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, 2015

Date of reporting period:
December 31, 2015

 

ITEM 1.
REPORTS TO STOCKHOLDERS.
 



Cornerstone Strategic
Value Fund, Inc.

 

Annual Report
December 31, 2015
 



CONTENTS

 

Portfolio Summary

1

Schedule of Investments

2

Statement of Assets and Liabilities

8

Statement of Operations

9

Statement of Changes in Net Assets

10

Financial Highlights

11

Notes to Financial Statements

12

Report of Independent Registered Public Accounting Firm

17

Results of Annual Meeting of Stockholders

18

2015 Tax Information

19

Additional Information Regarding the Fund’s Directors and Corporate Officers

20

Description of Dividend Reinvestment Plan

22

Proxy Voting and Portfolio Holdings Information

24

Summary of General Information

25

Stockholder Information

25

 


Cornerstone Strategic Value Fund, Inc.
Portfolio Summary – as of December 31, 2015 (unaudited)

 

SECTOR ALLOCATION

 

Sector

Percent of
Net Assets

Closed-End Funds

48.7

Information Technology

10.5

Financials

7.8

Health Care

7.1

Consumer Discretionary

6.1

Industrials

4.7

Consumer Staples

4.6

Exchange-Traded Funds

3.5

Energy

2.2

Materials

1.4

Telecommunication Services

1.4

Utilities

0.5

Other

1.5

 

TOP TEN HOLDINGS, BY ISSUER

 

 

Holding

Sector

Percent of

Net Assets

1.

Alphabet Inc.

Information Technology

4.2

2.

Cohen & Steers Preferred Securities and Income Fund, Inc.

Closed-End Funds

3.7

3.

BlackRock Resources & Commodities Strategy Trust

Closed-End Funds

3.1

4.

CBRE Clarion Global Real Estate Income Fund

Closed-End Funds

2.7

5.

Alpine Global Total Dynamic Dividend Fund

Closed-End Funds

2.6

6.

Apple Inc.

Information Technology

2.6

7.

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

Closed-End Funds

2.5

8.

JPMorgan Chase & Co.

Financials

2.2

9.

Wells Fargo & Company

Financials

2.1

10.

Amazon.com, Inc.

Consumer Discretionary

2.1

 


 

1

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015

 

Description

 

No. of

Shares

   

Value

 

EQUITY SECURITIES — 98.47%

 

CLOSED-END FUNDS — 48.65%

 

CONVERTIBLE SECURITIES — 2.47%

 

Advent Claymore Convertible Securities and Income Fund

   

159,429

   

$

2,155,480

 

Advent Claymore Convertible Securities and Income Fund II

   

85,586

     

475,002

 

AllianzGI Convertible & Income Fund

   

323,782

     

1,793,752

 

AllianzGI Convertible & Income Fund II

   

707,326

     

3,571,996

 
             

7,996,230

 

CORE — 4.06%

 

Adams Express Company (The)

   

37,885

     

486,064

 

Advent/Claymore Enhanced Growth & Income Fund

   

3,788

     

31,327

 

Gabelli Equity Trust Inc. (The)

   

239,396

     

1,271,193

 

General American Investors Company, Inc.

   

84,421

     

2,696,407

 

Guggenheim Enhanced Equity Strategy Fund

   

12,244

     

193,088

 

Liberty All-Star Equity Fund

   

840,511

     

4,496,734

 

Royce Micro-Cap Trust, Inc.

   

186,559

     

1,354,418

 

Royce Value Trust

   

181,263

     

2,133,465

 

Sprott Focus Trust, Inc.

   

76,346

     

442,807

 

Zweig Fund, Inc. (The)

   

1,700

     

22,338

 
             

13,127,841

 

CORPORATE DEBT INVESTMENT GRADE-RATED — 0.00%

 

Cutwater Select Income Fund

   

1

     

25

 
                 

DEVELOPED MARKET — 1.29%

 

Aberdeen Australia Equity Fund, Inc.

   

398,970

   

 

2,174,386

 

Aberdeen Israel Fund, Inc.

   

468

     

8,078

 

Aberdeen Singapore Fund, Inc.

   

44,362

     

379,739

 

New Ireland Fund, Inc. (The)

   

21,976

     

306,126

 

Swiss Helvetia Fund, Inc. (The)

   

122,860

     

1,297,402

 
             

4,165,731

 

EMERGING MARKETS — 1.36%

 

Aberdeen Chile Fund, Inc.

   

149,715

     

835,410

 

Aberdeen Indonesia Fund, Inc.

   

5,861

     

32,353

 

First Trust/Aberdeen Emerging Opportunity Fund

   

15,657

     

204,480

 

JPMorgan China Region Fund, Inc.

   

9,342

     

143,119

 

Mexico Fund, Inc. (The)

   

26,038

     

432,752

 

Turkish Investment Fund, Inc. (The)

   

21,231

     

165,177

 

Voya Emerging Markets High Dividend Equity Fund

   

348,441

     

2,578,463

 
             

4,391,754

 

EMERGING MARKETS DEBT — 1.06%

 

India Fund, Inc. (The)

   

109,700

     

2,494,578

 

Western Assets Emerging Markets Income Fund, Inc.

   

95,905

     

933,156

 
             

3,427,734

 

ENERGY MLP — 0.88%

 

Fiduciary/Claymore MLP Opportunity Fund

   

219,200

     

2,845,216

 

 


See accompanying notes to financial statements.

2

 

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015 (continued)

 

Description

 

No. of

Shares

   

Value

 

GENERAL & INSURED LEVERAGED — 0.13%

 

Invesco Value Municipal Income Trust

   

1

   

$

14

 

Nuveen Dividend Advantage Municipal Fund 3

   

28,453

     

408,585

 
             

408,599

 

GENERAL BOND — 0.62%

 

Deutsche Multi-Market Income Trust

   

189,794

     

1,450,026

 

Deutsche Strategic Income Trust

   

53,445

     

561,707

 
             

2,011,733

 

GLOBAL — 9.57%

 

Alpine Global Dynamic Dividend Fund

   

227,745

     

2,015,543

 

Alpine Global Total Dynamic Dividend Fund

   

1,091,449

     

8,382,328

 

Calamos Global Dynamic Income Fund

   

319,167

     

2,285,236

 

Clough Global Opportunities Fund

   

93,300

     

974,052

 

Calamos Global Total Return Fund

   

49,454

     

564,765

 

Clough Global Allocation Fund

   

8,813

     

118,711

 

Clough Global Equity Fund

   

67,361

     

844,033

 

Delaware Enhanced Global Dividend and Income Fund

   

352,791

     

3,298,596

 

GDL Fund (The)

   

241,652

     

2,418,936

 

John Hancock Hedged Equity & Income Fund

   

31,317

     

452,844

 

Lazard Global Total Return and Income Fund, Inc.

   

44,142

     

577,377

 

Lazard World Dividend & Income Fund, Inc.

   

66,508

     

605,888

 

Nuveen Global Value Opportunities Fund

   

138,783

   

 

1,515,510

 

Royce Global Value Trust, Inc.

   

54,807

     

408,312

 

Virtus Total Return Fund

   

134,482

     

512,376

 

Voya Infrastructure, Industrials and Materials Fund

   

165,005

     

2,022,961

 

Wells Fargo Advantage Global Dividend Opportunity Fund

   

671,793

     

3,977,015

 
             

30,974,483

 

HIGH CURRENT YIELD (LEVERAGED) — 0.33%

 

BlackRock Debt Strategies Fund, Inc.

   

175,634

     

591,887

 

Franklin Universal Trust

   

4,286

     

24,559

 

Invesco High Income Trust II

   

3,385

     

43,497

 

Neuberger Berman High Yield Strategies Fund Inc.

   

10,075

     

101,657

 

Western Asset Global High Income Fund Inc.

   

12,119

     

105,678

 

Western Asset Global Partners Income Fund Inc.

   

25,493

     

197,061

 
             

1,064,339

 

INCOME & PREFERRED STOCK — 1.25%

 

Calamos Strategic Total Return Fund

   

178,249

     

1,764,665

 

LMP Capital and Income Fund Inc.

   

183,445

     

2,269,215

 
             

4,033,880

 

LOAN PARTICIPATION — 0.35%

 

Nuveen Credit Strategies Income Fund

   

145,227

     

1,138,580

 

 


See accompanying notes to financial statements.
 

3

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015 (continued)

 

Description

 

No. of

Shares

   

Value

 

NATURAL RESOURCES — 3.83%

 

Adams Natural Resources Fund, Inc.

   

15,800

   

$

280,292

 

BlackRock Energy and Resources Trust

   

22,900

     

286,937

 

BlackRock Resources & Commodities Strategy Trust

   

1,389,918

     

9,882,317

 

First Trust Energy Infrastructure Fund

   

23,400

     

341,406

 

Tortoise Energy Independence Fund, Inc.

   

80,364

     

906,506

 

Voya Natural Resources Equity Income Fund

   

127,230

     

694,676

 
             

12,392,134

 

OPTION ARBITRAGE/OPTIONS STRATEGIES — 3.29%

 

AllianzGI NFJ Dividend, Interest & Premium Strategy Fund

   

657,556

     

8,147,119

 

Eaton Vance Tax-Managed Global Diversified Equity Income Fund

   

47,400

     

419,490

 

Voya Asia Pacific High Dividend Equity Income Fund

   

14,827

     

133,888

 

Voya Global Equity Dividend and Premium Opportunity Fund

   

243,912

     

1,707,384

 

Voya International High Dividend Equity Fund

   

38,337

     

243,823

 
             

10,651,704

 

PACIFIC EX JAPAN — 0.14%

 

Aberdeen Greater China Fund, Inc.

   

53,382

     

456,950

 
                 

REAL ESTATE — 11.84%

 

Alpine Global Premier Properties Fund

   

1,099,963

   

 

6,346,786

 

CBRE Clarion Global Real Estate Income Fund

   

1,149,740

     

8,784,014

 

Cohen & Steers Preferred Securities and Income Fund, Inc.

   

657,261

     

12,119,893

 

Cohen & Steers Quality Income Realty Fund, Inc.

   

305,515

     

3,733,393

 

LMP Real Estate Income Fund Inc.

   

123,733

     

1,613,478

 

Neuberger Berman Real Estate Securities Income Fund Inc.

   

537,557

     

2,693,161

 

Nuveen Real Estate Income Fund

   

52,053

     

552,803

 

RMR Real Estate Income Fund

   

127,145

     

2,450,083

 
             

38,293,611

 

SECTOR EQUITY — 1.42%

 

GAMCO Global Gold, Natural Resources & Income Trust

   

508,121

     

2,413,575

 

GAMCO Natural Resources, Gold & Income Trust by Gabelli

   

380,903

     

2,182,574

 
             

4,596,149

 

UTILITY — 4.76%

 

Brookfield Global Listed Infrastructure Income Fund Inc.

   

22,154

     

260,309

 

Cohen & Steers Infrastructure Fund, Inc.

   

345,372

     

6,589,698

 

Duff & Phelps Global Utility Income Fund Inc.

   

292,763

     

4,312,399

 

 


See accompanying notes to financial statements.

4

 

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015 (continued)

 

Description

 

No. of

Shares

   

Value

 

UTILITY (continued)

 

Gabelli Global Utility & Income Trust (The)

   

60,473

   

$

1,009,899

 

Macquarie Global Infrastructure Total Return Fund Inc.

   

88,920

     

1,693,926

 

Reaves Utility Income Fund

   

52,400

     

1,360,828

 

Tekla Healthcare Opportunities Fund

   

10,326

     

179,569

 
             

15,406,628

 

TOTAL CLOSED-END FUNDS

     

157,383,321

 
                 

CONSUMER DISCRETIONARY — 6.14%

 

Amazon.com, Inc. *

   

10,000

     

6,758,900

 

Comcast Corporation - Class A

   

41,013

     

2,314,363

 

Home Depot, Inc. (The)

   

19,600

     

2,592,100

 

Lowe's Companies, Inc.

   

8,000

     

608,320

 

Starbucks Corporation

   

15,000

     

900,450

 

Time Warner Cable Inc.

   

4,000

     

742,360

 

Twenty-First Century Fox, Inc.

   

5,000

     

136,150

 

Walt Disney Company (The)

   

55,200

     

5,800,416

 
             

19,853,059

 

CONSUMER STAPLES — 4.64%

 

Archer-Daniels-Midland Company

   

16,000

     

586,880

 

Constellation Brands, Inc.

   

3,000

     

427,320

 

Costco Wholesale Corporation

   

9,000

     

1,453,500

 

CVS Caremark Corporation

   

18,430

     

1,801,901

 

Kimberly-Clark Corporation

   

5,000

     

636,500

 

Kraft Heinz Company (The)

   

4,000

     

291,040

 

Kroger Co. (The)

   

30,000

   

 

1,254,900

 

Mondelēz International, Inc. - Class A

   

26,000

     

1,165,840

 

Monster Beverage Corporation *

   

4,000

     

595,840

 

Reynolds American Inc.

   

22,000

     

1,015,300

 

Walgreens Boots Alliance, Inc.

   

15,000

     

1,277,325

 

Wal-Mart Stores, Inc.

   

73,700

     

4,517,810

 
             

15,024,156

 

ENERGY — 2.16%

 

ConocoPhillips

   

21,974

     

1,025,966

 

EOG Resources, Inc.

   

15,000

     

1,061,850

 

Exxon Mobil Corporation

   

39,936

     

3,113,011

 

Phillips 66

   

7,987

     

653,337

 

Schlumberger Limited

   

8,000

     

558,000

 

Valero Energy Corporation

   

8,000

     

565,680

 
             

6,977,844

 

EXCHANGE-TRADED FUNDS — 3.48%

 

iShares Core S&P 500 ETF

   

30,000

     

6,146,100

 

SPDR S&P 500 ETF Trust

   

25,000

     

5,097,250

 
             

11,243,350

 

FINANCIALS — 7.76%

 

ACE Limited

   

6,000

     

701,100

 

Allstate Corporation (The)

   

4,000

     

248,360

 

American Express Company

   

13,000

     

904,150

 

American International Group, Inc.

   

8,000

     

495,760

 

American Tower Corporation

   

4,000

     

387,800

 

Aon plc

   

8,500

     

783,785

 

Berkshire Hathaway Inc. - Class B *

   

21,000

     

2,772,840

 

BlackRock, Inc. - Class A

   

3,500

     

1,191,820

 

Capital One Financial Corporation

   

4,500

     

324,810

 

 


See accompanying notes to financial statements.
 

5

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015 (continued)

 

Description

 

No. of

Shares

   

Value

 

CONSUMER STAPLES (continued)

 

Discover Financial Services

   

6,500

   

$

348,530

 

Intercontinental Exchange, Inc.

   

2,500

     

640,650

 

JPMorgan Chase & Co.

   

106,132

     

7,007,896

 

Marsh & McLennan Companies, Inc.

   

8,500

     

471,325

 

McGraw Hill Financial, Inc.

   

2,000

     

197,160

 

Moody’s Corporation

   

3,000

     

301,020

 

PNC Financial Services Group, Inc. (The)

   

8,000

     

762,480

 

Travelers Companies, Inc. (The)

   

6,000

     

677,160

 

Wells Fargo & Company

   

126,800

     

6,892,848

 
             

25,109,494

 

HEALTH CARE — 7.10%

 

Abbott Laboratories

   

26,200

     

1,176,642

 

AbbVie Inc.

   

16,200

     

959,688

 

Aetna Inc.

   

11,000

     

1,189,320

 

Allergan plc *

   

6,577

     

2,055,313

 

Amgen Inc.

   

17,800

     

2,889,474

 

Anthem, Inc.

   

9,000

     

1,254,960

 

Boston Scientific Corporation *

   

2,000

     

36,880

 

Cardinal Health, Inc.

   

6,000

     

535,620

 

Celgene Corporation *

   

10,000

     

1,197,600

 

Cigna Corporation

   

5,000

     

731,650

 

Eli Lilly and Company

   

11,000

     

926,860

 

Express Scripts Holding Company *

   

8,000

     

699,280

 

Gilead Sciences, Inc.

   

14,000

     

1,416,660

 

Johnson & Johnson

   

13,000

     

1,335,360

 

McKesson Corporation

   

3,000

     

591,690

 

Merck & Company, Inc.

   

35,267

     

1,862,803

 

Regeneron Pharmaceuticals, Inc. *

   

1,000

     

542,870

 

Stryker Corporation

   

8,000

     

743,520

 

Thermo Fisher Scientific Inc.

   

10,000

   

 

1,418,500

 

UnitedHealth Group Incorporated

   

12,000

     

1,411,680

 
             

22,976,370

 

INDUSTRIALS — 4.70%

 

Boeing Company (The)

   

9,000

     

1,301,310

 

Danaher Corporation

   

13,000

     

1,207,440

 

Delta Air Lines, Inc.

   

18,000

     

912,420

 

FedEx Corporation

   

6,000

     

893,940

 

General Dynamics Corporation

   

6,000

     

824,160

 

General Electric Company

   

80,000

     

2,492,000

 

Honeywell International Inc.

   

16,000

     

1,657,120

 

Illinois Tool Works Inc.

   

8,000

     

741,440

 

Lockheed Martin Corporation

   

4,000

     

868,600

 

Northrop Grumman Corporations

   

5,000

     

944,050

 

Precision Castparts Corporation

   

2,000

     

464,020

 

Raytheon Company

   

5,000

     

622,650

 

Southwest Airlines Co.

   

12,000

     

516,720

 

3M Company

   

5,000

     

753,200

 

Union Pacific Corporation

   

13,000

     

1,016,600

 
             

15,215,670

 

INFORMATION TECHNOLOGY — 10.50%

 

Alphabet Inc. - Class A *

   

2,000

     

1,556,020

 

Alphabet Inc. - Class C *

   

16,005

     

12,145,875

 

Apple Inc.

   

79,000

     

8,315,540

 

Automatic Data Processing, Inc.

   

7,000

     

593,040

 

Cisco Systems, Inc.

   

35,000

     

950,425

 

Cognizant Technology Solutions Corporation *

   

6,000

     

360,120

 

Facebook, Inc. *

   

21,000

     

2,197,860

 

Fiserv, Inc. *

   

4,000

     

365,840

 

 


See accompanying notes to financial statements.

6

 

 


Cornerstone Strategic Value Fund, Inc.
Schedule of Investments – December 31, 2015 (concluded)

 

Description

 

No. of

Shares

   

Value

 

INFORMATION TECHNOLOGY (continued)

 

Intel Corporation

   

66,000

   

$

2,273,700

 

MasterCard Incorporated

   

10,000

     

973,600

 

Microsoft Corporation

   

22,000

     

1,220,560

 

Oracle Corporation

   

61,272

     

2,238,266

 

Visa Inc. - Class A

   

10,000

     

775,500

 
             

33,966,346

 

MATERIALS — 1.38%

 

Air Products & Chemicals, Inc.

   

5,000

     

650,550

 

Dow Chemical Company (The)

   

29,500

     

1,518,660

 

Ecolab Inc.

   

5,500

     

629,090

 

LyondellBasell Industries N.V.

   

7,000

     

608,300

 

PPG Industries, Inc.

   

8,000

     

790,560

 

Sherwin-Williams Company (The)

   

1,000

     

259,600

 
             

4,456,760

 

TELECOMMUNICATION SERVICES — 1.37%

 

AT&T, Inc.

   

7,568

     

260,415

 

Verizon Communications, Inc.

   

90,000

     

4,159,800

 
             

4,420,215

 

UTILITIES — 0.59%

 

Dominion Resources, Inc.

   

10,000

     

676,400

 

NextEra Energy, Inc.

   

6,000

     

623,340

 

PPL Corporation

   

6,000

     

204,780

 

Public Service Enterprises Group, Inc.

   

6,500

     

251,485

 

Xcel Energy Inc.

   

4,000

     

143,640

 
             

1,899,645

 

TOTAL EQUITY SECURITIES

 

(cost - $316,701,918)

     

318,526,230

 
                 

SHORT-TERM INVESTMENT — 0.90%

 

MONEY MARKET FUND — 0.90%

 

Fidelity Institutional Money Market Government Portfolio - Class I, 0.01%^ (cost - $2,908,238)

   

2,908,238

   

 

2,908,238

 
                 

TOTAL INVESTMENTS — 99.37%

         

(cost - $319,610,156)

     

321,434,468

 
                 

OTHER ASSETS IN EXCESS OF LIABILITIES — 0.63%

     

2,042,736

 
                 

NET ASSETS — 100.00%

   

$

323,477,204

 

 


 

*

Non-income producing security.

 

 

^

The rate shown is the 7-day effective yield as of December 31, 2015.

 


See accompanying notes to financial statements.
 

7

 


Cornerstone Strategic Value Fund, Inc.
Statement of Assets and Liabilities – December 31, 2015

 

ASSETS

   

Investments, at value (cost – $319,610,156) (Notes B and C)

 

$

321,434,468

 

Cash

   

554

 

Receivables:

       

Investments sold

   

11,652,674

 

Dividends

   

1,352,444

 

Prepaid expenses

   

10,352

 

Total Assets

   

334,450,492

 
         

LIABILITIES

       

Payables:

       

Investments purchased

   

10,482,747

 

Investment management fees (Note D)

   

306,061

 

Directors’ fees and expenses

   

45,867

 

Administration fees (Note D)

   

19,893

 

Other accrued expenses

   

118,720

 

Total Liabilities

   

10,973,288

 
         

NET ASSETS (applicable to 21,407,414 shares of common stock)

 

 

323,477,204

 
         

NET ASSET VALUE PER SHARE ($323,477,204 ÷ 21,407,414)

 

 

15.11

 
         

NET ASSETS CONSISTS OF

       

Common stock, $0.001 par value; 21,407,414 shares issued

       

and outstanding (100,000,000 shares authorized)

 

 

21,407

 

Paid-in Capital

   

322,667,112

 

Accumulated net realized loss on investments

   

(1,035,626

)

Net unrealized appreciation in value of investments

   

1,824,311

 

Net assets applicable to shares outstanding

   

323,477,204

 

 


See accompanying notes to financial statements.

8

 

 


Cornerstone Strategic Value Fund, Inc.
Statement of Operations – for the Year Ended December 31, 2015

 

INVESTMENT INCOME

   

Income:

   

Dividends

 

$

5,873,021

 
         

Expenses:

       

Investment management fees (Note D)

   

2,572,252

 

Merger expenses (Note A)

   

219,964

 

Administration fees (Note D)

   

192,919

 

Directors’ fees and expenses

   

104,486

 

Legal and audit fees

   

66,554

 

Accounting fees

   

59,032

 

Custodian fees

   

49,088

 

Printing

   

38,267

 

Transfer agent fees

   

33,443

 

Insurance

   

14,811

 

Stock exchange listing fees

   

10,480

 

Miscellaneous

   

6,224

 

Total Expenses

   

3,367,520

 

Net Investment Income

   

2,505,501

 
         

NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS

       

Net realized gain from investments

   

2,394,207

 

Capital gain distributions from regulated investment companies

   

3,721,009

 

Net change in unrealized appreciation in value of investments

   

(31,475,170

)

Net realized and unrealized loss on investments

   

(25,359,954

)

         

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

(22,854,453

)

 


See accompanying notes to financial statements.
 

9

 


Cornerstone Strategic Value Fund, Inc.
Statement of Changes in Net Assets

 

   

For the Years ended December 31

 
   

2015

   

2014

 
         

INCREASE IN NET ASSETS

       

Operations:

       

Net investment income

 

$

2,505,501

   

$

2,581,075

 

Net realized gain from investments

   

6,115,216

     

12,308,473

 

Net change in unrealized appreciation in value of investments

   

(31,475,170

)

   

4,601,426

 
                 

Net increase/(decrease) in net assets resulting from operations

   

(22,854,453

)

   

19,490,974

 
                 

Dividends and distributions to stockholders (Note B):

               

Net investment income

   

(2,505,501

)

   

(2,581,075

)

Net realized gains

   

(6,408,287

)

   

(12,356,393

)

Return-of-capital

   

(56,039,075

)

   

(22,273,549

)

                 

Total dividends and distributions to stockholders

   

(64,952,863

)

   

(37,211,017

)

                 

Common stock transactions:

               

Cash in lieu of 76 fractional shares from the reverse stock split

   

     

(1,539

)

Issuance of 12,780,186 and 0 shares in connection with the merger of Cornerstone Progressive Return Fund

   

235,773,265

     

 

Proceeds from 432,511 and 258,745* shares newly issued in reinvestment of dividends and distributions, respectively

   

7,223,924

     

5,636,862

 
                 

Net increase in net assets from common stock transactions

   

242,997,189

     

5,635,323

 
                 

Total increase/(decrease) in net assets

   

155,189,873

     

(12,084,720

)

                 

NET ASSETS

               

Beginning of year

   

168,287,331

     

180,372,051

 

End of year

 

$

323,477,204

   

$

168,287,331

 

 


*

Shares are adjusted for the one-for-four reverse split that was effective on December 29, 2014.

 


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,

 
   

2015

     

2014*

 

   

2013*

 

   

2012*

 

   

2011*

 

PER SHARE OPERATING PERFORMANCE

                                   

Net asset value, beginning of year

 

$

20.54

   

$

22.72

   

$

22.72

   

$

24.52

   

$

30.20

 

Net investment income #

   

0.17

     

0.32

     

0.40

     

0.44

     

0.28

 

Net realized and unrealized gain/(loss) on investments

   

(1.18

)

   

2.10

     

3.80

     

2.76

     

(0.16

)

Net increase/(decrease) in net assets resulting from operations

   

(1.01

)

   

2.42

     

4.20

     

3.20

     

0.12

 
                                         

Dividends and distributions to stockholders:

                                       

Net investment income

   

(0.17

)

   

(0.32

)

   

(0.40

)

   

(1.48

)

   

(0.52

)

Net realized capital gains

   

(0.44

)

   

(1.52

)

   

(1.76

)

   

(0.76

)

   

 

Return-of-capital

   

(3.81

)

   

(2.76

)

   

(2.76

)

   

(3.08

)

   

(5.60

)

Total dividends and distributions to stockholders

   

(4.42

)

   

(4.60

)

   

(4.92

)

   

(5.32

)

   

(6.12

)

                                         

Common stock transactions:

                                       

Anti-dilutive effect due to shares issued:

                                       

Rights offering

   

     

     

0.72

     

0.32

     

0.20

 

Reinvestment of dividends and distributions

   

0.00

+ 

   

0.00

+ 

   

0.00

+ 

   

0.00

+ 

   

0.12

 

Total common stock transactions

   

0.00

+ 

   

0.00

+ 

   

0.72

     

0.32

     

0.32

 
                                         

Net asset value, end of year

 

$

15.11

   

$

20.54

   

$

22.72

   

$

22.72

   

$

24.52

 

Market value, end of year

 

$

15.66

   

$

20.02

   

$

26.40

   

$

24.00

   

$

26.36

 

Total investment return (a)

   

0.21

%

   

(6.29

)%

   

36.67

%

   

13.33

%

   

(11.11

)%

                                         

RATIOS/SUPPLEMENTAL DATA

                                       

Net assets, end of year (000 omitted)

 

$

323,477

   

$

168,287

   

$

180,372

   

$

105,704

   

$

88,111

 

Ratio of expenses to average net assets, net of fee waivers and fees paid indirectly, if any (b)

   

1.31

%(d)

   

1.33

%

   

1.33

%

   

1.40

%

   

1.55

%

Ratio of expenses to average net assets, excluding fee waivers and fees paid indirectly, if any (b)

   

1.31

%(d)

   

1.33

%

   

1.33

%

   

1.40

%

   

1.55

%

Ratio of net investment income to average net assets (c)

   

0.97

%(d)

   

1.47

%

   

1.69

%

   

1.83

%

   

0.98

%

Portfolio turnover rate

   

88

%

   

51

%

   

48

%

   

41

%

   

38

%


 
 

*

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 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”.

 

Reorganization: Pursuant to a plan of merger approved by the stockholders of each of the Fund and Cornerstone Progressive Return Fund (“CFP”), the Fund acquired all of the net assets of CFP ($235,773,269) on June 26, 2015 and is the accounting survivor of the merger. A total of 16,689,008 shares of beneficial interest of CFP were exchanged for 12,780,186 shares of common stock of the Fund immediately after the closing date. The exchange ratio was 0.765785 shares of CLM for each share of CFP. This merger qualified as tax-free reorganizations under Section 368(a)(1) (C) of the Internal Revenue Code. CFP’s net assets included $5,253,546 of net unrealized appreciation on investments, $(23,450,547) of accumulated net investment loss, and $(3,391,585) of accumulated net realized loss on investments. The aggregate net assets of the Fund prior to the merger totaled $152,222,319 and following the merger the combined net assets of the Fund totaled $387,995,588.

 

Because the combined entities have been managed as a single integrated entity since the merger was completed, it is not practicable to separate the amounts of revenue and earnings of CFP that have been included in the Fund’s Statement of Operations since June 26, 2015.

 

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

 


12

 

 


Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)

 

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, 2015, 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, 2015, the Fund did not invest in derivative instruments or engage in 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.

 

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, 2015, 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 2012 through 2014, and for the year ended December 31, 2015. 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-

 


 

13

 


Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)

 

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 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.

 


14

 

 


Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (continued)

 

The following is a summary of the inputs used as of December 31, 2015 in valuing the Fund’s investments carried at value:

 

Valuation Inputs

 

Investments

in Securities

   

Other

Financial

Instruments*

 

Level 1 – Quoted Prices

       

Equity Investments

 

$

318,526,230

   

$

 

Short-Term Investments

   

2,908,238

     

 

Level 2 – Other Significant Observable Inputs

   

     

 

Level 3 – Significant Unobservable Inputs

   

     

 

Total

 

$

321,434,468

   

$

 

 


*

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, 2015 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, 2015.

 

It is the Fund’s policy to recognize transfers into and out of any Level at the end of the reporting period.

 

In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or its Equivalent). The amendments apply to reporting entities that elect to measure the fair value of an investment using the net asset value per share (or its equivalent) practical expedient. The ASU is essentially effective for public entities beginning in 2016 and for all other entities beginning in 2017, but earlier application is permitted. Although still evaluating the potential impacts of ASU 2015-07 to the Fund, the Investment Manager does not expect the adoption of the ASU to have an effect on the Fund.

 

NOTE D. AGREEMENTS WITH AFFILIATES

 

At December 31, 2015, 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, 2015, Cornerstone earned $2,572,252 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, 2015, AFS earned $192,919 as administrator.

 

NOTE E. INVESTMENT IN SECURITIES

 

For the year ended December 31, 2015, purchases and sales of securities, other than short-term investments, were $411,797,402 and $226,086,822, respectively.

 


 

15

 


Cornerstone Strategic Value Fund, Inc.
Notes to Financial Statements (concluded)

 

NOTE F. SHARES OF COMMON STOCK

 

The Fund has 100,000,000 shares of common stock authorized and 21,407,414 shares issued and outstanding at December 31, 2015. Transactions in common stock for the year ended December 31, 2015 were as follows:

 

Shares at beginning of year

   

8,194,717

 

Shares newly issued in reinvestment of dividends and distributions

   

432,511

 

Shares issued in merger of CFP with and into CLM

   

12,780,186

 

Shares at end of year

   

21,407,414

 

 

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, 2015 and December 31, 2014 was as follows:

 

   

2015

   

2014

 

Ordinary Income

 

$

2,505,501

   

$

6,774,673

 

Long-Term Capital Gains

   

6,408,287

     

8,162,795

 

Return-of-Capital

   

56,039,075

     

22,273,549

 

Total Distributions

 

$

64,952,863

   

$

37,211,017

 

 

At December 31, 2015, the components of accumulated earnings on a tax basis for the Fund were as follows:

 

Net unrealized appreciation

 

$

788,685

 

Total accumulated earnings

 

$

788,685

 

 

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, 2015, the Fund increased accumulated net realized loss on investments by $694,635 and increased paid-in capital by $694,635. 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, 2015.

 

The Fund utilized $694,635 of capital loss carryforward acquired from CFP during the merger. As of December 31, 2015, the Fund had no remaining capital loss carryforwards.

 

The following information is computed on a tax basis for each item as of December 31, 2015:

 

Cost of portfolio investments

 

$

320,645,782

 

Gross unrealized appreciation

 

$

26,553,157

 

Gross unrealized depreciation

   

(25,764,471

)

Net unrealized appreciation

 

$

788,686

 

 

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 Stockholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
New York, New York

   

We have audited the accompanying statement of assets and liabilities of the Cornerstone Strategic Value Fund, Inc. (the “Fund”), including the schedule of investments as of December 31, 2015, and 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 the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2015, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Cornerstone Strategic Value Fund, Inc. as of December 31, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

 

TAIT, WELLER & BAKER LLP

 

Philadelphia, Pennsylvania
February
23, 2016

 


 

17

 


Results of Annual Meeting of Stockholders (unaudited)

 

On October 20, 2015, the Annual Meeting of Stockholders of the Fund was held and the following matter were voted upon based on 21,109,119 shares of common stock outstanding on the record date of August 24, 2015:

 

 

(1)

To approve the election of two directors to hold office until the year 2018 Annual Meeting of Stockholders.

 

Name of Directors

 

For

 

Withhold

Robert E. Dean

 

16,649,403

 

879,138

Scott B. Rogers

 

16,671,681

 

856,860

 


18

 

 


2015 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 2015 was 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:

 

1/30/15

   

2/27/15

   

3/31/15

   

4/30/15

   

5/29/15

   

6/30/15

 

Ordinary Income(1)

 

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

 

Return-of-Capital(2)

   

0.3175

     

0.3175

     

0.3175

     

0.3175

     

0.3175

     

0.3175

 

Capital Gain(3)

   

0.0363

     

0.0363

     

0.0363

     

0.0363

     

0.0363

     

0.0363

 

Total

 

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

 
                                                 

Payment Dates:

 

7/31/15

   

8/31/15

   

9/30/15

   

10/30/15

   

11/30/15

   

12/31/15

 

Ordinary Income(1)

 

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

   

$

0.0142

 

Return-of-Capital(2)

   

0.3175

     

0.3175

     

0.3175

     

0.3175

     

0.3175

     

0.3175

 

Capital Gain(3)

   

0.0363

     

0.0363

     

0.0363

     

0.0363

     

0.0363

     

0.0363

 

Total

 

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

   

$

0.3680

 

 


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 100% 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.

 


 

19

 


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.

1998

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

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.

2000

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.

2000

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.

2000

 


20

 

 


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

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 (since February 2012), Executive Vice President of Ultimus Fund Solutions, LLC (from March 2009-February 2012) previous Executive Director, JP Morgan Chase & Co.; Previous President of Bear Stearns Funds Management Inc.; Previous Senior Managing Director of Bear Stearns & Co. Inc.; Treasurer of the Fund and Cornerstone Total Return Fund, Inc.

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.

 


 

21

 


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 MKT 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 MKT 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

 


22

 

 


Description of Dividend Reinvestment Plan (unaudited) (concluded)

 

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. 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.

 


 

23

 


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, 2015 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.

 


24

 

 


Summary of General Information (unaudited)

 

Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment company whose shares trade on the NYSE MKT. 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 MKT (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.

 


 

25

 


 

 

 

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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 $26,000 and $20,000 with respect to the registrant's fiscal years ended December 31, 2015 and 2014, 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 $5,500 and $4,100 with respect to the registrant's fiscal years ended December 31, 2015 and 2014, 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. No fees were billed in either of the last two fiscal years other than the services reported in paragraphs (a) through (c) of this item.

 

(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, 2015 and 2014, aggregate non-audit fees of $5,500 and $4,100, 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, 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, 2015, net assets of Cornerstone Total Return Fund, Inc. were $115,331,199. 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, 2015 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
March 2, 2016
   

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
March 2, 2016
   
     
By (Signature and Title)*
/s/ Frank J. Maresca
 
   
Frank J. Maresca, Treasurer
 
   
(Principal Financial Officer)
 
       
Date
March 2, 2016
   

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