N-CSRS 1 t306472.txt CLM OMB APPROVAL ------------------------- OMB Number: 3235-0570 Expires: January 31, 2014 Estimated average burden hours per response: 20.6 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) 350 Jericho Turnpike, Suite 206, Jericho, New York 11753 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Frank J. Maresca Ultimus Fund Solutions, LLC 350 Jericho Turnpike, Suite 206, Jericho, New York 11753 -------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (513) 587-3400 --------------- Date of fiscal year end: December 31, 2011 ------------------ Date of reporting period: June 30, 2011 ------------------ 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 ==================== CORNERSTONE STRATEGIC VALUE FUND, INC. SEMI-ANNUAL REPORT JUNE 30, 2011 ===================== CONTENTS Portfolio Summary 1 Summary Schedule of Investments 2 Statement of Assets and Liabilities 4 Statement of Operations 5 Statement of Changes in Net Assets 6 Financial Highlights 7 Notes to Financial Statements 8 Results of Annual Meeting of Stockholders 13 Investment Management Agreement Approval Disclosure 14 Description of Dividend Reinvestment Plan 15 Proxy Voting and Portfolio Holdings Information 17 Privacy Policy Notice 18 Summary of General Information 21 Stockholder Information 21 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. PORTFOLIO SUMMARY - AS OF JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- SECTOR ALLOCATION Percent of Sector Net Assets -------------------------------------------------------------------------------- Closed-End Funds 24.8 -------------------------------------------------------------------------------- Information Technology 13.6 -------------------------------------------------------------------------------- Financials 10.6 -------------------------------------------------------------------------------- Energy 9.3 -------------------------------------------------------------------------------- Healthcare 8.6 -------------------------------------------------------------------------------- Industrials 8.5 -------------------------------------------------------------------------------- Consumer Discretionary 8.0 -------------------------------------------------------------------------------- Consumer Staples 7.9 -------------------------------------------------------------------------------- Materials 3.4 -------------------------------------------------------------------------------- Telecommunication Services 2.6 -------------------------------------------------------------------------------- Utilities 2.1 -------------------------------------------------------------------------------- Other 0.8 -------------------------------------------------------------------------------- TOP TEN HOLDINGS, BY ISSUER Percent of Holding Sector Net Assets -------------------------------------------------------------------------------- 1. Alpine Total Dynamic Dividend Fund Closed-End Funds 4.2 -------------------------------------------------------------------------------- 2. Eaton Vance Tax-Managed Diversified Equity Income Fund Closed-End Funds 4.1 -------------------------------------------------------------------------------- 3. Exxon Mobil Corporation Energy 4.0 -------------------------------------------------------------------------------- 4. Apple, Inc. Information Technology 3.2 -------------------------------------------------------------------------------- 5. Eaton Vance Risk-Managed Diversified Equity Income Fund Closed-End Funds 3.2 -------------------------------------------------------------------------------- 6. International Business Machines Corporation Information Technology 2.3 -------------------------------------------------------------------------------- 7. AllianceBernstein Income Fund Closed-End Funds 2.3 -------------------------------------------------------------------------------- 8. Microsoft Corporation Information Technology 2.2 -------------------------------------------------------------------------------- 9. JPMorgan Chase & Co. Financials 2.0 -------------------------------------------------------------------------------- 10. Eaton Vance Tax-Managed Global Diversified Equity Income Fund Closed-End Funds 2.0 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 1 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.20% CLOSED-END FUNDS - 24.84% CORE - 1.29% Adams Express Company (The) (a) 40,400 $ 450,056 Other Core (b) 345,138 ----------- 795,194 ----------- CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED -- 3.96% AllianceBernstein Income Fund 175,489 1,384,608 Federated Enhanced Treasury Income Fund 45,244 703,544 Other Corporate Debt Funds Investment Grade-Rated (b) 346,565 ----------- 2,434,717 ----------- GENERAL BOND - 0.03% Total General Bond (b) 19,228 ----------- GLOBAL - 4.34% Alpine Total Dynamic Dividend Fund 428,312 2,599,854 Other Global (b) 67,672 ---------- 2,667,526 ----------- GLOBAL INCOME - 0.93% Nuveen Multi-Currency Short-Term Government Income Fund 38,267 568,648 ----------- HIGH CURRENT YIELD (LEVERAGED) - 0.10% Total High Current Yield (Leveraged) (b) 63,737 ----------- OPTION ARBITRAGE/OPTIONS STRATEGIES - 13.58% Eaton Vance Enhanced Equity Income Fund II 51,400 606,006 Eaton Vance Risk-Managed Diversified Equity Income Fund 153,148 1,932,728 Eaton Vance Tax-Managed Buy-Write Opportunities Fund 80,300 1,022,219 Eaton Vance Tax-Managed Diversified Equity Income Fund 233,015 2,544,524 No. of Description Shares Value -------------------------------------------------------------------------------- OPTION ARBITRAGE/OPTIONS STRATEGIES (CONTINUED) Eaton Vance Tax-Managed Global Diversified Equity Income Fund 115,826 $ 1,212,698 Other Option Arbitrage/ Options Strategies (b) 1,023,201 ----------- 8,341,376 ----------- SECTOR EQUITY - 0.61% Total Sector Equity (b) 372,783 ----------- TOTAL CLOSED-END FUNDS 15,263,209 ----------- CONSUMER DISCRETIONARY - 8.02% McDonald's Corporation 11,400 961,248 Target Corporation 8,800 412,808 Yum! Brands, Inc. 9,000 497,160 Other Consumer Discretionary (b) 3,058,018 ----------- 4,929,234 ----------- CONSUMER STAPLES - 7.87% Altria Group, Inc. 20,800 549,328 Coca-Cola Company (The) 13,500 908,415 Procter & Gamble Company (The) 16,297 1,036,000 Wal-Mart Stores, Inc. 10,100 536,714 Other Consumer Staples (b) 1,801,607 ----------- 4,832,064 ----------- ENERGY - 9.33% Chevron Corporation 10,732 1,103,679 ConocoPhillips 14,974 1,125,895 Exxon Mobil Corporation 29,936 2,436,192 Schlumberger Ltd. 6,000 518,400 Other Energy (b) 548,520 ----------- 5,732,686 ----------- FINANCIALS - 10.56% Goldman Sachs Group, Inc. (The) 5,000 665,450 JPMorgan Chase & Co. 30,132 1,233,604 PNC Financial Services Group, Inc. 7,600 453,036 Travelers Companies, Inc. (The) 9,476 553,209 -------------------------------------------------------------------------------- See accompanying notes to financial statements. 2 CORNERSTONE STRATEGIC VALUE FUND, INC. SUMMARY SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED)(CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- FINANCIALS (CONTINUED) Wells Fargo & Company 27,900 $ 782,874 Other Financials (b) 2,800,886 ----------- 6,489,059 ----------- HEALTHCARE - 8.56% Abbott Laboratories 9,200 484,104 Biogen Idec, Inc.* 4,000 427,680 Bristol-Myers Squibb Company 19,000 550,240 Merck & Company, Inc. 15,267 538,772 UnitedHealth Group, Inc. 11,000 567,380 Other Healthcare (b) 2,690,353 ----------- 5,258,529 ----------- INDUSTRIALS - 8.50% 3M Company 4,400 417,340 Caterpillar, Inc. 5,300 564,238 Deere & Company 6,500 535,925 General Electric Company 46,900 884,534 Union Pacific Corporation 4,000 417,600 United TechnologiesCorporation 5,000 442,550 Other Industrials (b) 1,962,333 ----------- 5,224,520 ----------- INFORMATION TECHNOLOGY - 13.61% Apple, Inc.* 5,900 1,980,453 Google, Inc. - Class A* 1,500 759,570 Hewlett-Packard Company 11,400 414,960 Intel Corporation 39,500 875,320 International Business Machines Corporation 8,100 1,389,555 Microsoft Corporation 51,200 1,331,200 Oracle Corporation 25,272 831,701 QUALCOMM, Inc. 10,000 567,900 Other Information Technology (b) 210,112 ----------- 8,360,771 ----------- -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- MATERIALS - 3.16% E.I. Du Pont de Nemours & Company 9,500 $ 513,475 Freeport-McMoRan Copper & Gold, Inc. 10,000 529,000 Praxair, Inc. 6,500 704,535 Other Materials (b) 194,400 ----------- 1,941,410 ----------- REAL ESTATE INVESTMENT TRUST - 0.00% Total Real Estate Investment Trust (b) 1,627 ----------- TELECOMMUNICATION SERVICES - 2.62% AT&T, Inc. 37,039 1,163,395 Verizon Communications, Inc. 12,000 446,760 ----------- 1,610,155 ----------- UTILITIES - 2.13% Total Utilities (b) 1,306,883 ----------- TOTAL EQUITY SECURITIES (cost - $51,541,674) 60,950,147 ----------- SHORT-TERM INVESTMENT - 0.92% MONEY MARKET FUND - 0.92% Fidelity Institutional Money Market Government Portfolio - Class I (cost - $ 563,729) 563,729 563,729 ----------- TOTAL INVESTMENTS - 100.12% (cost - $52,105,403) 61,513,876 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS - (0.12)% (72,357) ----------- NET ASSETS - 100.00% $61,441,519 =========== ---------- (a) Affiliated investment. The Fund holds 0.73% (based on net assets) of The Adams Express Company. A director of the Fund also serves as a director to such company. During the six months ended June 30, 2011, there was a sale of 8,000 shares of this security with a cost of $97,052 and sale proceeds of $89,918. There were no purchases of this security during the six months ended June 30, 2011. (b) Represents issuers 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, 2011. * Non-income producing security. -------------------------------------------------------------------------------- See accompanying notes to financial statements. 3 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF ASSETS AND LIABILITIES - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- ASSETS Investments, at value: Unaffiliated issuers (cost - $51,661,732) $ 61,063,820 Affiliated issuers (cost - $ 443,671) 450,056 ------------ Total investments (cost - $52,105,403) 61,513,876 Receivables: Investment sold 189,194 Dividends 83,469 Prepaid expenses 4,348 ------------ Total Assets 61,790,887 ------------ LIABILITIES Payables: Securities purchased 195,610 Investment management fees 48,661 Directors' fees 26,815 Administration fees 5,113 Other accrued expenses 73,169 ------------ Total Liabilities 349,368 ------------ NET ASSETS (applicable to 8,565,518 shares of common stock outstanding) $ 61,441,519 ============ NET ASSET VALUE PER SHARE ($61,441,519 (division) 8,565,518) $ 7.17 ============ NET ASSETS CONSISTS OF Capital stock, $0.001 par value; 8,565,518 shares issued and outstanding (100,000,000 shares authorized) $ 8,566 Paid-in capital 54,106,102 Accumulated net realized loss on investments (2,081,622) Net unrealized appreciation in value of investments 9,408,473 ------------ Net assets applicable to shares outstanding $ 61,441,519 ============ -------------------------------------------------------------------------------- See accompanying notes to financial statements. 4 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. STATEMENT OF OPERATIONS - FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- INVESTMENT INCOME Income: Dividends from non-affiliated investments $1,112,743 Dividends from affiliated investments 4,840 ---------- Total Investment Income 1,117,583 ---------- Expenses: Investment management fees 315,051 Directors' fees 52,564 Administration fees 31,505 Legal and audit fees 24,635 Printing 20,033 Accounting fees 19,320 Transfer agent fees 11,090 Custodian fees 6,200 Insurance 4,786 Stock exchange listing fees 3,609 Miscellaneous 1,736 ---------- Total Expenses 490,529 ---------- Net Investment Income 627,054 ---------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from unaffiliated investments 2,094,276 Net realized gains from affiliated investments 40,313 Capital gain distributions from affiliated regulated investment companies 968 Net change in unrealized appreciation in value of investments 465,552 ---------- Net realized and unrealized gain on investments 2,601,109 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,228,163 ========== -------------------------------------------------------------------------------- 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, 2011 For the Year Ended (Unaudited) December 31, 2010 ------------- ------------------ INCREASE/(DECREASE) IN NET ASSETS Operations: Net investment income $ 627,054 $ 409,189 Net realized gain from investments 2,135,557 59,555 Net change in unrealized appreciation in value of investments 465,552 5,307,753 ----------- ------------ Net increase in net assets resulting from operations 3,228,163 5,776,497 ----------- ------------ Dividends and distributions to stockholders: Net investment income (627,054) (468,744) Return-of-capital (5,917,049) (11,304,528) ----------- ------------ Total dividends and distributions to stockholders (6,544,103) (11,773,272) ----------- ------------ Common stock transactions: Proceeds from rights offering of 0 and 1,433,827 shares of newly issued common stock, respectively -- 11,812,869 Offering expenses associated with rights offering (45,110) (90,887) Proceeds from 54,105 and 108,178 shares newly issued in reinvestment of dividends and distributions, respectively 536,880 1,093,718 ----------- ------------ Net increase in net assets from capital stock transactions 491,770 12,815,700 ----------- ------------ Total increase/(decrease) in net assets (2,824,170) 6,818,925 ----------- ------------ NET ASSETS Beginning of period 64,265,689 57,446,764 ----------- ------------ End of period $61,441,519 $ 64,265,689 =========== ============ -------------------------------------------------------------------------------- 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, 2011 ------------------------------------------------- (Unaudited) 2010 2009 2008 2007 2006 ------------- ---- ---- ---- ---- ---- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period $ 7.55 $ 8.24 $ 8.71 $ 18.12 $ 21.28 $ 22.60 ------- ------- ------- ------- -------- -------- Net investment income# 0.07 0.06 0.06 0.15 0.16 0.20 Net realized and unrealized gain/(loss) on investments 0.31 0.76 1.52 (5.55) 0.96 2.64 ------- ------- ------- ------- -------- -------- Net increase/(decrease) in net assets resulting from operations 0.38 0.82 1.58 (5.40) 1.12 2.84 ------- ------- ------- ------- -------- -------- Dividends and distributions to stockholders: Net investment income (0.07) (0.07) (0.06) (0.15) (0.16) (0.16) Net realized capital gains -- -- -- -- (1.32) -- Return-of-capital (0.70) (1.61) (2.03) (4.01) (3.00) (4.00) ------- ------- ------- ------- -------- -------- Total dividends and distributions to stockholders (0.77) (1.68) (2.09) (4.16) (4.48) (4.16) Common stock transactions: Anti-dilutive effect due to shares issued: Rights offering -- 0.13 -- -- -- -- Reinvestment of dividends and distributions 0.01 0.04 0.04 0.15 0.20 -- ------- ------- ------- ------- -------- -------- Total common stock transactions 0.01 0.17 0.04 0.15 0.20 -- ------- ------- ------- ------- -------- -------- Net asset value, end of period $ 7.17 $ 7.55 $ 8.24 $ 8.71 $ 18.12 $ 21.28 ======= ======= ======= ======= ======== ======== Market value, end of period $ 10.36 $ 8.84 $ 11.61 $ 7.62 $ 20.20 $ 33.80 ======= ======= ======= ======= ======== ======== Total investment return(a) 26.55%(b) (10.19)% 89.55% (49.92)% (29.04)% 45.36% ======= ======= ======= ======= ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $61,442 $64,266 $57,447 $59,510 $120,268 $136,344 Ratio of expenses to average net assets, net of fee waivers, if any (c)(d) 1.56%(e) 1.73% 1.80% 1.40% 1.23% 1.22% Ratio of expenses to average net assets, excluding fee waivers, if any (d)(f) 1.56%(e) 1.74% 2.01% 1.54% 1.35% 1.32% Ratio of expenses to average net assets, net of fee waivers, if any (d)(f) 1.56%(e) 1.74% 1.95% 1.44% 1.25% 1.25% Ratio of net investment income to average net assets 1.99%(e) 0.77% 0.79% 1.08% 0.86% 0.85% Portfolio turnover rate 12.53%(b) 25.28% 10.81% 13.24% 10.38% 10.59% ------------- * Effective December 23, 2008, a reverse stock split of 1:4 occurred. All per share amounts have been restated according to the terms of the split. # 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) Not annualized. (c) Expenses are net of fees paid indirectly. (d) Expenses do not include expenses of investment companies in which the Fund nvests. (e) Annualized. (f) Expenses exclude the reduction for fees paid indirectly. -------------------------------------------------------------------------------- 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 conformity 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. SUBSEQUENT EVENTS: The Fund has evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date its financial statements were issued. Based on this evaluation, no additional disclosures or adjustments were required to such financial statements. 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 Manager" 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, 2011, 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 NYSE Amex LLC is closed. The Fund is exposed to financial market risks, including the valuations of its investment portfolio. For the six months ended June 30, 2011, the Fund did not engage in derivative instruments and other hedging activities. 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. -------------------------------------------------------------------------------- 8 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) -------------------------------------------------------------------------------- RISKS ASSOCIATED WITH INVESTMENTS IN OTHER CLOSED-END FUNDS: Closed-end investment companies are subject to the risks of investing in the underlying securities. The Fund, as a holder of the securities of the closed-end investment company, will bear its pro rata portion of the closed-end investment company's expenses, including advisory fees. These expenses are in addition to the direct expenses of the Fund's own operations. 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 stockholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes. The Accounting for Uncertainty in Income Taxes Topic of the FASB Accounting Standards Codification defines the threshold for recognizing the benefits of tax-return positions in the financial statements as "more-likely-than-not" to be sustained by the taxing authority and requires measurement of a tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50 percent likely to be realized. The Fund's policy is to classify interest and penalties associated with underpayment of federal and state income taxes, if any, as income tax expense on its Statement of Operations. As of June 30, 2011, the Fund does not have any interest or penalties associated with the underpayment of any income taxes. Management reviewed any uncertain tax positions for open tax years 2007 through 2010, and for the period ended June 30, 2011. There was no material impact to the financial statements. DISTRIBUTIONS TO STOCKHOLDERS: Effective June 25, 2002, the Fund initiated a fixed, monthly distribution to stockholders. 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 stockholders and to disclose that portion of the distribution that is classified as ordinary income. Although it has no current intention to do so, the Board may terminate this distribution policy at any time and such termination may have an adverse effect on the market price for the Fund's common shares. The Fund determines annually whether to distribute any net realized long-term capital gains in excess of net realized short-term capital losses, including capital loss carryovers, if any. To the extent that the Fund's taxable income in any calendar year exceeds the aggregate amount distributed pursuant to this distribution policy, an additional distribution may be made to avoid the payment of a 4% U.S. federal excise tax, and to the extent that the aggregate amount distributed in any calendar year exceeds the Fund's taxable income, the amount of that excess may constitute a return-of-capital for tax purposes. A return- of-capital distribution reduces the cost basis of an investor's shares in the Fund. Dividends and distributions to stockholders are recorded by the Fund on the ex-dividend date. MANAGED DISTRIBUTION RISK: Under the managed distribution policy, the Fund makes monthly distributions to stockholders at a rate that may include periodic distributions of its net income and net capital gains, ("Net Earnings"), or from return-of-capital. If, for any fiscal year where total cash distributions exceeded Net Earnings (the "Excess"), the Excess would decrease the Fund's total assets and, as a result, would have the likely effect of increasing the Fund's expense ratio. There is a risk that the total Net Earnings from the Fund's portfolio would not be great enough to offset the amount of cash -------------------------------------------------------------------------------- 9 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) -------------------------------------------------------------------------------- distributions paid to Fund stockholders. If this were to be the case, the Fund's assets would be depleted, and there is no guarantee that the Fund would be able to replace the assets. In addition, in order to make such distributions, the Fund may have to sell a portion of its investment portfolio at a time when independent investment judgment might not dictate such action. Furthermore, such assets used to make distributions will not be available for investment pursuant to the Fund's investment objective. NOTE C. FAIR VALUE As required by the Fair Value Measurement and Disclosures Topic of the FASB Accounting Standards Codification, the Fund has performed an analysis of all assets and liabilities measured at fair value to determine the significance and character of all inputs to their fair value determination. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories. o Level 1 - quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement. o Level 2 - quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers. o Level 3 - model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund's own assumptions that market participants would use to price the asset or liability based on the best available information. The following is a summary of the inputs used as of June 30, 2011 in valuing the Fund's investments carried at value: INVESTMENTS IN OTHER FINANCIAL VALUATION INPUTS SECURITIES INSTRUMENTS* -------------------------------------------------------------------------------- Level 1 - Quoted Prices Equity Investments $ 60,950,147 -- Short-Term Investments 563,729 Level 2 - Other Significant Observable Inputs -- -- Level 3 - Significant Unobservable Inputs -- -- ------------ ----------- Total $ 61,513,876 -- ============ =========== ------------ * Other financial instruments include futures, forwards and swap contracts. The breakdown of the Fund's investments into major categories is disclosed in its Summary Schedule of Investments. During the six months ended June 30, 2011 the Fund did not have any significant transfers in and out of Level 1 or Level 2. 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, 2011. The disclosures for the Fund's fiscal year beginning January 1, 2011 relate to presenting separately any Level 3 purchases, sales, issuances and settlements on a gross basis instead of one net amount. Management continues to evaluate the impact of ASU No. 2010-6 for the required disclosures. In May 2011, FASB issued ASU No. 2011-04 "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs". ASU No. 2011-04 establishes common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles ("GAAP") and International Financial Reporting Standards ("IFRSs"). ASU No. -------------------------------------------------------------------------------- 10 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONTINUED) -------------------------------------------------------------------------------- 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and is applied prospectively. Management is currently evaluating the impact ASU No. 2011-04 may have on financial statement disclosures. NOTE D. AGREEMENTS Certain officers of the Fund are also officers of Cornerstone or Ultimus Fund Solutions, LLC ("Ultimus"). Such officers are paid no fees by the Fund for serving as officers of the Fund. INVESTMENT MANAGEMENT AGREEMENT Cornerstone serves as the Fund's Investment Manager with respect to all investments. As compensation for its investment management services, Cornerstone receives from the Fund, an annual fee, calculated weekly and paid monthly, equal to 1.00% of the Fund's average weekly net assets. For the six months ended June 30, 2011, Cornerstone earned $315,051 for investment management services. ADMINISTRATION AGREEMENT Under the terms of the Administration Agreement, Ultimus supplies executive, administrative and regulatory services for the Fund. Ultimus supervises the preparation of reports to stockholders for the Fund, reports to and filings with the Securities and Exchange Commission and materials for meetings of the Board of Directors. For these services, the Fund pays Ultimus a monthly fee at an annual rate of 0.100% of its average daily net assets up to $250 million and 0.075% of such assets in excess of $250 million, subject to an annual minimum fee of $50,000. FUND ACCOUNTING AGREEMENT Under the terms of the Fund Accounting Agreement, Ultimus calculates the net asset value per share and maintains the financial books and records of the Fund. For the performance of these services, the Fund pays Ultimus a base fee of $2,500 per month plus an asset based fee of 0.010% of the first $500 million of average daily net assets and 0.005% of such assets in excess of $500 million. NOTE E. AFFILIATED INVESTMENTS Transactions in affiliates for the six months ended June 30, 2011 were as follows: ADAMS PETROLEUM & EXPRESS RESOURCES COMPANY CORPORATION -------- ----------- Market value at beginning of period $518,848 $205,276 ======== ======== Shares at beginning of period 48,400 7,600 Shares purchased during the period -- -- Shares sold during the period (8,000) (7,600) -------- -------- Shares at end of period 40,400 -- ======== ======== Dividend income earned during the period $ 4,840 $ -- ======== ======== Cost of purchases during the period -- -- Proceeds from sales during the period $ 89,918 $216,035 Net realized gain/(loss) during the period $ (7,134) $ 47,447 Capital gain distribution $ 968 -- Market value at end of period $450,056 -- NOTE F. INVESTMENT IN SECURITIES For the six months ended June 30, 2011, purchases and sales of securities, other than short-term investments, were $7,879,157 and $10,361,891, respectively. NOTE G. SHARES OF COMMON STOCK The Fund has 100,000,000 shares of common stock authorized and 8,565,518 shares outstanding at June 30, 2011. Transactions in common stock for the six months ended June 30, 2011 were as follows: -------------------------------------------------------------------------------- 11 -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(CONCLUDED) -------------------------------------------------------------------------------- Shares at beginning of period 8,511,413 Shares newly issued in reinvestment of dividends and distributions 54,105 --------- Shares at end of period 8,565,518 ========= NOTE H. SHARE REPURCHASE PROGRAM As has been done in the past to enhance stockholder 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, 2011. 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 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. The tax character of dividends and distributions paid to stockholders during the year ended December 31, 2010 for the Fund was ordinary income $468,744 and return-of-capital $11,304,528. Accounting principles generally accepted in the United States of America require that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. 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"). The Fund incurred no such loss. At December 31, 2010, the Fund had a capital loss carryforward for U.S. federal income tax purposes of $4,217,018 of which $484,687 expires in 2011, $3,297,622 expires in 2016, and $434,709 expires in 2017. Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Under the law in effect prior to the Act, pre-enactment net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At June 30, 2011, 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 $52,105,564, $11,586,693, $(2,178,381) and $9,408,312, respectively. -------------------------------------------------------------------------------- 12 RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED) On April 19, 2011, the Annual Meeting of Stockholders of Cornerstone Strategic Value Fund, Inc. was held and the following matter was voted upon based on 8,521,342 shares of common stock outstanding on February 16, 2011: (1) To approve the re-election of two Class I directors until the 2014 Annual eeting. Name of Class I Directors For Withheld Ralph W. Bradshaw 6,899,706 301,022 Edwin Meese III 6,847,943 352,785 -------------------------------------------------------------------------------- 13 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 continuation 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 continuation of the Agreement occurred at an in person meeting of the Board held on February 11, 2011. 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 materials and information and discussions with management of the Investment Manager, the Board determined that the approval of the continuation of the Agreement was consistent with the best interests of the Fund and its stockholders, 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 stockholders. 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 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 regarding 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 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. The Board was advised by independent legal counsel with respect to its deliberations and its duties when considering the Agreement's continuance. 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 closed-end funds in the Fund's peer group, 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 stockholders, 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 stockholders. Accordingly, in light of the above considerations and such other factors and information it considered relevant, the Board by a unanimous vote (including a separate vote of all the Independent Directors present in person at the meeting) approved the continuance of the Agreement with respect to the Fund. -------------------------------------------------------------------------------- 14 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, LLC (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. Stockholders automatically participate in the Fund's Plan, unless and until an election is made to withdraw from the Plan on behalf of such participating stockholder. Stockholders who do not wish to have Distributions automatically reinvested should so notify the Agent at P.O. Box 922, Wall Street Station, New York, New York 10269-0560. Under the Plan, the Fund's Distributions to stockholders are reinvested in full and fractional shares as described below. When the Fund declares a Distribution the Agent, on the stockholder's behalf, will (i) receive additional authorized shares from the Fund either newly issued or repurchased from stockholders by the Fund and held as treasury stock ("Newly Issued Shares") or (ii) purchase outstanding shares on the open market, on the NYSE Amex LLC or elsewhere, with cash allocated to it by the Fund ("Open Market Purchases"). The method for determining the number of Newly Issued Shares received when Distributions are reinvested will be determined by dividing the amount of the Distribution either by the Fund's last reported net asset value per share or by a price equal to the average closing price of the Fund over the five trading days preceding the payment date of the Distribution, whichever is lower. However, if the last reported net asset value of the Fund's shares is higher than its market price (i.e., the Fund is selling at a discount), shares may be acquired by the Agent in Open Market Purchases and allocated to the reinvesting stockholders based on the average cost of such Open Market Purchases. Whenever the Fund declares a Distribution and the last reported net asset value of the Fund's shares is higher than its market price, the Agent will apply the amount of such Distribution payable to Plan participants of the Fund in Fund shares (less such Plan participant's pro rata share of brokerage commissions incurred with respect to Open Market Purchases in connection with the reinvestment of such Distribution) to the purchase on the open market of Fund shares for such Plan participant's account. Such purchases will be made on or after the payable date for such Distribution, and in no event more than 30 days after such date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities laws. The Agent may aggregate a Plan participant's purchases with the purchases of other Plan participants, and the average price (including brokerage commissions) of all shares purchased by the Agent shall be the price per share allocable to each Plan participant. Registered stockholders who do not wish to have their Distributions automatically reinvested should so notify the Fund in writing. If a stockholder has not elected to receive cash Distributions and the Agent does not receive notice of an election to receive cash Distributions prior to the record date of any Distribution, the stockholder will automatically receive such Distributions in additional shares. Participants in the Plan may withdraw from the Plan by providing written notice to the Agent at least 30 days prior to the applicable Distribution payment date. When a Participant withdraws from the Plan, or upon suspension or termination of the Plan at the sole discretion of the Fund's Board of Directors, certificates for whole shares credited to his or her account under the Plan will, upon request, be issued. Whether or not a participant requests that certificates for whole shares be issued, a cash payment will be made for any fraction of a share credited to such account. The Agent will maintain all stockholder accounts in the Plan and furnish written confirmations of all -------------------------------------------------------------------------------- 15 DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED) transactions in the accounts, including information needed by stockholders 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 stockholder'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 stockholders. In the case of stockholders, 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 stockholder as representing the total amount of shares registered in the stockholder'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 888-556-0422. -------------------------------------------------------------------------------- 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 (513) 326-3597 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 (513) 326-3597. 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 is 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. -------------------------------------------------------------------------------- 17 PRIVACY POLICY (UNAUDITED) -------------------------------------------------------------------------------- FACTS WHAT DOES CORNERSTONE STRATEGIC VALUE FUND, INC. (THE "FUND") DO WITH YOUR PERSONAL INFORMATION? -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- What? The types of personal information we, and our service providers, on our behalf, collect and share depend on the product or service you have with us. This information can include: o Social Security number o account balances o account transactions o transaction history o wire transfer instructions o checking account information When you are NO LONGER our customer, we continue to share your information as described in this notice. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- How? All financial companies need to share customers' personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers ' personal information; the reasons the Fund, and our service providers, on our behalf, choose to share; and whether you can limit this sharing. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 18 PRIVACY POLICY (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- Reasons we can share your Does the Cornerstone Can you limit personal information Fund share? this sharing? -------------------------------------------------------------------------------- FOR OUR EVERYDAY BUSINESS PURPOSES - Yes No such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus -------------------------------------------------------------------------------- FOR OUR MARKETING PURPOSES - to No We don't share offer our products and services to you -------------------------------------------------------------------------------- FOR JOINT MARKETING WITH OTHER No We don't share FINANCIAL COMPANIES -------------------------------------------------------------------------------- FOR OUR AFFILIATES' EVERYDAY BUSINESS Yes No PURPOSES - information about your transactions and experiences -------------------------------------------------------------------------------- FOR OUR AFFILIATES' EVERYDAY BUSINESS No We don't share PURPOSES - information about your creditworthiness -------------------------------------------------------------------------------- FOR OUR AFFILIATES TO MARKET TO YOU No We don't share -------------------------------------------------------------------------------- FOR NONAFFILIATES TO MARKET TO YOU No We don't share -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- QUESTIONS? Call (513) 326-3597. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- WHAT WE DO -------------------------------------------------------------------------------- WHO IS PROVIDING THIS NOTICE? Cornerstone Strategic Value Fund, Inc. (the "Fund") -------------------------------------------------------------------------------- HOW DOES THE FUND AND THE FUND'S To protect your personal information from SERVICE PROVIDERS, ON THE FUND'S unauthorized access and use, we and BEHALF PROTECT MY PERSONAL our service providers use security measures INFORMATION? that comply with federal law. These measures include computer safeguards and secured files and buildings. -------------------------------------------------------------------------------- HOW DOES THE FUND AND THE FUND'S We collect your personal information, for SERVICE PROVIDERS, ON THE FUND'S example, when you: BEHALF COLLECT MY PERSONAL INFORMATION? o open an account o provide account information o give us your contact information o make a wire transfer We also collect your information from others, such as credit bureaus, affiliates, or other companies. -------------------------------------------------------------------------------- 19 PRIVACY POLICY (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- WHY CAN'T I LIMIT ALL SHARING? Federal law gives you the right to limit only o sharing for affiliates' everyday business purposes - information about your creditworthiness o affiliates from using your information to market to you o sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. -------------------------------------------------------------------------------- DEFINITIONS -------------------------------------------------------------------------------- AFFILIATES Companies related by common ownership or control. They can be financial and nonfinancial companies. o CORNERSTONE ADVISORS, INC. -------------------------------------------------------------------------------- NONAFFILIATES Companies not related by common ownership or control. They can be financial and nonfinancial companies. o THE FUND DOES NOT SHARE WITH NONAFFILIATES, SO THEY CAN MARKET TO YOU. -------------------------------------------------------------------------------- JOINT MARKETING A formal agreement between nonaffiliated financial companies that together market financial products or services to you. o THE FUND DOES NOT JOINTLY MARKET. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 20 SUMMARY OF GENERAL INFORMATION (UNAUDITED) Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment company whose shares trade on the NYSE Amex 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. STOCKHOLDER INFORMATION (UNAUDITED) The Fund is listed on the NYSE Amex LLC (symbol "CLM"). The previous week's net asset value per share, market price, and related premium or discount are available on THE WALL STREET JOURNAL website at http://online.wsj.com/mdc/public/page/2_3040-CEF33.html under the designation "Cornerstone Strat Value (CLM)" and on the BARRON'S website at http://online.barrons.com/mdc/public/page/2_3040-CEF33.html under the same designation. 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 stockholders of the Fund for their information. The financial information included herein is taken from the Fund without examination by the 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. -------------------------------------------------------------------------------- 21 This page intentionally left blank. This page intentionally left blank. Cornerstone Strategic Value Fund, Inc. ITEM 2. CODE OF ETHICS. Not required ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not required ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Not required ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not required ITEM 6. INVESTMENTS. (a) -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- EQUITY SECURITIES - 99.20% CLOSED-END FUNDS - 24.84% CORE - 1.29% Adams Express Company (The)(a) 40,400 $ 450,056 General American Investors Company, Inc. 12,300 345,138 ----------- 795,194 ----------- CORPORATE DEBT FUNDS INVESTMENT GRADE-RATED - 3.96% AllianceBernstein Income Fund 175,489 1,384,608 Federated Enhanced Treasury Income Fund 45,244 703,544 Invesco Van Kampen Bond Fund 17,300 329,565 MFS Government Markets Income Trust 2,500 17,000 ----------- 2,434,717 ----------- GENERAL BOND - 0.03% MFS InterMarket Income Trust I 2,300 19,228 ----------- GLOBAL - 4.34% Alpine Total Dynamic Dividend Fund 428,312 2,599,854 Clough Global Allocation Fund 4,400 67,672 ----------- 2,667,526 ----------- GLOBAL INCOME - 0.93% Nuveen Multi-Currency Short-Term Government Income Fund 38,267 568,648 ----------- HIGH CURRENT YIELD (LEVERAGED) - 0.10% First Trust Strategic High Income Fund III 14,101 63,737 ----------- OPTION ARBITRAGE/OPTIONS STRATEGIES - 13.58% Eaton Vance Enhanced Equity Income Fund II 51,400 606,006 Eaton Vance Risk-Managed Diversified Equity Income Fund 153,148 1,932,728 Eaton Vance Tax-Managed Buy-Write Income Fund 10,563 145,453 Eaton Vance Tax-Managed Buy-Write Opportunities Fund 80,300 1,022,219 Eaton Vance Tax-Managed Diversified Equity Income Fund 233,015 2,544,524 Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund 29,492 357,738 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- CLOSED-END FUNDS (CONTINUED) OPTION ARBITRAGE/OPTIONS STRATEGIES (CONTINUED) Eaton Vance Tax-Managed Global Diversified Equity Income Fund 115,826 $ 1,212,698 Nuveen Equity Premium Advantage Fund 10,442 131,047 Nuveen Equity Premium and Growth Fund 6,100 80,947 Nuveen Equity Premium Opportunity Fund 24,800 308,016 ----------- 8,341,376 ----------- SECTOR EQUITY - 0.61% Evergreen Utilities and High Income Fund 26,910 316,192 Gabelli Healthcare & WellnessRx Trust (The) * 7,321 56,591 ----------- 372,783 ----------- TOTAL CLOSED-END FUNDS 15,263,209 ----------- CONSUMER DISCRETIONARY - 8.02% Best Buy Company, Inc. 6,500 204,165 Comcast Corporation - Class A 14,555 368,824 DIRECTV Group, Inc. (The) - Class A * 4,000 203,280 Family Dollar Stores, Inc. 2,000 105,120 Ford Motor Company * 12,000 165,480 Gap, Inc. (The) 9,200 166,520 Home Depot, Inc. (The) 2,000 72,440 McDonald's Corporation 11,400 961,248 News Corporation - Class A 10,000 177,000 Starbucks Corporation 2,800 110,572 Target Corporation 8,800 412,808 Time Warner Cable, Inc. 1,966 153,426 Time Warner, Inc. 7,900 287,323 TJX Companies, Inc. (The) 7,000 367,710 Viacom, Inc. - Class B 5,450 277,950 Walt Disney Company (The) 10,200 398,208 Yum! Brands, Inc. 9,000 497,160 ----------- 4,929,234 ----------- CONSUMER STAPLES - 7.87% Altria Group, Inc. 20,800 549,328 Coca-Cola Company (The) 13,500 908,415 Costco Wholesale Corporation 2,500 203,100 CVS Caremark Corporation 8,430 316,800 General Mills, Inc. 5,000 186,100 H.J. Heinz Company 4,000 213,120 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- CONSUMER STAPLES (CONTINUED) PepsiCo, Inc. 5,600 $ 394,408 Philip Morris International, Inc. 2,500 166,925 Procter & Gamble Company (The) 16,297 1,036,000 Sysco Corporation 10,300 321,154 Wal-Mart Stores, Inc. 10,100 536,714 ----------- 4,832,064 ----------- ENERGY - 9.33% Chevron Corporation 10,732 1,103,679 ConocoPhillips 14,974 1,125,895 Exxon Mobil Corporation 29,936 2,436,192 Marathon Oil Corporation 3,500 184,380 Occidental Petroleum Corporation 3,500 364,140 Schlumberger Ltd. 6,000 518,400 ----------- 5,732,686 ----------- FINANCIALS - 10.56% AFLAC, Inc. 5,500 256,740 American Express Company 6,400 330,880 Bank of New York Mellon Corporation (The) 7,754 198,657 Capital One Financial Corporation 2,500 129,175 Chubb Corporation (The) 3,500 219,135 Franklin Resources, Inc. 1,500 196,935 Goldman Sachs Group, Inc. (The) 5,000 665,450 JPMorgan Chase & Co. 30,132 1,233,604 Loews Corporation 2,000 84,180 Marsh & McLennan Companies, Inc. 10,000 311,900 MetLife, Inc. 5,700 250,059 PNC Financial Services Group, Inc. 7,600 453,036 Prudential Financial, Inc. 4,000 254,360 State Street Corporation 3,000 135,270 T. Rowe Price Group, Inc. 3,000 181,020 Travelers Companies, Inc. (The) 9,476 553,209 U.S. Bancorp 9,901 252,575 Wells Fargo & Company 27,900 782,874 ----------- 6,489,059 ----------- HEALTH CARE - 8.56% Abbott Laboratories 9,200 484,104 Aetna, Inc. 5,000 220,450 Amgen, Inc. * 6,700 390,945 Becton, Dickinson and Company 3,900 336,063 Biogen Idec, Inc. * 4,000 427,680 See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- HEALTH CARE (CONTINUED) Bristol-Myers Squibb Company 19,000 $ 550,240 Cardinal Health, Inc. 7,950 361,089 Covidien Plc 2,599 138,345 Eli Lilly & Company 4,700 176,391 Express Scripts, Inc. * 3,000 161,940 Gilead Sciences, Inc. * 6,000 248,460 McKesson Corporation 1,800 150,570 Medtronic, Inc. 6,000 231,180 Merck & Company, Inc. 15,267 538,772 Stryker Corporation 2,000 117,380 UnitedHealth Group, Inc. 11,000 567,380 WellPoint, Inc. 2,000 157,540 ----------- 5,258,529 ----------- INDUSTRIALS - 8.50% 3M Company 4,400 417,340 Caterpillar, Inc. 5,300 564,238 CSX Corporation 10,500 275,310 Deere & Company 6,500 535,925 Emerson Electric Company 6,000 337,500 General Dynamics Corporation 3,200 238,464 General Electric Company 46,900 884,534 Illinois Tool Works, Inc. 2,500 141,225 Lockheed Martin Corporation 3,000 242,910 Raytheon Company 3,500 174,475 Union Pacific Corporation 4,000 417,600 United Parcel Service, Inc. - Class B 4,100 299,013 United Technologies Corporation 5,000 442,550 Waste Management, Inc. 6,800 253,436 ----------- 5,224,520 ----------- INFORMATION TECHNOLOGY - 13.61% Apple, Inc. * 5,900 1,980,453 Google, Inc. - Class A * 1,500 759,570 Hewlett-Packard Company 11,400 414,960 Intel Corporation 39,500 875,320 International Business Machines Corporation 8,100 1,389,555 Microsoft Corporation 51,200 1,331,200 Oracle Corporation 25,272 831,701 QUALCOMM, Inc. 10,000 567,900 Texas Instruments, Inc. 6,400 210,112 ----------- 8,360,771 ----------- See accompanying notes to financial statements. -------------------------------------------------------------------------------- CORNERSTONE STRATEGIC VALUE FUND, INC. SCHEDULE OF INVESTMENTS - JUNE 30, 2011 (UNAUDITED) (CONCLUDED) -------------------------------------------------------------------------------- No. of Description Shares Value -------------------------------------------------------------------------------- MATERIALS - 3.16% Dow Chemical Company (The) 5,400 $ 194,400 E.I. Du Pont de Nemours & Company 9,500 513,475 Freeport-McMoRan Copper & Gold, Inc. 10,000 529,000 Praxair, Inc. 6,500 704,535 ----------- 1,941,410 ----------- REAL ESTATE INVESTMENT TRUST - 0.00% Simon Property Group, Inc. 14 1,627 ----------- TELECOMMUNICATION SERVICES - 2.62% AT&T, Inc. 37,039 1,163,395 Verizon Communications, Inc. 12,000 446,760 ----------- 1,610,155 ----------- UTILITIES - 2.13% Dominion Resources, Inc. 7,700 371,679 Duke Energy Corporation 15,800 297,514 Exelon Corporation 3,000 128,520 FirstEnergy Corporation 3,000 132,450 NextEra Energy, Inc. 4,000 229,840 Public Service Enterprises Group, Inc. 4,500 146,880 ----------- 1,306,883 ----------- TOTAL EQUITY SECURITIES (cost - $51,541,674) 60,950,147 ----------- SHORT-TERM INVESTMENT - 0.92% MONEY MARKET FUND - 0.92% Fidelity Institutional Money Market Government Portfolio - Class I (cost - $563,729) 563,729 563,729 ----------- TOTAL INVESTMENTS - 100.12% (cost - $52,105,403) 61,513,876 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS - (0.12)% (72,357) ----------- NET ASSETS - 100.00% $61,441,519 =========== -------- (a) Affiliated investment. The Fund holds 0.73% (based on net assets) of The Adams Express Company. A director of the Fund also serves as a director to such company. During the six months ended June 30, 2011, there was a sale of 8,000 shares of this security with a cost of $97,052 and sale proceeds of $89,918. There were no purchases of this security during the six months ended June 30, 2011. * Non-income producing security. See accompanying notes to financial statements. (b) Not applicable ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not required ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a) Not required (b) There has not been a change in any of the Portfolio Managers identified in response to this Item in the registrant's most recent annual report on Form N-CSR. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. None ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors that have been implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) Based on their evaluation of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the registrant's principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported on a timely basis. (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) 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 required (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)): Attached hereto (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons: Not applicable (b) Certifications required by Rule 30a-2(b) under the Act (17 CFR 270.30a-2(b)): Attached hereto Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act 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. (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 2, 2011 ------------------- 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 2, 2011 ------------------- By (Signature and Title)* /s/ Frank J. Maresca ----------------------------------------- Frank J. Maresca, Treasurer (Principal Financial Officer) Date September 2, 2011 ------------------- * Print the name and title of each signing officer under his or her signature.