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)

 

48 Wall Street, 22nd Floor, New York, New York 10005
(Address of principal executive offices) (Zip code)

 

Frank J. Maresca

 

AST Fund Solutions, LLC, 48 Wall Street, 22nd Floor, New York, New York 10005
(Name and address of agent for service)

 

Registrant's telephone number, including area code: (866) 668-6558

 

Date of fiscal year end: December 31, 2017

 

Date of reporting period: December 31, 2017

 

 

 

ITEM 1. REPORTS TO STOCKHOLDERS.

 

 

Cornerstone Strategic

Value Fund, Inc.

 

Annual Report

December 31, 2017

 

 

 

 

CONTENTS
 
Portfolio Summary
1
Schedule of Investments
2
Statement of Assets and Liabilities
8
Statement of Operations
9
Statements of Changes in Net Assets
10
Financial Highlights
11
Notes to Financial Statements
12
Report of Independent Registered Public Accounting Firm
17
2017 Tax Information
18
Additional Information Regarding the Fund’s Directors and Corporate Officers
19
Description of Dividend Reinvestment Plan
21
Proxy Voting and Portfolio Holdings Information
23
Summary of General Information
23
Stockholder Information
23
 

 

 

Cornerstone Strategic Value Fund, Inc.
Portfolio Summary – as of December 31, 2017 (unaudited)
 
SECTOR ALLOCATION
 
Sector
Percent of
Net Assets
Closed-End Funds
24.1
Information Technology
19.4
Health Care
11.4
Financials
11.2
Consumer Discretionary
9.8
Industrials
8.2
Consumer Staples
5.8
Energy
2.6
Exchange-Traded Funds
1.8
Materials
1.7
Utilities
1.3
Telecommunication Services
0.7
Real Estate
0.6
Other
1.4
 
TOP TEN HOLDINGS, BY ISSUER*
 
 
Holding
Sector
Percent of
Net Assets
1.
Alphabet Inc. - Class C
Information Technology
3.0
2.
Apple Inc.
Information Technology
2.7
3.
Microsoft Corporation
Information Technology
2.7
4.
Facebook, Inc. - Class A
Information Technology
2.5
5.
Amazon.com, Inc.
Consumer Discretionary
2.5
6.
JPMorgan Chase & Co.
Financials
2.3
7.
Johnson & Johnson
Health Care
2.1
8.
General American Investors Company, Inc.
Closed-End Funds
1.8
9.
Home Depot, Inc. (The)
Consumer Discretionary
1.8
10.
Adams Diversified Equity Fund, Inc.
Closed-End Funds
1.6
 
*

Excludes short-term investments.
 
 
 
1

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017
 
Description  No. of
Shares		   Value 
EQUITY SECURITIES — 98.65%
CLOSED-END FUNDS — 24.10%
 
CORE — 6.18%
Adams Diversified Equity Fund, Inc.   654,545   $9,837,811 
Advent/Claymore Enhanced Growth & Income Fund   66,688    556,178 
Gabelli Equity Trust, Inc.   12,106    74,936 
General American Investors Company, Inc.   318,510    10,956,744 
Royce Micro-Cap Trust, Inc.   437,755    4,134,596 
Royce Value Trust   134,114    2,168,623 
Source Capital, Inc.   38,753    1,579,572 
Sprott Focus Trust, Inc.   97,528    772,422 
Tri-Continental Corporation   251,161    6,766,277 
         36,847,159 
CORPORATE DEBT BBB LEVERAGED — 0.11%
Western Asset/Claymore Inflation-Linked Opportunities & Income Fund   38,254    436,861 
Western Asset/Claymore Inflation-Linked Securities & Income Fund   20,313    239,490 
         676,351 
DEVELOPED MARKET — 0.76%
Aberdeen Japan Equity Fund, Inc.   16,977    153,472 
Aberdeen Singapore Fund, Inc.   8,690    107,930 
European Equity Fund, Inc. (The)   3,842    38,189 
Japan Smaller Capitalization Fund, Inc.   38,353    452,949 
Morgan Stanley Asia-Pacific Fund, Inc.   110,110    2,026,031 
New Germany Fund, Inc. (The)   31,622   615,048 
New Ireland Fund, Inc. (The)   70,873    888,039 
Swiss Helvetia Fund, Inc. (The)   19,670    250,989 
         4,532,647 
EMERGING MARKETS — 5.22%
Aberdeen Chile Fund, Inc.*   44,906    401,011 
Central Europe, Russia and Turkey Fund, Inc. (The )   26,186    638,677 
First Trust/Aberdeen Emerging Opportunity Fund   21,127    344,793 
India Fund, Inc. (The)   241,287    6,302,416 
Latin American Discovery Fund, Inc. (The)   50,945    586,886 
Mexico Equity & Income Fund Inc.   25,669    263,364 
Mexico Fund, Inc. (The)   224,320    3,533,040 
Morgan Stanley China A Share Fund, Inc.   337,460    7,889,815 
Morgan Stanley Emerging Markets Fund, Inc.   66,946    1,197,664 
Morgan Stanley India Investment Fund, Inc.   28,698    951,339 
Taiwan Fund, Inc. (The) *   18,945    395,382 
Templeton Dragon Fund, Inc.   304,488    6,549,537 
Templeton Emerging Markets Fund   125,790    2,064,214 
         31,118,138 
EMERGING MARKETS HARD CURRENCY DEBT — 0.22%
Templeton Emerging Markets Income Fund   117,950    1,317,502 
 
See accompanying notes to financial statements.
 
 
2
  

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017 (continued)
 
Description  No. of
Shares		   Value 
ENERGY MLP — 0.01%
ClearBridge Energy MLP Total Return Fund Inc.   8,100   $94,122 
           
GLOBAL — 1.40%
Alpine Global Dynamic Dividend Fund   10,617    115,088 
Alpine Total Dynamic Dividend Fund   282,760    2,677,750 
Delaware Enhanced Global Dividend and Income Fund   40,423    490,331 
Gabelli Global Small and Mid Cap Value Trust (The)   97,619    1,243,666 
GDL Fund (The)   149,198    1,451,697 
Lazard Global Total Return and Income Fund, Inc.   24,306    437,508 
Lazard World Dividend & Income Fund, Inc.   19,283    224,261 
Royce Global Value Trust, Inc.   158,158    1,709,688 
         8,349,989 
GLOBAL INCOME — 0.45%
Legg Mason BW Global Income Opportunities Fund Inc.   208,990    2,668,802 
           
INCOME & PREFERRED STOCK — 0.40%
Calamos Strategic Total Return Fund   95,927    1,158,798 
Delaware Investments Dividend & Income Fund, Inc.   10,182    109,660 
LMP Capital and Income Fund Inc.   81,376    1,135,195 
         2,403,653 
NATURAL RESOURCES — 2.83%
Adams Natural Resources Fund, Inc.   369,159   7,324,115 
BlackRock Energy & Resources Trust   105,994    1,502,995 
BlackRock Resources & Commodities Strategy Trust   821,540    8,026,446 
         16,853,556 
OPTION ARBITRAGE/OPTIONS STRATEGIES — 0.24%
AllianzGI NFJ Dividend, Interest & Premium Strategy Fund   92,864    1,211,875 
Madison Covered Call & Equity Strategy Fund   14,092    108,790 
Voya Asia Pacific High Dividend Equity Income Fund   12,270    128,590 
         1,449,255 
PACIFIC EX JAPAN — 0.30%
Aberdeen Greater China Fund, Inc.   40,207    500,577 
Asia Pacific Fund, Inc. (The)   200    2,822 
Korea Fund, Inc. (The)   31,437    1,297,405 
         1,800,804 
REAL ESTATE — 2.79%
Alpine Global Premier Properties Fund   433,268    2,920,226 
CBRE Clarion Global Real Estate Income Fund   905,857    7,174,388 
Cohen & Steers Preferred Securities and Income Fund, Inc.   162,867    3,464,181 
Cohen & Steers Quality Income Realty Fund, Inc.   55,735    705,048 
RMR Real Estate Income Fund   125,575    2,397,225 
         16,661,068 
 
See accompanying notes to financial statements.
 
 
 
3
 

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017 (continued)
 
Description  No. of
Shares		   Value 
SECTOR EQUITY — 1.28%
Gabelli Healthcare & WellnessRx Trust
   233,737   $2,414,503 
GAMCO Global Gold, Natural Resources & Income Trust   20,636    107,514 
GAMCO Natural Resources, Gold & Income Trust   28,827    193,429 
Nuveen Real Asset Income and Growth Fund   184,809    3,289,600 
Tekla Healthcare Investors   30,000    676,500 
Tekla Healthcare Opportunities Fund   9,100    159,432 
Tekla World Healthcare Fund   56,525    769,305 
         7,610,283 
UTILITY — 1.91%
Cohen & Steers Infrastructure Fund, Inc.   232,775    5,586,600 
Duff & Phelps Global Utility Income Fund Inc.   138,251    2,145,656 
Gabelli Global Utility & Income Trust (The)   39,868    849,188 
Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income Fund   1,200    14,916 
Macquarie Global Infrastructure Total Return Fund Inc.   96,587    2,490,013 
Reaves Utility Income Fund   9,500    293,930 
         11,380,303 
TOTAL CLOSED-END FUNDS        143,763,632 
           
CONSUMER DISCRETIONARY — 9.80%
Amazon.com, Inc. *   12,500   14,618,375 
Carnival Corporation   15,000    995,550 
Charter Communications, Inc. *   5,600    1,881,376 
Comcast Corporation - Class A   175,000    7,008,750 
Ford Motor Company   97,000    1,211,530 
General Motors Company   39,000    1,598,610 
Home Depot, Inc. (The)   56,600    10,727,398 
Lowe's Companies, Inc.   30,000    2,788,200 
Marriott International, Inc. - Class A   10,000    1,357,300 
McDonald's Corporation   28,700    4,939,844 
Netflix, Inc. *   16,000    3,071,360 
Newell Brands Inc.   19,000    587,100 
Priceline Group Inc. (The) *   1,500    2,606,610 
Royal Caribbean Cruises Ltd.   6,000    715,680 
Starbucks Corporation   52,000    2,986,360 
TJX Companies, Inc. (The)   18,000    1,376,280 
         58,470,323 
CONSUMER STAPLES — 5.77%
Altria Group, Inc.   55,000    3,927,550 
British American Tobacco p.l.c. - ADR   14,202    951,392 
Clorox Company (The)   7,000    1,041,180 
Constellation Brands, Inc.   7,000    1,599,990 
Costco Wholesale Corporation   15,000    2,791,800 
CVS Health Corporation   31,000    2,247,500 
Estée Lauder Companies Inc. (The) - Class A   12,000    1,526,880 
Kellogg Company   8,700    591,426 
Kraft Heinz Company (The)   16,000    1,244,160 
Kroger Company (The)   25,000    686,250 
 
See accompanying notes to financial statements.
 
 
4
  

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017 (continued)
 
Description  No. of
Shares		   Value 
CONSUMER STAPLES (continued)
Mondelez International, Inc.   45,000   $1,926,000 
Monster Beverage Corporation *   14,000    886,060 
PepsiCo, Inc.   50,000    5,996,000 
Philip Morris International Inc.   10,000    1,056,500 
Procter & Gamble Company (The)   40,055    3,680,253 
Sysco Corporation   17,500    1,062,775 
Tyson Foods, Inc.   8,000    648,560 
Walgreens Boots Alliance, Inc.   35,000    2,541,700 
         34,405,976 
ENERGY — 2.62%
Chevron Corporation   35,000    4,381,650 
Concho Resources Inc. *   2,500    375,550 
ConocoPhillips   23,000    1,262,470 
EOG Resources, Inc.   8,600    928,026 
Exxon Mobil Corporation   84,636    7,078,955 
Occidental Petroleum Corporation   14,400    1,060,704 
Pioneer Natural Resources Company   3,000    518,550 
         15,605,905 
EXCHANGE-TRADED FUNDS — 1.80%
iShares Core S&P 500 ETF   20,000    5,377,000 
SPDR S&P 500 ETF   20,000    5,337,200 
         10,714,200 
FINANCIALS — 11.24%
Allstate Corporation (The)   14,000    1,465,940 
American Express Company   20,000    1,986,200 
Aon plc   9,000    1,206,000 
Bank of America Corporation   263,300    7,772,616 
Bank of New York Mellon Corporation (The)   38,500    2,073,610 
BB&T Corporation   22,000    1,093,840 
Berkshire Hathaway Inc. - Class B *   20,000    3,964,400 
BlackRock, Inc. - Class A   5,000    2,568,550 
Brighthouse Financial, Inc. *   2    117 
Charles Schwab Corporation (The)   24,000    1,232,880 
Citigroup Inc.   77,000    5,729,570 
CME Group Inc.   9,000    1,314,450 
Goldman Sachs Group, Inc. (The)   11,000    2,802,360 
Intercontinental Exchange, Inc.   15,000    1,058,400 
JPMorgan Chase & Co.   131,000    14,009,140 
Loews Corporation   10,000    500,300 
Marsh & McLennan Companies, Inc.   18,000    1,465,020 
MetLife, Inc.   25,500    1,289,280 
Moody's Corporation   6,000    885,660 
Morgan Stanley   54,000    2,833,380 
PNC Financial Services Group, Inc. (The)   18,000    2,597,220 
S&P Global Inc.   9,000    1,524,600 
State Street Corporation   13,000    1,268,930 
U.S. Bancorp   55,000    2,946,900 
Wells Fargo & Company   56,800    3,446,056 
         67,035,419 
HEALTH CARE — 11.38%
Abbott Laboratories   57,000    3,252,990 
AbbVie Inc.   72,000    6,963,120 
Aetna Inc.   13,000    2,345,070 
Allergan plc   4,400    719,752 
Amgen Inc.   26,000    4,521,400 
Baxter International Inc.   17,000    1,098,880 
Becton, Dickinson and Company   6,000    1,284,360 
 
 
See accompanying notes to financial statements.
 
5

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017 (continued)
 
Description  No. of
Shares		   Value 
HEALTH CARE (continued)
Boston Scientific Corporation *   49,000   $1,214,710 
Celgene Corporation *   28,000    2,922,080 
Cigna Corporation   9,000    1,827,810 
Edwards Lifesciences Corporation *   8,000    901,680 
Eli Lilly and Company   18,000    1,520,280 
Express Scripts Holding Company *   22,000    1,642,080 
Gilead Sciences, Inc.   36,000    2,579,040 
HCA Healthcare, Inc. *   8,000    702,720 
Humana Inc.   5,000    1,240,350 
Intuitive Surgical, Inc.   3,000    1,094,820 
Johnson & Johnson   90,700    12,672,604 
McKesson Corporation   6,000    935,700 
Medtronic Plc   28,000    2,261,000 
Mylan N.V. *   13,000    550,030 
Regeneron Pharmaceuticals, Inc. *   3,000    1,127,880 
Thermo Fisher Scientific Inc.   14,000    2,658,320 
UnitedHealth Group Incorporated   42,000    9,259,320 
Vertex Pharmaceuticals Incorporated *   9,000    1,348,740 
Zimmer Biomet Holdings, Inc.   3,000    362,010 
Zoetis Inc.   12,000    864,480 
         67,871,226 
INDUSTRIALS — 8.18%
3M Company   17,000    4,001,290 
Boeing Company (The)   21,000    6,193,110 
CSX Corporation   32,000    1,760,320 
Cummins Inc.   4,000    706,560 
Danaher Corporation   17,000    1,577,940 
Deere & Company   10,000    1,565,100 
Delta Air Lines, Inc   26,000    1,456,000 
Eaton Corporation plc   12,500    987,625 
FedEx Corporation   9,000    2,245,860 
General Dynamics Corporation   8,000    1,627,600 
Honeywell International Inc.   24,000    3,680,640 
Illinois Tool Works Inc.   11,900    1,985,515 
Ingersoll-Rand Plc   7,000    624,330 
Lockheed Martin Corporation   6,000    1,926,300 
Norfolk Southern Corporation   8,000    1,159,200 
Northrop Grumman Corporation   8,000    2,455,280 
Raytheon Company   8,000    1,502,800 
Republic Services, Inc.   7,000    473,270 
Roper Technologies, Inc.   5,000    1,295,000 
Southwest Airlines Co.   21,500    1,407,175 
United Parcel Service, Inc. - Class B   19,000    2,263,850 
United Technologies Corporation   21,000    2,678,970 
Union Pacific Corporation   30,000    4,023,000 
Waste Management, Inc.   14,000    1,208,200 
         48,804,935 
INFORMATION TECHNOLOGY — 19.42%
Adobe Systems Incorporated *   17,000    2,979,080 
Alphabet Inc. - Class C *   17,005    17,794,032 
Analog Devices, Inc.   13,000    1,157,390 
Apple Inc.   95,000    16,076,850 
Applied Materials, Inc.   43,000    2,198,160 
Broadcom Limited   16,000    4,110,400 
Corning Incorporated   31,900    1,020,481 
Electronic Arts Inc. *   12,000    1,260,720 
Facebook, Inc. - Class A *   85,500    15,087,330 
 
 
See accompanying notes to financial statements.
6
  

 

 

Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2017 (concluded)
 
Description  No. of
Shares		   Value 
INFORMATION TECHNOLOGY (continued)
Fidelity National Information Services, Inc.   15,000   $1,411,350 
Fiserv, Inc. *   10,000    1,311,300 
Intel Corporation   198,500    9,162,760 
Intuit Inc.   9,000    1,420,020 
Lam Research Corporation   6,000    1,104,420 
Mastercard Incorporated   34,000    5,146,240 
Microsoft Corporation   186,000    15,910,440 
Oracle Corporation   87,272    4,126,220 
PayPal Holdings, Inc. *   20,000    1,472,400 
Salesforce.com, Inc. *   23,000    2,351,290 
TE Connectivity Ltd.   13,000    1,235,520 
Texas Instruments Incorporated   35,000    3,655,400 
Visa, Inc. - Class A   51,000    5,815,020 
         115,806,823 
MATERIALS — 1.73%
Air Products and Chemicals, Inc.   7,000    1,148,560 
DowDuPont Inc.   61,294    4,365,359 
Ecolab Inc.   8,000    1,073,440 
Monsanto Company   12,000    1,401,360 
Praxair, Inc.   7,000    1,082,760 
Sherwin-Williams Company (The)   3,000    1,230,120 
         10,301,599 
REAL ESTATE — 0.61%
American Tower Corporation   17,000    2,425,390 
Prologis, Inc.   19,000    1,225,690 
         3,651,080 
TELECOMMUNICATION SERVICES — 0.70%
AT&T, Inc.   107,568    4,182,244 
           
UTILITIES — 1.30%
American Electric Power Company, Inc.   14,200    1,044,694 
DTE Energy Company   7,000    766,220 
Edison International   9,800    619,752 
NextEra Energy, Inc.   18,000    2,811,420 
PG&E Corporation   14,000    627,620 
Sempra Energy   9,000    962,280 
Xcel Energy Inc.   19,000    914,090 
         7,746,076 
TOTAL EQUITY SECURITIES
(cost - $526,078,505)        588,359,438 
           
SHORT-TERM INVESTMENT — 2.45%
MONEY MARKET FUND — 2.45%
Fidelity Institutional Money Market Government Portfolio - Class I, 1.15%^ (cost - $14,661,711)   14,661,711    14,661,711 
           
TOTAL INVESTMENTS — 101.10%
(cost - $540,740,216)        603,021,149 
           
LIABILITIES IN EXCESS OF OTHER ASSETS — (1.10)%        (6,582,483)
           
NET ASSETS — 100.00%       $596,438,666 
 

*

Non-income producing security.
 
^
The rate shown is the 7-day effective yield as of December 31, 2017.
 
 
See accompanying notes to financial statements.
 
7

 

 

Cornerstone Strategic Value Fund, Inc.
Statement of Assets and Liabilities – December 31, 2017
 
ASSETS    
Investments, at value (cost – $540,740,216) (Notes B and C)  $603,021,149 
Cash   157,189 
Receivables:     
Investments sold   2,053,975 
Dividends   1,484,193 
Prepaid expenses   2,315 
Total Assets   606,718,821 
      
LIABILITIES     
Payables:     
Investments purchased   9,523,848 
Investment management fees (Note D)   537,010 
Directors’ fees and expenses   46,336 
Administration fees (Note D)   34,428 
Other accrued expenses   138,533 
Total Liabilities   10,280,155 
      
NET ASSETS (applicable to 44,023,775 shares of common stock)  $596,438,666 
      
NET ASSET VALUE PER SHARE ($596,438,666 ÷ 44,023,775)  $13.55 
      
NET ASSETS CONSISTS OF     
Common stock, $0.001 par value; 44,023,775 shares issued and outstanding (100,000,000 shares authorized)  $44,024 
Paid-in capital   534,426,032 
Accumulated net realized loss on investments   (312,323)
Net unrealized appreciation in value of investments   62,280,933 
Net assets applicable to shares outstanding  $596,438,666 
 
 
See accompanying notes to financial statements.
8
  

 

 

Cornerstone Strategic Value Fund, Inc.
Statement of Operations – for the Year Ended December 31, 2017
 
 
INVESTMENT INCOME    
Income:    
Dividends  $10,511,443 
      
Expenses:     
Investment management fees (Note D)   4,526,655 
Administration fees (Note D)   343,311 
Directors’ fees and expenses   184,595 
Printing   77,745 
Accounting fees   75,353 
Custodian fees   73,855 
Legal and audit fees   50,148 
Transfer agent fees   34,799 
Stock exchange listing fees   15,542 
Insurance   12,058 
Miscellaneous   18,536 
Total Expenses   5,412,597 
Net Investment Income   5,098,846 
      
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS     
Net realized gain from investments and foreign currency   39,277,175 
Capital gain distributions from regulated investment companies   4,988,865 
Net change in unrealized appreciation in value of investments   49,678,288 
Net realized and unrealized gain on investments   93,944,328 
      
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  $99,043,174 
 
 
See accompanying notes to financial statements.
 
9

 

 

Cornerstone Strategic Value Fund, Inc.
Statements of Changes in Net Assets
 
 
   For the Year Ended December 31, 
   2017   2016 
         
INCREASE IN NET ASSETS        
Operations:        
Net investment income  $5,098,846   $5,246,295 
Net realized gain from investments and foreign currency   44,266,040    15,455,728 
Net change in unrealized appreciation in value of investments   49,678,288    10,778,334 
           
Net increase in net assets resulting from operations   99,043,174    31,480,357 
           
Dividends and distributions to stockholders (Note B):          
Net investment income   (4,536,690)   (5,036,752)
Net realized gains   (43,647,009)   (16,123,155)
Return-of-capital   (46,231,602)   (56,300,130)
           
Total dividends and distributions to stockholders   (94,415,301)   (77,460,037)
           
Common stock transactions:          
Proceeds from rights offering of 14,454,716 and 6,783,942 shares of newly issued common stock, respectively   200,342,364    95,721,421 
Offering expenses associated with rights offering   (213,640)   (170,894)
Proceeds from 871,810 and 505,893 shares newly issued in reinvestment of dividends and distributions, respectively   11,657,670    6,976,348 
           
Net increase in net assets from common stock transactions   211,786,394    102,526,875 
           
Total increase in net assets   216,414,267    56,547,195 
           
NET ASSETS          
Beginning of year   380,024,399    323,477,204 
End of year  $596,438,666   $380,024,399 
 
 
See accompanying notes to financial statements.
10
  

 

 

Cornerstone Strategic Value Fund, Inc.
Financial Highlights

 

Contained below is per share operating performance data for a share of common stock outstanding, total investment return, ratios to average net assets and other supplemental data for each year indicated. This information has been derived from information provided in the financial statements and market price data for the Fund’s shares.
 
   For the Years Ended December 31, 
   2017   2016   2015   2014*   2013* 
PER SHARE OPERATING PERFORMANCE                    
Net asset value, beginning of year  $13.24   $15.11   $20.54   $22.72   $22.72 
Net investment income #   0.15    0.23    0.17    0.32    0.40 
Net realized and unrealized gain/(loss) on investments   2.65    1.01    (1.18)   2.10    3.80 
Net increase/(decrease) in net assets resulting from operations   2.80    1.24    (1.01)   2.42    4.20 
                          
Dividends and distributions to stockholders:                         
Net investment income   (0.13)   (0.22)   (0.17)   (0.32)   (0.40)
Net realized capital gains   (1.29)   (0.71)   (0.44)   (1.52)   (1.76)
Return-of-capital   (1.37)   (2.47)   (3.81)   (2.76)   (2.76)
Total dividends and distributions to stockholders   (2.79)   (3.40)   (4.42)   (4.60)   (4.92)
                          
Common stock transactions:                         
Anti-dilutive effect due to shares issued:                         
Rights offering   0.30    0.29    —    —    0.72 
Reinvestment of dividends and distributions   
0.00
+   
0.00
+   
0.00
+   
0.00
+   
0.00
+
Total common stock transactions   0.30    0.29    
0.00
+   
0.00
+   0.72 
                          
Net asset value, end of year  $13.55   $13.24   $15.11   $20.54   $22.72 
Market value, end of year  $15.47   $15.17   $15.66   $20.02   $26.40 
Total investment return (a)
   25.48%   23.73%   0.21%   (6.29)%   36.67%
                          
RATIOS/SUPPLEMENTAL DATA                         
Net assets, end of year (000 omitted)  $596,439   $380,024   $323,477   $168,287   $180,372 
Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (b)
   1.20%   1.25%   1.31%(d)   1.33%   1.33%
Ratio of expenses to average net assets, excluding fee waivers and fees paid indirectly, if any (b)
   1.20%   1.25%   1.31%(d)   1.33%   1.33%
Ratio of net investment income to average net assets (c)
   1.13%   1.66%   0.97%(d)   1.47%   1.69%
Portfolio turnover rate   81%   88%   88%   51%   48%
 
*
Effective December 29, 2014, a reverse split of 1:4 occurred. All per share amounts have been restated according to the terms of the reverse split.
#
Based on average shares outstanding.
+
Amount rounds to less than $0.01 per share.
(a)
Total investment return at market value is based on the changes in market price of a share during the period and assumes reinvestment of dividends and distributions, if any, at actual prices pursuant to the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
(b)
Expenses do not include expenses of investments companies in which the Fund invests.
(c)
Recognition of net investment income by the Fund may be affected by the timing of the declaration of dividends, if any, by investment companies in which the Fund invests.
(d)
Includes reorganization costs. Without these costs, ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any, ratio of expenses to average net assets, excluding fee waivers and fees paid indirectly, if any, and ratio of net investment income to average net assets would have been 1.22%, 1.22% and 1.06% for the for the year ended December 31, 2015, respectively.
 
 
See accompanying notes to financial statements.
 
11

 

 

Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements
 
NOTE A. ORGANIZATION
 
Cornerstone Strategic Value Fund, Inc. (the “Fund” or “CLM”) 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. As an investment company, the Fund follows the accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 “Financial Services –Investment Companies”.
 
NOTE B. SIGNIFICANT ACCOUNTING POLICIES
 
Management Estimates: The Fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board. 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 New York Stock Exchange (“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 NASDAQ Official 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 December 31, 2017, 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 is closed.
 
The Fund is exposed to financial market risks, including the valuations of its investment portfolio. During the year ended December 31, 2017, the Fund did not invest in derivative instruments or engage in hedging activities.
 
 
12
  

 

 

Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)
 
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.
 
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 December 31, 2017, the Fund does not have any interest or penalties associated with the under-payment of any income taxes. Management reviewed any uncertain tax positions for open tax years 2014 through 2016, and for the year ended December 31, 2017. 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.
 
 
 
13

 

 

Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)
 
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 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.
 
 
●
Level 1 – quoted unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.
 
 
●
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.
 
 
●
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 December 31, 2017 in valuing the Fund’s investments carried at value:
 
Valuation Inputs  Investments
in Securities		   Other
Financial
Instruments*		 
Level 1 – Quoted Prices          
Equity Investments  $588,359,438   $— 
Short-Term Investments   14,661,711    — 
Level 2 – Other Significant Observable Inputs   —    — 
Level 3 – Significant Unobservable Inputs   —    — 
Total  $603,021,149   $— 
 
 
*
Other financial instruments include futures, forwards and swap contracts.
 
The breakdown of the Fund’s investments into major categories is disclosed in its Schedule of Investments.
 
During the year ended December 31, 2017 the Fund did not have any transfers in and out of any Level.
 
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 December 31, 2017.
 
It is the Fund’s policy to recognize transfers into and out of any Level at the end of the reporting period.
 
 
14
  
 

 

 

Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)
 
On October 13, 2016, the Securities and Exchange Commission (the “SEC”) adopted new rules and forms and amended existing rules and forms which are intended to modernize and enhance the reporting and disclosure of information by registered investment companies and to improve the quality of information that funds provide to investors, including modifications to Regulation S-X which would require standardized, enhanced disclosure about derivatives in investment company financial statements. The compliance dates of the other amendments and rules is April 2019 for larger fund groups and April 2020 for smaller fund groups. Management is currently evaluating the impacts to the financial statement disclosures.
 
NOTE D. AGREEMENTS WITH AFFILIATES
 
At December 31, 2017, certain officers of the Fund are also officers of Cornerstone or AST Fund Solutions, LLC (“AFS”). 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 year ended December 31, 2017, Cornerstone earned $4,526,655 for investment management services.
 
Administration Agreement
 
Under the terms of the administration agreement, AFS supplies executive, administrative and regulatory services for the Fund. AFS supervises the preparation of reports to shareholders 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 AFS a monthly fee at an annual rate of 0.075% of its average daily net assets, subject to an annual minimum fee of $50,000. For the year ended December 31, 2017, AFS earned $343,311 as administrator.
 
NOTE E. INVESTMENT IN SECURITIES
 
For the year ended December 31, 2017, purchases and sales of securities, other than short-term investments, were $487,344,537 and $361,861,058, respectively.
 
NOTE F. SHARES OF COMMON STOCK
 
The Fund has 100,000,000 shares of common stock authorized and 44,023,775 shares issued and outstanding at December 31, 2017. Transactions in common stock for the year ended December 31, 2017 were as follows:
 
Shares at beginning of year
28,697,249
Shares newly issued from rights offering
14,454,716
Shares newly issued in reinvestment of dividends and distributions
871,810
Shares at end of year
44,023,775
 
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.
 
The tax character of dividends and distributions paid to stockholders during the years ended December 31, 2017 and December 31, 2016 was as follows:
 
   2017   2016 
Ordinary Income  $ 21,269,516   $ 7,994,909 
Long-Term Capital Gains   26,914,183    13,164,998 
Return-of-Capital   46,231,602    56,300,130 
Total Distributions  $94,415,301   $77,460,037 
 
 
 
15

 

 

Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (concluded)
 
At December 31, 2017, the components of accumulated earnings on a tax basis for the Fund were as follows:
 
Net unrealized appreciation  $61,968,611 
Total accumulated earnings  $61,968,611 
 
GAAP requires 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. For the year ended December 31, 2017, the Fund decreased accumulated net realized loss on investments by $562,156 and decreased undistributed net investment income by $562,156 on the Statement of Assets and Liabilities. 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 losses during the year ended December 31, 2017.
 
As of December 31, 2017, the Fund had no remaining capital loss carryforwards.
 
The following information is computed on a tax basis for each item as of December 31, 2017:
 
Cost of portfolio investments  $541,052,538 
Gross unrealized appreciation  $69,751,421 
Gross unrealized depreciation   (7,782,810)
Net unrealized appreciation  $61,968,611 
 
The difference between book-basis and tax-basis unrealized appreciation is attributable to the tax deferral of losses on wash sales.
 
 
16
  
Report of Independent Registered Public Accounting Firm
 
To the Shareholders and Board of Directors
of Cornerstone Strategic Value Fund, Inc.
 
Opinion on the Financial Statements
 
We have audited the accompanying statement of assets and liabilities of Cornerstone Strategic Value Fund, Inc. (the “Fund”), including the schedule of investments, as of December 31, 2017, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of Cornerstone Strategic Value Fund, Inc. as of December 31, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the Fund’s auditor since 2002.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
 
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2017 by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
 
  TAIT, WELLER & BAKER LLP
 
Philadelphia, Pennsylvania
February 15, 2018
 
 
 
17

 

 

2017 Tax Information (unaudited)
 
This notification along with Form 1099-DIV reflects the amount to be used by calendar year taxpayers on their U.S. federal income tax returns. As indicated in this notice, a portion of the Fund’s distributions for 2017 were comprised of a return-of-capital; accordingly these distributions do not represent yield or investment return on the Fund’s portfolio.
 
  SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(Per Share Amounts)
Payment Dates:  1/31/17   2/28/17   3/31/17   4/28/17   5/31/17   6/30/17 
Ordinary Income (1)
  $0.0524   $0.0524   $0.0524   $0.0524   $0.0524   $0.0524 
Return-of-Capital (2)
   0.1139    0.1139    0.1139    0.1139    0.1139    0.1139 
Capital Gain (3)
   0.0663    0.0663    0.0663    0.0663    0.0663    0.0663 
Total  $0.2326   $0.2326   $0.2326   $0.2326   $0.2326   $0.2326 
                               
Payment Dates:   
7/31/17
    
8/31/17
    
9/29/17
    
10/31/17
    
11/30/17
    
12/29/17
 
Ordinary Income (1)
  $0.0524   $0.0524   $0.0524   $0.0524   $0.0524   $0.0524 
Return-of-Capital (2)
   0.1139    0.1139    0.1139    0.1139    0.1139    0.1139 
Capital Gain (3)
   0.0663    0.0663    0.0663    0.0663    0.0663    0.0663 
Total  $0.2326   $0.2326   $0.2326   $0.2326   $0.2326   $0.2326 
 
 
Notes:
 
(1)
Ordinary Income Dividends – This is the total per share amount of ordinary income dividends and short-term capital gain distributions (if applicable) included in the amount reported in Box 1a on Form 1099-DIV.
 
(2)
Return-of-Capital – This is the per share amount of return-of-capital, or sometimes called nontaxable, distributions reported in Box 3 – under the title “Nondividend distributions” – on Form 1099-DIV. This amount should not be reported as taxable income on your current return. Rather, it should be treated as a reduction in the original cost basis of your investment in the Fund.
 
(3)
Capital Gains Distributions – This is the total per share amount of capital gain distribution included in the amount reported in Box 2a on Form 1099-DIV.
 
The Fund has met the requirements to pass through 36.75% of its ordinary income dividends as qualified dividends, which are subject to a maximum federal tax rate of 23.8% (20% qualified dividends maximum long-term capital gain rate plus 3.8% Medicare tax). This is reported in Box 1b on Form 1099-DIV. Ordinary income dividends should be reported as dividend income on Form 1040. Please note that to utilize the lower tax rate for qualifying dividend income, stockholders generally must have held their shares in the Fund for at least 61 days during the 121 day period beginning 60 days before the ex-dividend date.
 
Long-term capital gain distributions arise from gains on securities held by the Fund for more than one year. They are subject to a maximum federal rate of 20% (23.8%, reflecting 3.8% Medicare tax on income exceeding certain threshold amounts).
 
Foreign stockholders will generally be subject to U.S. withholding tax on the amount of the actual ordinary income dividend paid by the Fund.
 
In general, distributions received by tax-exempt recipients (e.g., IRA’s and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting.
 
Stockholders are strongly advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.
 
 
18
  

 

 

Additional Information Regarding the Fund’s Directors and Corporate Officers (unaudited)
 
Name and
Address*
(Birth Date)
Position(s)
Held with Fund
Principal Occupation
over Last 5 Years
Position with Fund Since
Ralph W. Bradshaw**
(Dec. 1950)
Chairman of the Board of Directors and President
President, Cornerstone Advisors, Inc.; Financial Consultant; President and Director of Cornerstone Total Return Fund, Inc.
2001
Robert E. Dean
(Apr. 1951)
Director; Audit, Nominating and Corporate Governance Committee Member
Director, National Bank Holdings Corp.; Director of Cornerstone Total Return Fund, Inc.
2014
Edwin Meese III
(Dec. 1931)
Director; Audit, Nominating and Corporate Governance Committee Member
Ronald Reagan Distinguished Fellow Emeritus, The Heritage Foundation Washington D.C.; Distinguished Visiting Fellow at the Hoover Institution, Stanford University; Director of Cornerstone Total Return Fund, Inc.
2001
Matthew W. Morris
(May 1971)
Director; Audit, Nominating and Corporate Governance Committee Member
Chief Executive Officer, Stewart Information Services Corporation, Director of Cornerstone Total Return Fund, Inc.
2017
Scott B. Rogers
(July 1955)
Director; Audit, Nominating and Corporate Governance Committee Member
Director, Board of Health Partners, Inc.; Chief Executive Officer, Asheville Buncombe Community Christian Ministry (“ABCCM”); President, ABCCM Doctor's Medical Clinic; Member of North Carolina Governor’s Council on Homelessness (from July 2014); Director of Cornerstone Total Return Fund, Inc.
2001
Andrew A. Strauss
(Nov. 1953)
Director; Chairman of Nominating and Corporate Governance Committee and Audit Committee Member
Attorney and senior member of Strauss & Associates, P.A., Attorneys; Director of Cornerstone Total Return Fund, Inc.
2001
 
 
 
19

 

 

Additional Information Regarding the Fund’s Directors and Corporate Officers (unaudited) (concluded)
 
Name and
Address*
(Birth Date)
Position(s)
Held with Fund
Principal Occupation
over Last 5 Years
Position with Fund Since
Glenn W. Wilcox, Sr.
(Dec. 1931)
Director; Chairman of Audit Committee, Nominating and Corporate Governance Committee Member
Chairman of the Board of Tower Associates, Inc.; Chairman of the Board of Wilcox Travel Agency, Inc.; Director of Champion Industries, Inc.; Director of Cornerstone Total Return Fund, Inc.
2001
Gary A. Bentz
(June 1956)
Chief Compliance Officer, Secretary, and Assistant Treasurer
Chairman and Chief Financial Officer of Cornerstone Advisors, Inc.; Financial Consultant, C.P.A., Chief Compliance Officer, Secretary, and Assistant Treasurer of Cornerstone Total Return Fund, Inc.
2004, 2008, 2009
Frank J. Maresca
(Oct. 1958)
Treasurer
Executive Vice President of AST Fund Solutions, LLC; Treasurer of The Asia Pacific Fund, Inc. (since July 2016); Treasurer of Cornerstone Total Return Fund, Inc. (since April 2013)
2013
 
*
The mailing address of each Director and/or Officer with respect to the Fund’s operation is 48 Wall Street, 22nd floor, New York, NY 10005.
 
**
Designates a director who is an “interested person” of the Fund as defined by the Investment Company Act of 1940, as amended. Mr. Bradshaw is an interested person of the Fund by virtue of his current position with the Investment Adviser of the Fund.
 
 
20
  
Description of Dividend Reinvestment Plan (unaudited)
 
Cornerstone Strategic Value Fund, Inc. (the “Fund”) operates a Dividend Reinvestment Plan (the “Plan”), 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 American 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 the average closing price of the Fund over the five trading days preceding the payment date of the Distribution (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. Upon notice from the Fund, the Agent will receive the distribution in cash and will purchase shares of common stock in the open market, on the NYSE American or elsewhere, for the participants’ accounts, except that the Agent will endeavor to terminate purchases in the open market and cause the Fund to issue the remaining shares if, following the commencement of the purchases, the market value of the shares, including brokerage commissions, exceeds the net asset value at the time of valuation. These remaining shares will be issued by the Fund at a price equal to the net asset value at the time of valuation.
 
In a case where the Agent has terminated open market purchases and caused the issuance of remaining shares by the Fund, the number of shares received by the participant in respect of the cash dividend or distribution will be based on the weighted average of prices paid for shares purchased in the open market, including brokerage commissions, and the price at which the Fund issues the remaining shares. To the extent that the Agent is unable to terminate purchases in the open market before the Agent has completed its purchases, or remaining shares cannot be issued by the Fund because the Fund declared a dividend or distribution payable only in cash, and the market price exceeds the net asset value of the shares, the average share purchase price paid by the Agent may exceed the net asset value of the shares, resulting in the acquisition of fewer shares than if the dividend or distribution had been paid in shares issued by the Fund.
 
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
 
 
 
21

 

 

Description of Dividend Reinvestment Plan (unaudited) (concluded)
 
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. The Agent will maintain all stockholder accounts in the Plan and furnish written confirmations of all 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. 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.
 
Participants may at any time sell some or all of their shares though the Agent. Shares may be sold via the internet at www.amstock.com or through the toll free number. Participants can also use the tear off portion attached to the bottom of their statement and mail the request to American Stock Transfer and Trust Company LLC, P.O Box 922 Wall Street Station, New York, N.Y. 10269-0560. There is a fee of $15.00 per transaction and commission of $0.10 per share.
 
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 (866) 668-6558.
 
 
22
  

 

 

Proxy Voting and Portfolio Holdings Information (unaudited)
 
The policies and procedures that the Fund uses to determine how to vote proxies relating to its portfolio securities are available:
 
 
●
without charge, upon request, by calling toll-free (866) 668-6558; and
 
 
●
on the website of the Securities and Exchange Commission, http://www.sec.gov.
 
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent period ended June 30, 2017 is available without charge, upon request, by calling toll-free (866) 668-6558, and on the SEC’s website at http://www.sec.gov or on the Fund’s website at www.cornerstonestrategicvaluefund.com (See Form N-PX).
 
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 Form 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 toll-free 1-800-SEC-0330.
 
Summary of General Information (unaudited)
 
Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment company whose shares trade on the NYSE American. Its investment objective is to seek long-term capital appreciation through investment 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 American (symbol “CLM”). The previous week’s net asset value per share, market price, and related premium or discount are available on the Fund’s website at www.cornerstonestrategicvaluefund.com.
 
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 common stock in the open market.
 
 
 
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Cornerstone Strategic Value Fund, Inc.

 

 

 

 

 

 

 

ITEM 2. CODE OF ETHICS.

 

As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal 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. Pursuant to Item 12(a)(1), a copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR. During the period covered by this report, the code of ethics has not been amended, and the registrant has not granted any waivers, including implicit waivers, from the provisions of the code of ethics.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

The registrant's board of directors has determined that the registrant does not have an audit committee financial expert serving on its audit committee. The audit committee determined that, although none of its members meet the technical definition of an audit committee financial expert, the experience provided by each member of the audit committee together offer the registrant adequate oversight for the registrant's current level of financial complexity.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a) Audit Fees. The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $27,400 and $26,600 with respect to the registrant's fiscal years ended December 31, 2017 and 2016, respectively.

 

(b) Audit-Related Fees. No fees were billed in either 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.

 

(c) Tax Fees. The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $5,750 and $5,600 with respect to the registrant's fiscal years ended December 31, 2017 and 2016, respectively. The services comprising these fees are the preparation of the registrant's federal and state income and federal excise tax returns.

 

(d) All Other Fees. Other fees billed were $1,600 and $1,600 with respect to the registrant's fiscal years ended December 31, 2017 and 2016, respectively.

 

(e)(1) Before the principal accountant is engaged by the registrant to render (i) audit, audit-related or permissible non-audit services to the registrant or (ii) non-audit services to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant, either (a) the audit committee shall pre-approve such engagement; or (b) such engagement shall be entered into pursuant to pre-approval policies and procedures established by the audit committee. Any such policies and procedures must be detailed as to the particular service and not involve any delegation of the audit committee's responsibilities to the registrant's investment adviser. The audit committee may delegate to one or more of its members the authority to grant pre-approvals. The pre-approval policies and procedures shall include the requirement that the decisions of any member to whom authority is delegated under this provision shall be presented to the full audit committee at its next scheduled meeting. Under certain limited circumstances, pre-approvals are not required if certain de minimus thresholds are not exceeded, as such thresholds are determined by the audit committee in accordance with applicable Commission regulations.

 

 

 

(e)(2) None of the services described in paragraph (b) through (d) of this Item were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f) Less than 50% of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

 

(g) During the fiscal years ended December 31, 2017 and 2016, aggregate non-audit fees of $7,350 and $7,200, respectively, were billed by the registrant's principal accountant for services rendered to the registrant. No non-audit fees were billed in either of the last two fiscal years by the registrant's principal accountant for services 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.

 

(h) The principal accountant has not provided any non-audit services 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 investment adviser that provides ongoing services to the registrant.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

(a) The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934. Robert E. Dean, Glenn W. Wilcox, Sr., (Chairman), Edwin Meese III, Matthew W. Morris, Andrew A. Strauss and Scott B. Rogers are the members of the registrant's audit committee.

 

(b) Not applicable

 

ITEM 6. SCHEDULE OF INVESTMENTS.

 

(a) Not required

 

 

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

The registrant and Cornerstone Advisors, Inc., the registrant's investment adviser, share the same proxy voting policies and procedures. The proxy voting policies and procedures of the registrant and Cornerstone Advisors, Inc. are attached as Exhibit 99.VOTEREG.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

(a)(1) All information included in this Item is as of the date of the filing of this Form N-CSR, unless otherwise noted. Ralph W. Bradshaw is the portfolio manager of the registrant. Mr. Bradshaw has acted as portfolio manager since 2002. Mr. Bradshaw is President of Cornerstone Advisors, Inc. and serves as President and Chairman of the Board of the registrant and Cornerstone Total Return Fund, Inc.

 

(a)(2) Ralph W. Bradshaw manages one other closed-end registered investment company: Cornerstone Total Return Fund, Inc. As of December 31, 2017, net assets of Cornerstone Total Return Fund, Inc. were $293,792,440. Mr. Bradshaw manages no accounts except for the registrant and Cornerstone Total Return Fund, Inc. Mr. Bradshaw manages no accounts where the advisory fee is based on the performance of the account. No material conflicts of interest exist in connection with the portfolio manager's management of the registrant's investments, on the one hand, and the investment of the other accounts included in response to this Item, on the other.

 

(a)(3) Compensation of Ralph W. Bradshaw includes a fixed salary paid by Cornerstone Advisors, Inc. plus his share of the profits of Cornerstone Advisors, Inc. The profitability of Cornerstone Advisors, Inc. is primarily dependent upon the value of the assets of the registrant and other managed accounts. However, compensation is not directly based upon the registrant's performance or on the value of the registrant's assets.

 

(a)(4) The dollar range of equity securities in the registrant beneficially owned by each portfolio manager as of December 31, 2017 is as follows: Ralph W. Bradshaw: over $100,000

 

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 trustees 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.CODE ETH Code of Ethics

 

Exhibit 99.VOTEREG Proxy Voting Policies and Procedures

 

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 February 15, 2018    

 

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 February 15, 2018    
     
By (Signature and Title)* /s/ Frank J. Maresca  
    Frank J. Maresca, Treasurer  
    (Principal Financial Officer)  
       
Date February 15, 2018    

 

* Print the name and title of each signing officer under his or her signature.