incorporated 7,000 439,600 Allstate Corporation (The) 6,800 310,012 American Express Company ^ 14,600 549,982 American International Group, Inc. ^ 5,831 154,288 Bank of America Corporation 31,138 743,264 Bank of New York Mellon Corporation 8,254 312,249 BB&T Corporation ^ 4,000 91,080 Capital One Financial Corporation ^ 5,000 190,050 CB Richard Ellis Group, Inc., Class A ^ * 9,000 172,800 Charles Schwab Corporation (The) ^ 16,000 328,640 Chubb Corporation (The) ^ 4,100 200,941 Citigroup Inc. 13,800 231,288 Freddie Mac 5,400 88,560 Goldman Sachs Group, Inc. (The) ^ 2,800 489,720 Hartford Financial Services Group, Inc. (The) ^ 6,000 387,420 JPMorgan Chase & Co. 45,132 1,548,479 Lehman Brothers Holdings Inc. 2,700 53,487 Loews Corporation ^ 5,000 234,500 Marsh & McLennan Companies, Inc. ^ 6,000 159,300 Merrill Lynch & Co., Inc. ^ 4,700 149,037 Metlife, Inc. ^ 15,200 802,104 Morgan Stanley ^ 7,000 252,490 PNC Financial Services Group, Inc. 4,600 262,660 Prudential Financial, Inc. 4,200 250,908 State Street Corporation 3,500 223,965 SunTrust Banks, Inc. ^ 5,000 181,100 T. Rowe Price Group Inc. 5,000 282,350 Travelers Companies, Inc. (The) 9,476 411,258 U.S. Bancorp 16,901 471,369 Wachovia Corporation ^ 9,100 141,323 Wells Fargo & Company 39,900 947,625 ----------- 11,061,849 ----------- HEALTHCARE - 11.62% Abbott Laboratories 11,200 593,264 Aetna Inc. 6,000 243,180 Amgen Inc. * 9,900 466,884 Baxter International Inc. ^ 5,000 319,700 Becton, Dickinson and Company 4,400 357,720 Biogen Idec Inc. * 3,000 167,670 Bristol-Myers Squibb Company ^ 25,500 523,515 Cardinal Health, Inc. 2,950 152,161 Covidien Limited 2,599 124,466 Eli Lilly and Company 4,700 216,952 Gilead Sciences, Inc. * 7,000 370,650 Johnson & Johnson 40,900 2,631,506 McKesson Corporation ^ 2,800 156,548 Medtronic, Inc. 14,500 750,375 Merck & Co. Inc. ^ 17,500 659,575 Pfizer Inc. ^ 43,560 760,993 Schering-Plough Corporation 29,000 571,010 Stryker Corporation 3,500 220,080 UnitedHealth Group Incorporated 22,000 577,500 WellPoint Inc. * 3,500 166,810 Wyeth 20,200 968,792 ----------- 10,999,351 ----------- INDUSTRIALS - 11.58% 3M Co. 9,400 654,146 Boeing Company (The) ^ 4,200 276,024 Burlington Northern Santa Fe Corporation 5,400 539,406 Caterpillar Inc. 6,800 501,976 CSX Corporation 6,500 408,265 Danaher Corporation 3,500 270,550 Deere & Company ^ 8,000 577,040 Emerson Electric Co. 12,000 593,400 FedEx Corp. ^ 2,000 157,580 General Dynamics Corporation ^ 3,200 269,440 General Electric Company 73,900 1,972,391 Honeywell International Inc. 12,500 628,500 Illinois Tool Works Inc. 13,300 631,883 Ingersoll-Rand Company Ltd., Class A 4,500 168,435 Lockheed Martin Corporation ^ 4,000 394,640 Norfolk Southern Corporation ^ 5,500 344,685 Northrop Grumman Corporation 2,500 167,250 Precision Castparts Corp. 2,500 240,925 Raytheon Company 11,000 619,080 Union Pacific Corporation 4,000 302,000 United Parcel Service, Inc., Class B 7,100 436,437 United Technologies Corporation 7,500 462,750 Waste Management, Inc. 9,300 350,703 ----------- 10,967,506 ----------- INFORMATION TECHNOLOGY - 16.53% Adobe Systems Incorporated ^ * 4,200 165,438 Agilent Technologies Inc. * 4,000 142,160 Apple Computer, Inc. ^ * 8,500 1,423,240 Applied Materials, Inc. ^ 17,800 339,802 Automatic Data Processing, Inc. 6,900 289,110 Cisco Systems, Inc. * 47,900 1,114,154 Corning Incorporated 16,500 380,325 Dell Inc. * 4,700 102,836 eBay Inc. * 5,000 136,650 EMC Corporation * 72,648 1,067,199 Google Inc. * 5,500 2,895,310 Hewlett-Packard Company 19,900 879,779 Intel Corporation 60,500 1,299,540 International Business Machines Corporation 12,600 1,493,478 Microsoft Corporation 65,200 1,793,652 Oracle Corporation * 48,272 1,013,712 QUALCOMM Inc. 13,000 576,810 Texas Instruments Incorporated ^ 14,400 405,504 Yahoo! Inc. * 6,300 130,158 ----------- 15,648,857 ----------- MATERIALS - 4.15% Alcoa Inc. ^ 20,400 726,648 Dow Chemical Company (The) ^ 5,400 188,514 E. I. du Pont de Nemours and Company 17,300 741,997 Freeport-McMoRan Copper & Gold, Inc. 7,500 878,925 International Paper Company ^ 7,000 163,100 Monsanto Company 5,660 715,650 Praxair, Inc. ^ 5,500 518,320 ----------- 3,933,154 ----------- REAL ESTATE INVESTMENT TRUST - 0.38% Simon Property Group, Inc. ^ 4,000 359,560 ----------- TELECOMMUNICATION SERVICES - 2.83% AT&T Inc. 56,539 1,904,799 FairPoint Communications, Inc. ^ 646 4,658 Sprint Nextel Corporation ^ 5,446 51,737 Verizon Communications Inc. 20,300 718,620 ----------- 2,679,814 ----------- UTILITIES - 3.81% American Electric Power Company, Inc. 8,000 321,840 Dominion Resources, Inc. 14,200 674,358 Duke Energy Corporation 15,800 274,604 Edison International 9,000 462,420 Exelon Corporation 3,000 269,880 FirstEnergy Corp. 5,000 411,650 FPL Group, Inc. 4,000 262,320 PG&E Corporation ^ 5,000 198,450 Public Service Enterprise Group Incorporated 7,000 321,510 Southern Company (The) ^ 11,900 415,548 ----------- 3,612,580 ----------- TOTAL EQUITY SECURITIES (cost - $80,773,544) 94,199,017 ----------- SHORT-TERM INVESTMENTS - 11.86% MONEY MARKET SECURITY - 0.56% JPMorgan U.S. Government Money Market Fund 529,788 529,788 ----------- Principal Amount (000's) ---------- REPURCHASE AGREEMENTS - 11.30% Bear, Stearns & Co. Inc. + ++ (Agreements dated 6/30/2008 to be repurchased at $9,124,924, 2.50%, 7/1/2008, collateralized by $9,382,896 in United States Treasury Bonds) $ 9,124 9,124,290 Bear, Stearns & Co. Inc. + ++ (Agreements dated 6/30/2008 to be repurchased at $1,578,483, 1.25%, 7/1/2008, collateralized by $1,628,917 in United States Treasury Bonds) 1,578 1,578,428 ------------ 10,702,718 ------------ TOTAL SHORT-TERM INVESTMENTS (cost - $11,232,506) 11,232,506 ------------ TOTAL INVESTMENTS - 111.34% (cost - $92,006,050) 105,431,523 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS - (11.34)% (10,737,000) ------------ NET ASSETS - 100.00% $ 94,694,523 ============ ------------------------------ (a) Affiliated investment. The Fund holds 0.62% (based on net assets) of Adams Express Company. A director of the Fund also serves as a director to such company. During the six months ended June 30, 2008 there were no purchases or sales of this security. ^ Security or a portion thereof is out on loan. * Non-income producing security. ADR American Depositary Receipt + Stated interest rate, before rebate earned by borrower of securities on loan. ++ Represents investment purchased with collateral received for securities on loan.
(b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT 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 second fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Not applicable. (a)(2) Separate certifications of Principal Executive and Financial Officers pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as EX-99.CERT. (b) Certification of Principal Executive and Financial Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. By: /S/ RALPH W. BRADSHAW ------------------------- Name: Ralph W. Bradshaw Title: Principal Executive Officer Date: September 8, 2008 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: September 8, 2008 By: /S/ KAYADTI A. MADISON ---------------------- Name: Kayadti A. Madison Title: Principal Financial Officer Date: September 8, 2008