UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05150
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CORNERSTONE STRATEGIC VALUE FUND, INC.
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(Exact name of registrant as specified in charter)
383 MADISON AVENUE, NEW YORK, NY 10179
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(Address of principal executive offices) (Zip code)
FRANK J. MARESCA. 383 MADISON AVE, NEW YORK, NY
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(Name and address of agent for service)
Registrant's telephone number, including area code: 212-272-3550
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Date of fiscal year end: DECEMBER 31, 2003
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Date of reporting period: JANUARY 1, 2003 THROUGH JUNE 30, 2003
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Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Directors and President
Gary A. Bentz Director, Vice President
and Treasurer
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Thomas R. Westle Secretary
STOCK TRANSFER AGENT AND
INVESTMENT MANAGER REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
One West Pack Square Trust Co.
Suite 1650 59 Maiden
Asheville, NC 28801 New York, NY 10038
ADMINISTRATOR INDEPENDENT ACCOUNTANTS
Bear Stearns Funds Tait, Weller & Baker
Management Inc. 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Spitzer & Feldman P.C.
101 Carnegie Center 405 Park Avenue
Princeton, NJ 08540 New York, NY 10022
EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-3550.
[CLM LOGO]
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. The financial information herein
is taken from the records of the Fund without examination by independent
accountants, who do not express an opinion thereon. It is not a prospectus,
circular or representation intended for use in the purchase or sale of shares of
the Fund or of any securities mentioned in this report.
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2003
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CONTENTS
Letter to Shareholders 1
Portfolio Summary 3
Schedule of Investments 4
Statement of Assets and Liabilities 8
Statement of Operations 9
Statement of Changes in Net Assets 10
Financial Highlights 11
Notes to Financial Statements 12
Results of Annual Meeting of Stockholders 16
Description of Dividend Reinvestment & Cash Purchase Plan 17
Summary of General Information 19
Shareholder Information 19
Privacy Policy Notice 20
LETTER TO SHAREHOLDERS
July 25, 2003
Dear Fellow Shareholders:
Our semi-annual report for Cornerstone Strategic Value Fund, Inc. (the "Fund"),
covering the six months ended June 30, 2003, follows. At the end of the period,
the Fund's net assets were $25.0 million and the Net Asset Value ("NAV") per
share was $6.53. The share price closed at $7.35 and the Fund's price discount
to NAV improved from a discount of 8.7% at the beginning of the year to a
premium of 12.6% at the end of the current period. After reflecting the
reinvestment of distributions totaling $0.50 per share, the Fund achieved a
total investment return based on market value of 36.26% for the six months
ended June 30, 2003. We are gratified by this performance and believe it
reflects positive investor support for the direction of the Fund.
ECONOMIC AND MARKET SUMMARY
Investors welcomed continuation of the recovery that started near the end of
2002, following years of dismal returns in the equity markets. The economy is
being deluged with fiscal stimulus as an election year approaches. The Federal
Reserve emphasized their commitment to keep rates low for some time. However,
even after multiple tax cuts and the lowest interest rates in decades, the
results so far are anything but stellar as evidenced by the stubbornly high
level of unemployment. In spite of this, consumer confidence remains high.
Most equity indices, both domestic and global, finished positive for the
period. Following weakness in the first three months of the year, the S&P 500
Index's (the "Index") second quarter represented its best quarterly performance
since 1998. Complications from SARS and the war with Iraq kept expectations for
second quarter earnings low, but investors anticipate continued recovery in the
second half of the year.
PORTFOLIO PERFORMANCE
Following the protracted equity downturn of recent years, we are pleased to
report that the Fund's portfolio made significant progress over the last six
months, comparing well with its Index benchmark's return of 11.76%. The
portfolio remained broadly diversified and essentially fully invested. We
believe that this approach helped dampen the negative influences of the last
few years and will serve the Fund well as equity markets face the uncertain
future.
The Fund profited from its exposure to other domestic closed-end funds. By
buying funds with special situations and those at historically wide discounts,
their underlying portfolio performance is magnified as the discount narrows.
The investment manager attempts to enhance portfolio performance by taking
advantage of temporary and occasional pricing inefficiencies in certain
securities. The availability and magnitude of such opportunities
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1
LETTER TO SHAREHOLDERS (CONCLUDED)
are unpredictable and therefore, their effect on possible portfolio
out-performance may vary considerably from year to year.
CREATING VALUE
Our efforts are focused on creating extra value for our shareholders. This
concentration has led to significant change in a number of areas.
As illustrated in the financial highlights section of this report, the Fund's
shareholders received substantial benefit over the last few years from share
repurchases when the Fund traded at a discount. At a premium, the Fund's shares
are now trading above the value of their underlying assets.
Last year, the Fund's Board established a monthly distribution policy with a
fixed payout. Shareholders have the flexibility to receive their distributions
in cash or to maintain their holdings in Fund stock by reinvesting in additional
shares through the Fund's dividend reinvestment plan. It is expected that, as
with those of last year, the bulk of this year's distributions will be
classified as tax-deferring return-of-capital shortly after the end of the year.
Our efforts to control costs have proven very beneficial for the Fund. An
in-depth study of insurance options led to improved pricing, while operating
efficiencies have reduced overall printing and legal expenses. The Fund's move
to the American Stock Exchange, LLC, while creating a substantial reduction in
listing fees, has also been accompanied by higher daily trading volumes.
Cornerstone Advisors, Inc, the Fund's investment manager, extended its voluntary
agreement to waive a substantial portion of its management fees to the extent
that monthly operating expenses exceed 0.10%. These actions together have
resulted in a much lower expense ratio than in past years, even in spite of the
Fund's relatively small asset size.
The Fund's Board of Directors, its officers, and its investment manager are
mindful of the trust that the Fund's shareholders have placed in us. We know you
have a choice, we appreciate your support, and we look forward to continuing our
service to you in the future.
Sincerely,
/S/ RALPH W. BRADSHAW
---------------------
Ralph W. Bradshaw
Chairman
IN ADDITION TO HISTORICAL INFORMATION, THIS REPORT CONTAINS FORWARD-LOOKING
STATEMENTS, WHICH MAY CONCERN, AMONG OTHER THINGS, DOMESTIC AND FOREIGN MARKET,
INDUSTRY AND ECONOMIC TRENDS AND DEVELOPMENTS AND GOVERNMENT REGULATION AND
THEIR POTENTIAL IMPACT ON THE FUND'S INVESTMENT PORTFOLIO. THESE STATEMENTS ARE
SUBJECT TO RISKS AND UNCERTAINTIES AND ACTUAL TRENDS, DEVELOPMENTS AND
REGULATIONS IN THE FUTURE AND THEIR IMPACT ON THE FUND COULD BE MATERIALLY
DIFFERENT FROM THOSE PROJECTED, ANTICIPATED OR IMPLIED. THE FUND HAS NO
OBLIGATION TO UPDATE OR REVISE FORWARD-LOOKING STATEMENTS.
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2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF JUNE 30, 2003 (UNAUDITED)
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TOP TEN, BY SECTOR
Percent of
Sector Net Assets
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1. Financials 19.2
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2. Information Technology 14.2
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3. Healthcare 13.9
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4. Consumer Discretionary 13.0
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5. Industrials 11.4
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6. Consumer Staples 8.9
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7. Energy 5.8
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8. Closed-End Domestic Funds 4.7
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9. Telecommunication Services 4.2
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10. Materials 2.4
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TOP TEN HOLDINGS, BY ISSUER
Persent of
Holding Sector Net Assets
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1. Microsoft Corp. Information Technology 3.4
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2. General Electric Co. Industrials 3.3
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3. Wal-Mart Stores, Inc. Consumer Discretionary 2.9
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4. Exxon Mobil Corp. Energy 2.7
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5. Pfizer Inc. Healthcare 2.6
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6. Citigroup Inc. Financials 2.5
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7. American International Group, Inc. Financials 2.0
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8. Johnson & Johnson Healthcare 1.9
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9. International Business Machines Corp. Information Technology 1.8
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10. Bank of America Corp. Financials 1.7
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3
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS -- JUNE 30, 2003 (UNAUDITED)
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No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
EQUITY SECURITIES - 99.83%
CLOSED-END DOMESTIC FUNDS - 4.66%
Gabelli Global Multimedia Trust, Inc. 16,000 $ 124,000
General American Investors Co., Inc. 10,500 288,120
Royce Focus Trust, Inc. 39,400 266,738
Salmon Brothers Fund, Inc. (The) 28,200 302,868
Tri-Continental Corp. 12,500 184,750
----------
1,166,476
----------
CONSUMER DISCRETIONARY - 12.95%
AOL Time Warner Inc.+ 10,500 168,945
Bed Bath & Beyond Inc.+ 1,000 38,810
Best Buy Co., Inc.+ 1,000 43,920
Carnival Corp. 2,100 68,271
Clear Channel Communications, Inc.+ 2,100 89,019
Comcast Corp., Class A+ 3,882 117,159
Costco Wholesale Corp.+ 1,500 54,900
CVS Corp. 1,500 42,045
Delphi Corp. 2,000 17,260
Ford Motor Co. 6,500 71,435
Fortune Brands, Inc. 1,000 52,200
Gannett Co., Inc. 2,000 153,620
Gap, Inc. (The) 2,700 50,652
General Motors Corp. 1,900 68,400
Goodyear Tire & Rubber Co. (The) 2,500 13,125
Harley-Davidson, Inc. 1,000 39,860
Hilton Hotels Corp. 1,500 19,185
Home Depot, Inc. (The) 7,100 235,152
Kohl's Corp.+ 1,000 51,380
Limited Brands 2,500 38,750
Lowe's Companies, Inc. 2,500 107,375
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (CONTINUED)
Marriott International, Inc., Class A 1,000 $ 38,420
May Department Stores Co. (The) 1,000 22,260
McDonald's Corp. 4,600 101,476
NIKE, Inc., Class B 1,000 53,490
Omnicom Group Inc. 1,000 71,700
Reebok International Ltd.+ 1,500 50,445
Sears, Roebuck & Co. 1,000 33,640
Staples, Inc.+ 1,500 27,525
Starbucks Corp.+ 1,200 29,424
Target Corp. 3,200 121,088
Viacom Inc., non-voting Class B+ 6,000 261,960
Wal-Mart Stores, Inc. 13,300 713,811
Walt Disney Co. (The) 7,200 142,200
Yum! Brands, Inc.+ 1,000 29,560
----------
3,238,462
----------
CONSUMER STAPLES - 8.86%
Albertson's, Inc. 2,500 48,000
Altria Group, Inc. 6,400 290,816
Anheuser-Busch Companies, Inc. 3,200 163,360
Archer-Daniels-Midland Co. 2,415 31,081
Coca-Cola Co. (The) 7,500 348,075
Colgate-Palmolive Co. 2,000 115,900
ConAgra Foods, Inc. 1,900 44,840
General Mills, Inc. 2,500 118,525
Gillette Co. (The) 2,600 82,836
Kimberly-Clark Corp. 1,900 99,066
Kroger Co. (The)+ 3,500 58,380
PepsiCo, Inc. 5,100 226,950
Procter & Gamble Co. (The) 3,800 338,884
Sara Lee Corp. 2,800 52,668
Sysco Corp. 3,300 99,132
Walgreen Co. 3,200 96,320
----------
2,214,833
----------
See accompanying notes to financial statements
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4
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONTINUED)
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No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
ENERGY - 5.82%
Anadarko Petroleum Corp. 900 $ 40,023
Baker Hughes Inc. 2,500 83,925
CenterPoint Energy, Inc. 2,500 20,375
ChevronTexaco Corp. 3,340 241,148
ConocoPhillips 3,528 193,334
El Paso Corp. 2,500 20,200
Exxon Mobil Corp. 19,000 682,290
Marathon Oil Corp. 2,500 65,875
Reliant Resources, Inc.+ 1,971 12,082
Schlumberger Ltd. 2,000 95,140
----------
1,454,392
----------
FINANCIALS - 19.23%
AFLAC Inc. 1,900 58,425
American Express Co. 4,600 192,326
American International Group, Inc. 9,042 498,938
Bank of America Corp. 5,400 426,762
Bank of New York Co., Inc. (The) 2,500 71,875
Bank One Corp. 4,100 152,438
BB&T Corp. 1,600 54,880
Charles Schwab Corp. (The) 5,000 50,450
Citigroup Inc. 14,600 624,880
Fannie Mae 3,700 249,528
Fifth Third Bancorp 2,000 114,680
FleetBoston Financial Corp. 3,900 115,869
Freddie Mac 2,500 126,925
Hartford Financial Services Group, Inc. (The) 2,500 125,900
HSBC Holdings plc ADR 963 56,923
J.P. Morgan Chase & Co. 6,000 205,080
Marsh & McLennan Companies, Inc. 4,000 204,280
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
FINANCIALS (CONTINUED)
MBNA Corp. 4,500 $ 93,780
Mellon Financial Corp. 1,800 49,950
Merrill Lynch & Co., Inc. 3,000 140,040
MetLife, Inc. 2,700 76,464
Morgan Stanley 3,500 149,625
National City Corp. 2,200 71,962
PNC Financial Services Group 1,100 53,691
Prudential Financial, Inc. 2,500 84,125
State Street Corp. 1,000 39,400
SunTrust Banks, Inc. 1,100 65,274
Travelers Property Casualty Corp., Class A 738 11,734
Travelers Property Casualty Corp., Class B 1,517 23,923
U.S. Bancorp 4,200 102,900
Wachovia Corp. 3,600 143,856
Washington Mutual, Inc. 3,150 130,095
Wells Fargo & Co. 4,800 241,920
----------
4,808,898
----------
HEALTHCARE - 13.88%
Abbott Laboratories 5,300 231,928
Amgen Inc.+ 3,500 234,430
Baxter International Inc. 2,500 65,000
Boston Scientific Corp.+ 1,500 91,650
Bristol-Myers Squibb Co. 6,000 162,900
Cardinal Health, Inc. 2,500 160,750
Eli Lilly & Co. 4,000 275,880
Genzyme Corp.+ 2,500 104,500
HCA Inc. 2,000 64,080
HEALTHSOUTH Corp.+ 2,500 1,275
See accompanying notes to financial statements
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5
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
Johnson & Johnson 9,200 $ 475,640
McKesson Corp. 1,000 35,740
Medtronic, Inc. 4,300 206,271
Merck & Co. Inc. 6,000 363,300
Pfizer Inc. 19,000 648,850
Schering-Plough Corp. 2,500 46,500
UnitedHealth Group Inc. 3,000 150,750
Wyeth 3,300 150,315
----------
3,469,759
----------
INDUSTRIALS - 11.41%
3M Co. 1,500 193,470
Automatic Data Processing, Inc. 2,000 67,720
Boeing Co. (The) 6,000 205,920
Caterpillar Inc. 1,300 72,358
Cendant Corp.+ 2,700 49,464
Concord EFS, Inc.+ 2,500 36,800
Emerson Electric Co. 1,500 76,650
FedEx Corp. 1,000 62,030
First Data Corp. 5,000 207,200
General Electric Co. 29,000 831,720
Honeywell International Inc. 2,800 75,180
Illinois Tool Works Inc. 1,000 65,850
Lockheed Martin Corp. 1,500 71,355
Masco Corp. 1,700 40,545
Paychex, Inc. 2,500 73,275
Southwest Airlines Co. 2,700 46,440
Transocean Inc.+ 2,500 54,925
Tyco International Ltd. 9,500 180,310
Union Pacific Corp. 1,000 58,020
United Parcel Service, Inc., Class B 3,500 222,950
United Technologies Corp. 1,700 120,411
Waste Management, Inc. 1,700 40,953
----------
2,853,546
----------
--------------------------------------------------------------------------------
No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 14.17%
Agere Systems Inc., Class A+ 115 $ 268
Agere Systems Inc., Class B+ 2,830 6,509
Agilent Technologies, Inc.+ 1,800 35,190
Altera Corp.+ 1,500 24,600
Analog Devices, Inc.+ 1,000 34,820
Apple Computer, Inc.+ 2,500 47,800
Applied Materials, Inc.+ 5,400 85,644
Cisco Systems, Inc.+ 21,900 363,321
Computer Associates International, Inc. 2,500 55,700
Corning Inc.+ 3,000 22,170
Dell Computer Corp.+ 8,300 265,268
Electronic Data Systems Corp. 2,500 53,625
EMC Corp.+ 7,000 73,290
Hewlett-Packard Co. 10,300 219,390
Intel Corp. 19,500 405,288
International Business Machines Corp. 5,400 445,500
Linear Technology Corp. 1,000 32,210
Maxim Integrated Products, Inc. 1,000 34,190
Micron Technology, Inc. 2,500 29,075
Microsoft Corp. 32,700 837,447
Motorola, Inc. 6,600 62,238
Oracle Corp.+ 6,300 75,726
QUALCOMM Inc. 2,500 89,375
Sanmina-SCI Corp.+ 2,500 15,775
Siebel Systems, Inc.+ 2,500 23,850
Solectron Corp.+ 3,000 11,220
Sun Microsystems, Inc.+ 10,000 46,000
Texas Instruments Inc. 4,900 86,240
Yahoo! Inc.+ 1,900 62,244
----------
3,543,973
----------
MATERIALS - 2.37%
Air Products & Chemicals, Inc. 1,000 41,600
Alcoa Inc. 3,100 79,050
Dow Chemical Co. (The) 2,700 83,592
See accompanying notes to financial statements
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6
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED) (CONCLUDED)
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No. of Value
Description Shares (Note A)
--------------------------------------------------------------------------------
MATERIALS (CONTINUED)
E .I. du Pont de Nemours & Co. 3,700 $ 154,068
Georgia-Pacific Corp. 1,000 18,950
International Paper Co. 2,000 71,460
Praxair, Inc. 1,500 90,150
Weyerhaeuser Co. 1,000 54,000
----------
592,870
----------
TELECOMMUNICATION SERVICES - 4.16%
ALLTEL Corp. 2,500 120,550
AT&T Corp. 2,400 46,200
AT&T Wireless Services Inc.+ 7,022 57,651
BellSouth Corp. 6,500 173,095
Lucent Technologies Inc.+ 10,700 21,721
SBC Communications Inc. 10,400 265,720
Sprint Corp. (FON Group) 3,000 43,200
Verizon Communications Inc. 7,900 311,655
----------
1,039,792
----------
UTILITIES - 2.32%
American Electric Power Co., Inc. 1,200 35,796
Dominion Resources, Inc. 1,000 64,270
Duke Energy Corp. 5,600 111,720
Edison International+ 2,500 41,075
FirstEnergy Corp. 2,500 96,125
Scottish Power plc ADR 4,000 97,240
Southern Co. (The) 2,400 74,784
TXU Corp. 1,000 22,450
Xcel Energy, Inc. 2,500 37,600
----------
581,060
----------
TOTAL EQUITY SECURITIES
(cost - $25,974,987) 24,964,061
----------
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Principal
Amount Value
Description (000's) (Note A)
--------------------------------------------------------------------------------
SHORT-TERM INVESTMENT - 0.22%
REPURCHASE AGREEMENT - 0.22%
Bear, Stearns & Co. Inc.
(Agreement dated 06/30/03 to be repurchased at $56,026),
1.10%, 07/01/03 (cost - $56,024) (Note F) $ 56 $ 56,024
---------
TOTAL INVESTMENTS - 100.05%
(cost - $26,031,011) (Notes A, G) 25,020,085
----------
SECURITIES LENDING
COLLATERAL (Note E) - 0.92% 229,702
LIABILITIES IN EXCESS OF OTHER
ASSETS - (0.97)% (242,734)
----------
NET ASSETS - 100.00% $ 25,007,053
============
-----------
+ Non-income producing security.
ADR American Depositary Receipts.
See accompanying notes to financial statements.
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7
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2003 (UNAUDITED)
--------------------------------------------------------------------------------
ASSETS
Investments, at value (Cost $26,031,011) (Notes A, G) $ 25,020,085
Cash collateral received for securities loaned (Note E) 229,702
Receivables:
Dividends 27,691
Interest 167
Prepaid expenses 8,187
------------
Total Assets 25,285,832
------------
LIABILITIES
Payables:
Upon return of securities loaned (Note E) 229,702
Investment management fees (Note B) 12,962
Other accrued expenses 36,115
------------
Total Liabilities 278,779
------------
NET ASSETS (applicable to 3,828,705
shares of common stock outstanding) $ 25,007,053
============
NET ASSET VALUE PER SHARE ($25,007,053 / 3,828,705) $ 6.53
============
NET ASSETS CONSISTS OF
Capital stock, $0.01 par value;
3,828,705 shares outstanding
(25,000,000 shares authorized) $ 38,287
Paid-in capital 55,699,955
Cost of 2,239,440 shares repurchased (26,999,661)
Distributions in excess of net investment income (1,813,482)
Accumulated net realized loss on investments (907,120)
Net unrealized depreciation in value of investments (1,010,926)
------------
Net assets applicable to shares outstanding $ 25,007,053
============
See accompanying notes to financial statements.
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8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
--------------------------------------------------------------------------------
INVESTMENT INCOME Income (Note A):
Dividends $ 215,852
Interest 1,292
-----------
Total Investment Income 217,144
-----------
Expenses:
Investment management fees (Note B) 118,330
Administration fees 24,795
Accounting fees 14,053
Legal and audit fees (Note B) 8,739
Directors' fees 7,354
Transfer agent fees 7,140
Stock exchange listing fees 4,880
Custodian fees 3,859
Insurance 2,764
Printing 655
-----------
Total Expenses 192,569
Less: Management fee waivers (Note B) (42,691)
Less: Fees paid indirectly (Note B) (6,784)
-----------
Net Expenses 143,094
-----------
Net Investment Income 74,050
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investments (322,063)
Net change in unrealized depreciation in value of investments 2,612,211
-----------
Net realized and unrealized gain on investments 2,290,148
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,364,198
===========
See accompanying notes to financial statements.
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9
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
For the Six
Months Ended For the Year
June 30, 2003 Ended
(unaudited) December 31, 2002
----------- -----------------
INCREASE/(DECREASE) IN NET ASSETS Operations:
Net investment income/(loss) $ 74,050 $ (38,781)
Net realized loss on investments (322,063) (116,327)
Net change in unrealized appreciation/
(depreciation) in value of investments 2,612,211 (8,612,397)
------------ ------------
Net increase/(decrease) in net assets
resulting from operations 2,364,198 (8,767,505)
------------ ------------
Dividends and distributions to shareholders (Notes A, G):
Net investment income (74,050) --
Return-of-capital (1,813,482) (1,887,643)
------------ ------------
Total dividends and distributions to shareholders (1,887,532) (1,887,643)
------------ ------------
Capital stock transactions (Note D):
Proceeds from 25,108 and 33,037 shares
newly issued in reinvestment of
dividends and distributions, respectively 154,578 194,649
Cost of 62,000 shares repurchased -- (419,744)
------------ ------------
Net increase/(decrease) in net assets
resulting from capital stock transactions 154,578 (225,095)
------------ ------------
Total increase/(decrease) in net assets 631,244 (10,880,243)
------------ ------------
NET ASSETS
Beginning of period 24,375,809 35,256,052
------------ ------------
End of period $ 25,007,053 $ 24,375,809
============ ============
See accompanying notes to financial statements.
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10
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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 period indicated. This information has been
derived from information provided in the financial statements and market price
data for the Fund's shares.
For the Years Ended December 31,
---------------------------------------------------------------------
For the Six
Months Ended
June 30, 2003
(unaudited) 2002 2001 2000 1999 1998
----------- ---- ---- ---- ---- ----
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 6.41 $ 9.20 $ 11.31 $ 14.95 $ 14.52 $ 11.53
--------- ---------- ---------- --------- --------- --------
Net investment income/(loss) # 0.02 (0.01) (0.06) (0.94) (0.09) (0.09)
Net realized and unrealized gain/(loss)
on investments and foreign currency
related translations 0.60 (2.29) (2.13) (1.81) 4.04 2.96
--------- ---------- ---------- --------- --------- --------
Net increase/(decrease) in net assets
resulting from operations 0.62 (2.30) (2.19) (2.75) 3.95 2.87
--------- ---------- ---------- --------- --------- --------
Dividends and distributions to shareholders:
Net investment income (0.02) -- -- -- -- --
Net realized gain on investments and
foreign currency related transactions -- -- -- (1.01) (3.87) --
Return-of-capital (0.48) (0.50) -- -- -- --
--------- ---------- ---------- --------- --------- --------
Total dividends and distributions
to shareholders (0.50) (0.50) -- (1.01) (3.87) --
--------- ---------- ---------- --------- --------- --------
Capital stock transactions:
Anti-dilutive effect due to capital
stock repurchased -- 0.02 0.08 0.12 0.35 0.12
Dilutive effect due to shares issued
in reinvestment of dividends
and distributions -- (0.01) -- -- -- --
--------- ---------- ---------- --------- --------- --------
Total capital stock transactions -- 0.01 0.08 0.12 0.35 0.12
--------- ---------- ---------- --------- --------- --------
Net asset value, end of period $ 6.53 $ 6.41 $ 9.20 $ 11.31 $ 14.95 $ 14.52
========= ========== ========== ========= ========= ========
Market value, end of period $ 7.35 $ 5.85 $ 8.05 $ 10.59 $ 14.25 $ 12.88
========= ========== ========== ========= ========= ========
Total investment return (a) (b) 36.26% (20.85)% (23.98)% (19.28)% 40.74% 36.42%
========= ========== ========== ========= ========= ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 25,007 $ 24,376 $ 35,256 $ 45,980 $ 66,204 $ 79,060
Ratio of expenses to average net assets,
net of fee waivers, if any 1.21%(c)(e) 1.80%(c) 1.77%(c) 1.72%(c) 1.55%(c) 1.91%
Ratio of expenses to average net assets,
excluding fee waivers, if any (d) 1.63% (e) 2.17% 2.11% 1.83% 1.64% --
Ratio of expenses to average net assets,
net of fee waivers, but excluding
fees paid indirectly, if any 1.27%(e) 1.86% 1.95% -- -- --
Ratio of net investment income/(loss) to
average net assets 0.63%(e) (0.13)% (0.64)% (1.12)% (0.59)% (0.69)%
Portfolio turnover 4.01% 29.63% 59.83% 28.26% 101.54% 50.39%
------------------------------------------------------------------------------------------------------------------------------------
# Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in
market price of a share during the period and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's dividend reinvestment plan. Total investment return does not
reflect brokerage commissions.
(b) For the year ended December 31, 2000, the Fund paid federal taxes on
realized long-term capital gains. Total investment return, assuming
reinvestment of distributions and federal taxes paid on long-term
capital gains, is (13.88)%.
(c) Expenses are net of fees paid indirectly.
(d) Expenses exclude fees paid indirectly.
(e) Annualized.
See accompanying notes to financial statements.
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------
NOTE A. SIGNIFICANT ACCOUNTING POLICIES
Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. As a result
of an Annual Meeting of Stockholders held on April 19, 2001, the Fund, formerly
known as the Clemente Strategic Value Fund, Inc., changed its name. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.
The following is a summary of significant accounting policies consistently
followed by the Fund:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. The Board of Directors
has established general guidelines for calculating fair value of not readily
marketable securities. At June 30, 2003, the Fund held no securities valued in
good faith by the Board of Directors. The net asset value per share of the Fund
is calculated weekly and on the last business day of the month with the
exception of those days on which the American Stock Exchange, LLC is closed.
REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Manager" or
"Cornerstone") considers creditworthy. The seller under a repurchase agreement
will be required to maintain the value of the securities as collateral, subject
to the agreement at not less than the repurchase price plus accrued interest.
Cornerstone monitors daily, the mark-to-market of the value of the collateral,
and, if necessary, requires the seller to maintain additional securities, so
that the value of the collateral is not less than the repurchase price. Default
by or bankruptcy of the seller would, however, expose the Fund to possible loss
because of adverse market action or delays in connection with the disposition of
the underlying securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
method for both financial reporting and income tax purposes. Interest income is
recorded on an accrual basis; dividend income is recorded on the ex-dividend
date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
DISTRIBUTIONS OF INCOME AND GAINS: Effective June 25, 2002, the Fund initiated a
fixed, monthly distribution to shareholders. To the extent that these
distributions exceed the current earnings of the Fund, the balance will be
generated from sales of portfolio securities held by the Fund, which will either
be short-term or long-term capital gains or a tax-free return-of-capital. Prior
thereto, the Fund distributed at least annually to shareholders, substantially
all of its net investment income and net realized short-term capital gains, if
any. The Fund determines annually whether to distribute any net realized
long-term capital gains in excess of net realized short-term capital losses,
including capital loss carryovers, if any. An additional distribution may be
made to the extent necessary to avoid the payment of a 4% U.S. federal excise
tax. Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.
The character of dividends and distributions made during the six months ended
June 30, 2003 from net investment income or net realized gains may differ from
their ultimate characterization for U.S. federal income tax purposes due to U.S.
generally accepted accounting principles/tax differences in the character of
income and expense recognition.
NOTE B. AGREEMENTS
Cornerstone serves as the Fund's investment manager with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund, an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. Cornerstone has voluntarily
agreed to waive its management fees from the Fund to the extent that monthly
operating expenses exceed 0.10% of average net assets calculated monthly.
Cornerstone has voluntarily agreed to continue the undertaking through December
31, 2003. For the six months ended June 30, 2003, Cornerstone earned $118,330
for investment management services, of which it waived $42,691.
Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $6,784 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $7,400 for the six months ended June 30,
2003 for legal services to Spitzer & Feldman P.C., counsel to the Fund. Thomas
R. Westle, a partner of the firm, serves as secretary of the Fund.
At June 30, 2003, pursuant to regulatory filings, separate shareholders owned
approximately 7% and 38% of the outstanding shares of the Fund based on Schedule
13D/A and Schedule 13G/A filings with the Securities and Exchange Commission on
May 9, 2003 and February 7, 2003, respectively.
NOTE C. INVESTMENT IN SECURITIES
For the six months ended June 30, 2003, purchases and sales of securities, other
than short-term investments, were $951,677 and $2,541,517 respectively.
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
NOTE D. SHARE REPURCHASE PROGRAM
On October 5, 1998, the Fund commenced a share repurchase program for purposes
of enhancing shareholder value and reducing the discount at which the Fund's
shares traded from their net asset value. The Fund had no repurchases for the
six months ended June 30, 2003. For the year ended December 31, 2002, the Fund
repurchased 62,000 of its shares for a total cost of $419,744 at a weighted
average discount of 12.93% from net asset value. The discount of individual
repurchases ranged from 6.11% - 17.42%. The Fund expects to continue to
repurchase its outstanding shares at such time and in such amounts as it
believes will further the accomplishment of its foregoing objectives, subject to
review by the Board of Directors. No limit has been placed on the number of
shares to be purchased by the Fund other than those imposed by federal
securities laws.
All purchases are made in accordance with federal securities laws, with shares
repurchased held in treasury effective January 1, 2002.
NOTE E. SECURITIES LENDING
To generate additional income, the Fund may lend up to 10% of its total assets.
The Fund receives payments from borrowers equivalent to the dividends and
interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers and
the related collateral received at June 30, 2003, were $223,675 and $229,702,
respectively. Any cash collateral received is reinvested into repurchase
agreements, which in turn is collateralized by various U.S. Government and
Agency securities.
During the six months ended June 30, 2003, the Fund earned $215 in securities
lending income which is included under the caption INTEREST in the Statement of
Operations.
NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT
Listed below is the collateral associated with the repurchase
agreement with Bear, Stearns & Co. Inc. outstanding at June 30, 2003.
PRINCIPAL
AMOUNT MARKET
ISSUER (000'S) MATURITY VALUE
------ ------- -------- -----
United States
Treasury Bond,
(interest only) $130 2/15/20 $59,326
NOTE G. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONCLUDED)
--------------------------------------------------------------------------------
The tax characteristic of distributions paid during the year ended December 31,
2002 were a return-of-capital of $1,887,643.
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses").
At December 31, 2002, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $585,057 of which $142,060 expires in 2009 and $442,997
expires in 2010.
At June 30, 2003, the identified cost for federal income tax purposes, as well
as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized depreciation from investments were $26,031,011, $2,308,772,
$(3,319,698) and $(1,010,926), respectively.
--------------------------------------------------------------------------------
15
RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)
On April 11, 2003, the Annual Meeting of Stockholders of Cornerstone Strategic
Value Fund, Inc. was held and the following matter was voted upon:
1. To elect three Class II Directors until the year 2006 Annual
Meeting.
NAME OF CLASS II DIRECTORS FOR WITHHOLD
-------------------------- --- --------
Gary A. Bentz 3,138,971 509,379
Thomas H. Lenagh 3,135,187 513,163
Scott B. Rogers 3,138,771 509,579
--------------------------------------------------------------------------------
16
DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)
Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment & Cash Purchase
Plan (the "Plan"), unless and until an election is made to withdraw from the
Plan on behalf of such participating shareholders. Shareholders who do not wish
to have distributions automatically reinvested should so notify American Stock
Transfer & Trust Co. (the "Agent") at P.O. Box 922, Wall Street Station, New
York, NY 10269-0560 or call (877) 248-6416. Under the Plan, all of the Fund's
dividends and other distributions to shareholders are reinvested in full and
fractional Shares as described below.
When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on
the shareholders' behalf, will: (i) receive additional authorized shares from
the Fund either newly issued or repurchased from shareholders by the Fund and
held as treasury stock ("Newly Issued Shares") or, (ii) at the sole discretion
of the Board of Directors, be authorized to purchase outstanding shares on the
open market, on the American Stock Exchange, LLC or elsewhere, with cash
allocated to it by the Fund ("Open Market Purchases").
Shares acquired by the Agent in Open Market Purchases will be allocated to the
reinvesting shareholders based on the average cost of such Open Market
Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at a price equal to the average closing price of the
Fund over the five trading days preceding the payment date of such dividend.
Registered shareholders who acquire their shares through Open Market Purchases
and who do not wish to have their Dividends automatically reinvested should so
notify the Fund in writing. If a Shareholder has not elected to receive cash
Dividends and the Agent does not receive notice of an election to receive cash
Dividends prior to the record date of any dividend, the shareholder will
automatically receive such Dividends in additional Shares.
Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Dividend payment date.
When a participant withdraws from the Plan, or upon termination of the Plan as
provided below, certificates for whole shares credited to his/her account under
the Plan will, upon request, be issued. Whether or not a participant requests
that certificates for whole shares be issued, a cash payment will be made for
any fraction of a Share credited to such account.
The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records. The Agent will hold shares in the
account of each Plan participant in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the Shareholder's name and held for the account of
beneficial owners participating in the Plan.
There will be no charge to participants for reinvesting Dividends other than
their share of brokerage commissions as discussed below. The Agent's fees for
administering the Plan and
--------------------------------------------------------------------------------
17
DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN (UNAUDITED)(CONCLUDED)
handling the reinvestment of Dividends will be paid by the Fund.
Each participant's account will be charged a pro-rata share of brokerage
commissions incurred with respect to the Agent's Open Market Purchases in
connection with the reinvestment of Dividends.
Brokerage charges for purchasing small amounts of shares for individual accounts
through the Plan are expected to be less than the usual brokerage charges for
such transactions because the Agent will be purchasing shares for all the
participants in blocks and pro-rating the lower commission that may be
attainable.
The automatic reinvestment of Dividends will not relieve participants of any
income tax that may be payable on such Dividends. Participants who receive
shares pursuant to the Plan as described above will recognize taxable income in
the amount of the fair market value of those shares. In the case of non-U.S.
participants whose Dividends are subject to U.S. income tax withholding and in
the case of participants subject to 28% federal backup withholding, the Agent
will reinvest Dividends after deduction of the amount required to be withheld.
The Fund reserves the right to amend or terminate the Plan by written notice to
participants. All correspondence concerning the Plan should be directed to the
Agent at the address referred to in the first paragraph of this section.
--------------------------------------------------------------------------------
18
SUMMARY OF GENERAL INFORMATION
The Fund - Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified
investment company whose shares trade on the American Stock Exchange, LLC. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is managed by Cornerstone Advisors, Inc.
SHAREHOLDER INFORMATION
Effective February 21, 2003, the Fund is listed on the American Stock Exchange,
LLC (symbol "CLM"). The share price is published in: THE NEW YORK TIMES (daily)
under the designation "CornerStrt" and THE WALL STREET JOURNAL (daily) and
BARRON'S (each Monday) under the designation "CornstnStrat." The net asset value
per share is published under "Closed-End Funds" each Sunday in THE NEW YORK
TIMES and each Monday in THE WALL STREET JOURNAL and BARRON'S under the
designation "CrnstnStrV."
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
19
PRIVACY POLICY NOTICE
The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:
1. Information from the Consumer: this category includes information the
Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address, phone
number, social security number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your transactions with the Fund, its affiliates, or
others (such as your account number and balance, payment history,
parties to transactions, cost basis information, and other financial
information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator
and transfer agent) to process your transactions and otherwise provide services
to you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your
nonpublic personal information.
--------------------------------------------------------------------------------
20
CORNERSTONE STRATEGIC VALUE FUND, INC.
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. If the registrant has not adopted such a code of ethics, explain
why it has not done so. NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS
WITH PERIODS ENDING ON OR AFTER JULY 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has determined that
the registrant either:
(i) Has at least one audit committee financial expert serving on its
audit committee; or
(ii) Does not have an audit committee financial expert serving on its
audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is "independent."
In order to be considered "independent" for purposes of this Item, a
member of an audit committee may not, other than in his or her
capacity as a member of the audit committee, the board of directors,
or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or other
compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as defined
in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an audit
committee financial expert.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON
OR AFTER JULY 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed
for each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate
fees billed in each of the last two fiscal years for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed
in each of the last two fiscal years for professional services rendered by the
principal accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the fees
disclosed under this category.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees
billed in each of the last two fiscal years for products and services provided
by the principal accountant, other than the services reported in paragraphs (a)
through (c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours
expended on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were attributed to
work performed by persons other than the principal accountant's full-time,
permanent employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR
AFTER DECEMBER 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Form N-CSR disclosure
requirement not yet effective with respect to the Registrant.
ITEM 6. [Reserved]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual
report on this Form N-CSR must, unless it invests exclusively in non-voting
securities, describe the policies and procedures that it uses to determine how
to vote proxies relating to portfolio securities, including the procedures that
the company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS WITH PERIODS ENDING ON OR
AFTER JULY 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The Principal Executive Officer and Principal Financial Officer
concluded that the Registrant's Disclosure Controls and Procedures are effective
based on their evaluation of the Disclosure Controls and Procedures as of a date
within 90 days of the filing date of this report.
(b) There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number
the exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2 under
the Act (17 CFR 270.30a-2)
SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) CORNERSTONE STRATEGIC VALUE FUND, INC..
By (Signature and Title)*
/S/ RALPH W. BRADSHAW
-------------------------
RALPH W. BRADSHAW,
Chairman and President (Principal Executive Officer)
Date: September 4, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)*
/S/ RALPH W. BRADSHAW
-------------------------
RALPH W. BRADSHAW,
Chairman and President (Principal Executive Officer)
Date: September 4, 2003
By (Signature and Title)*
/S/ GARY A. BENTZ
-------------------------
GARY A. BENTZ,
Vice President and Treasurer (Principal Financial Officer)
Date: September 4, 2003
* Print the name and title of each signing officer under his or her signature.
ALL CERTIFICATIONS (UNDER THE ACT'S SECTION 302 AND 906) SHOULD BE INCLUDED IN
ONE EDGAR EX-99.CERT EXHIBIT DOCUMENT TO FORM N-CSR)