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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-05150
CORNERSTONE STRATEGIC VALUE FUND, INC.
(Exact name of registrant as specified in charter)
383 Madison Avenue, New York, New York 10179
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(Address of principal executive offices) (Zip code)
Jodi Levine
383 Madison Avenue, New York, New York 10179
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 272-3550
Date of fiscal year end: December 31, 2006
Date of reporting period: December 31, 2006
Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
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ITEM 1. REPORTS TO STOCKHOLDERS.
The report of Cornerstone Strategic Value Fund, Inc. (the "Registrant")
to stockholders for the year ended December 31, 2006 follows.
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DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Directors and President
William A. Clark Director and Vice President
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Gary A. Bentz Chief Compliance Officer
Thomas R. Westle Secretary
Jodi B. Levine Treasurer
STOCK TRANSFER AGENT
INVESTMENT MANAGER AND REGISTRAR
Cornerstone Advisors, Inc. American Stock Transfer &
One West Pack Square Trust Co.
Suite 1650 59 Maiden Lane
Asheville, NC 28801 New York, NY 10038
INDEPENDENT REGISTERED
ADMINISTRATOR PUBLIC ACCOUNTING FIRM
Bear Stearns Funds Tait, Weller & Baker LLP
Management Inc. 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, PA 19103
CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Blank Rome LLP
101 Carnegie Center 405 Lexington Avenue
Princeton, NJ 08540 New York, NY 10174
EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179
For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-3550.
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CORNERSTONE STRATEGIC
VALUE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2006
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CONTENTS
Portfolio Summary 1
Summary Schedule of Investments 2
Statement of Assets and Liabilities 4
Statement of Operations 5
Statement of Changes in Net Assets 6
Financial Highlights 7
Notes to Financial Statements 8
Report of Independent Registered Public Accounting Firm 12
Tax Information 13
Additional Information Regarding the Fund's
Directors and Corporate Officers 14
Description of Dividend Reinvestment Plan 17
Proxy Voting and Portfolio Holdings Information 19
Privacy Policy Notice 19
Summary of General Information 20
Shareholder Information 20
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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2006 (UNAUDITED)
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SECTOR ALLOCATION
Percent of
Sector Net Assets
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Financials 21.4
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Information Technology 14.9
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Healthcare 11.8
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Consumer Discretionary 10.9
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Industrials 10.7
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Energy 9.8
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Consumer Staples 9.4
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Utilities 3.5
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Telecommunication Services 3.1
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Materials 2.5
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Closed-End Funds 1.1
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Other 0.9
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TOP TEN HOLDINGS, BY ISSUER
Percent of
Holding Sector Net Assets
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1. Exxon Mobil Corporation Energy 4.1
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2. General Electric Company Industrials 2.9
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3. Microsoft Corporation Information Technology 2.4
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4. Bank of America Corporation Financials 2.3
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5. Citigroup Inc. Financials 2.0
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6. Johnson & Johnson Healthcare 2.0
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7. Procter & Gamble Company (The) Consumer Staples 2.0
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8. EMC Corporation Information Technology 1.9
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9. Cisco Systems, Inc. Information Technology 1.7
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10. American International Group, Inc. Financials 1.5
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1
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2006
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No. of
Description Shares Value
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EQUITY SECURITIES - 99.59%
CLOSED-END FUNDS - 1.10%
Total Closed-End Funds (a) $ 1,497,073
------------
CONSUMER DISCRETIONARY - 10.94%
Comcast Corporation, Special Class A * 19,037 805,836
Home Depot, Inc. (The) 23,100 927,696
Time Warner Inc. ^ 76,000 1,655,280
Other Consumer Discretionary (a) 11,528,546
------------
14,917,358
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CONSUMER STAPLES - 9.43%
Altria Group, Inc. 22,300 1,913,786
Coca-Cola Company (The) 27,000 1,302,750
PepsiCo, Inc. ^ 21,100 1,319,805
Procter & Gamble Company (The) 41,297 2,654,158
Wal-Mart Stores, Inc. 21,600 997,488
Other Consumer Staples (a) 4,670,519
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12,858,506
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ENERGY - 9.81%
Baker Hughes Incorporated 10,600 791,396
Chevron Corporation 24,532 1,803,838
ConocoPhillips ^ 17,974 1,293,229
Exxon Mobil Corporation 73,500 5,632,305
Occidental Petroleum Corporation 16,000 781,280
Schlumberger Limited 22,000 1,389,520
Other Energy (a) 1,688,207
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13,379,775
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FINANCIALS - 21.35%
American Express Company 19,600 1,189,132
American International Group, Inc. 28,331 2,030,199
Bank of America Corporation ^ 59,138 3,157,378
Citigroup Inc. ^ 49,300 2,746,010
No. of
Description Shares Value
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FINANCIALS (CONTINUED)
Goldman Sachs Group, Inc. (The) 7,300 $ 1,455,255
JPMorgan Chase & Co. 40,132 1,938,376
Metlife, Inc. 15,200 896,952
Morgan Stanley 15,500 1,262,165
Prudential Financial, Inc. 10,700 918,702
U.S. Bancorp 28,401 1,027,832
Wachovia Corporation 19,600 1,116,220
Wells Fargo & Company 48,400 1,721,104
Other Financials (a) 9,641,202
------------
29,100,527
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HEALTHCARE - 11.80%
Abbott Laboratories 28,000 1,363,880
Amgen Inc. * 18,900 1,291,059
Johnson & Johnson 40,900 2,700,218
Medtronic, Inc. 19,000 1,016,690
Merck & Co. Inc. 20,000 872,000
Pfizer Inc. 36,060 933,954
UnitedHealth Group Incorporated 17,000 913,410
WellPoint Inc. * 11,500 904,935
Wyeth 20,200 1,028,584
Other Healthcare (a) 5,063,876
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16,088,606
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INDUSTRIALS - 10.73%
3M Co. 9,400 732,542
Boeing Company (The) 9,200 817,328
Caterpillar Inc. 11,800 723,694
General Electric Company 105,400 3,921,934
Other Industrials (a) 8,433,156
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14,628,654
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INFORMATION TECHNOLOGY - 14.93%
Cisco Systems, Inc. * 82,900 2,265,657
EMC Corporation * 200,648 2,648,554
Google Inc. ^ * 2,500 1,151,200
Hewlett-Packard Company 19,900 819,681
Intel Corporation 82,500 1,670,625
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See accompanying notes to financial statements
2
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SUMMARY SCHEDULE OF INVESTMENTS - DECEMBER 31, 2006 (CONCLUDED)
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No. of
Description Shares Value
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INFORMATION TECHNOLOGY (CONTINUED)
International Business Machines Corporation 12,600 $ 1,224,090
Microsoft Corporation 109,200 3,260,712
Oracle Corporation * 44,272 758,822
Other Information Technology (a) 6,559,429
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20,358,770
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MATERIALS - 2.46%
Total Materials (a) 3,350,348
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REAL ESTATE INVESTMENT TRUST - 0.48%
Total Real Estate Investment Trust (a) 658,385
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TELECOMMUNICATION SERVICES - 3.05%
AT&T Inc. 31,364 1,121,263
BellSouth Corporation 19,000 895,090
Verizon Communications Inc. 35,600 1,325,744
Other Telecommunication Services (a) 817,045
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4,159,142
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UTILITIES - 3.51%
Total Utilities (a) 4,785,770
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TOTAL EQUITY SECURITIES
(cost - $106,625,134) 135,782,914
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Principal
Amount
Description (000's) Value
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SHORT-TERM INVESTMENTS - 2.46%
REPURCHASE AGREEMENTS - 2.46%
Bear, Stearns & Co. Inc. +
(Agreements dated 12/29/2006 to be
repurchased at $3,356,577)(b) $ 3,355 $ 3,355,249
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TOTAL SHORT-TERM INVESTMENTS
(cost - $3,355,249) 3,355,249
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TOTAL INVESTMENTS - 102.05%
(cost - $109,980,383) 139,138,163
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LIABILITIES IN EXCESS OF
OTHER ASSETS - (2.05)% (2,793,834)
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NET ASSETS - 100.00% $136,344,329
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* Non-income producing security.
^ Security or a portion thereof is out on loan.
+ Includes investments purchased with cash collateral received for securities
on loan.
(a) Represents issues not identified as a top 50 holding in terms of market
value and issues or issuers not exceeding 1% of net assets individually or
in the aggregate, respectively, as of December 31, 2006.
(b) At December 29, 2006, the maturity date for all repurchase agreements held
was January 2, 2007, with interest rates ranging from 2.6565% to 5.3130%
and collateralized by $3,455,445 in U.S. Treasury Bond Strips.
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See accompanying notes to financial statements.
3
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2006
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ASSETS
Investments, at value, including collateral for securities
on loan of $2,748,824 (Cost $109,980,383)(1) $ 139,138,163
Receivables:
Securities sold 2,313,478
Dividends 174,261
Interest 4,917
Prepaid expenses 2,116
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Total Assets 141,632,935
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LIABILITIES
Payables:
Upon return of securities loaned 2,748,824
Securities purchased 2,332,902
Investment management fees 103,285
Directors' fees 30,993
Other accrued expenses 67,544
Due to custodian 5,058
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Total Liabilities 5,288,606
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NET ASSETS (applicable to 25,643,074 shares of
common stock outstanding) $ 136,344,329
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NET ASSET VALUE PER SHARE ($136,344,329 / 25,643,074) $ 5.32
=============
NET ASSETS CONSISTS OF
Capital stock, $0.001 par value; 25,643,074 shares
issued and outstanding (100,000,000 shares authorized) $ 25,643
Paid-in capital 132,448,640
Cost of 1,060,821 shares repurchased (19,974,127)
Accumulated net realized loss on investments (5,313,607)
Net unrealized appreciation in value of investments 29,157,780
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Net assets applicable to shares outstanding $ 136,344,329
=============
(1) Includes securities out on loan to brokers with a market value of
$2,730,234.
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See accompanying notes to financial statements.
4
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2006
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INVESTMENT INCOME
Income:
Dividends $ 2,726,475
Interest 44,799
Securities lending 33,496
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Total Investment Income 2,804,770
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Expenses:
Investment management fees 1,352,257
Administration fees 135,224
Directors' fees 109,900
Legal and audit fees 63,577
Printing 51,001
Accounting fees 39,475
Custodian fees 23,190
Transfer agent fees 19,899
Stock exchange listing fees 15,993
Insurance 8,202
Miscellaneous 2,500
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Total Expenses 1,821,218
Less: Management fee waivers (134,059)
Less: Fees paid indirectly (33,228)
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Net Expenses 1,653,931
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Net Investment Income 1,150,839
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized loss from investments (61,098)
Capital gain distributions from regulated investment companies 39,515
Net change in unrealized appreciation in value of investments 16,725,100
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Net realized and unrealized gain on investments 16,703,517
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 17,854,356
============
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See accompanying notes to financial statements
5
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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
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For the Years Ended
December 31,
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2006 2005
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DECREASE IN NET ASSETS
Operations:
Net investment income $ 1,150,839 $ 834,753
Net realized gain/(loss) from investments (61,098) 27,008,793
Capital gain distributions from regulated investment companies 39,515 --
Net change in unrealized appreciation in value of investments 16,725,100 (22,438,516)
------------- -------------
Net increase in net assets resulting from operations 17,854,356 5,405,030
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Dividends and distributions to shareholders:
Net investment income (1,150,839) (980,195)
Net realized capital gains -- (24,369,995)
Return-of-capital (25,065,536) --
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Total dividends and distributions to shareholders (26,216,375) (25,350,190)
------------- -------------
Capital stock transactions:
Proceeds from 932,769 and 832,602 shares newly issued
or from treasury in reinvestment of dividends
and distributions, respectively 5,000,232 4,961,290
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Total decrease in net assets (3,361,787) (14,983,870)
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NET ASSETS
Beginning of year 139,706,116 154,689,986
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End of year $ 136,344,329 $ 139,706,116
============= =============
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See accompanying notes to financial statements.
6
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CORNERSTONE STRATEGIC VALUE FUND, INC. FINANCIAL HIGHLIGHTS
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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.
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For the Years Ended December 31,
------------------------------------------------------------
2006 2005 2004 2003 2002
---- ---- ---- ---- ----
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of year $ 5.65 $ 6.48 $ 6.90 $ 6.41 $ 9.20
-------- -------- -------- -------- --------
Net investment income/(loss) # 0.05 0.03 0.05 0.04 (0.01)
Net realized and unrealized gain/(loss)
on investments 0.66 0.18 0.55 1.44 (2.29)
-------- -------- -------- -------- --------
Net increase/(decrease) in net assets
resulting from operations 0.71 0.21 0.60 1.48 (2.30)
-------- -------- -------- -------- --------
Dividends and distributions to shareholders:
Net investment income (0.04) (0.04) (0.05) (0.04) --
Net realized gain on investments -- (1.00) -- -- --
Return-of-capital (1.00) -- (0.99) (0.95) (0.50)
-------- -------- -------- -------- --------
Total dividends and distributions to shareholders (1.04) (1.04) (1.04) (0.99) (0.50)
-------- -------- -------- -------- --------
Capital stock transactions:
Anti-dilutive effect due to capital
stock repurchased -- -- -- -- 0.02
Anti-dilutive/(dilutive) effect due to shares issued
in reinvestment of dividends and distributions -- -- 0.02 -- (0.01)
-------- -------- -------- -------- --------
Total capital stock transactions -- -- 0.02 -- 0.01
-------- -------- -------- -------- --------
Net asset value, end of year $ 5.32 $ 5.65 $ 6.48 $ 6.90 $ 6.41
======== ======== ======== ======== ========
Market value, end of year $ 8.45 $ 7.05 $ 8.51 $ 9.00 $ 5.85
======== ======== ======== ======== ========
Total investment return (a) 45.36% (1.32)% 8.38% 77.69% (20.85)%
======== ======== ======== ======== ========
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted) $136,344 $139,706 $154,690 $ 26,565 $ 24,376
Ratio of expenses to average net assets,
net of fee waivers, if any (b) 1.22% 1.20% 1.28% 1.20% 1.80%
Ratio of expenses to average net assets,
excluding fee waivers, if any (c) 1.32% 1.36% 1.50% 1.59% 2.17%
Ratio of expenses to average net assets,
net of fee waivers, if any (c) 1.25% 1.26% 1.36% 1.25% 1.86%
Ratio of net investment income/(loss) to
average net assets 0.85% 0.58% 0.73% 0.68% (0.13)%
Portfolio turnover rate 10.59% 21.60% 39.05% 11.88% 29.63%
-------------------------------------------------------------------------------------------------------------------------
# Based on average shares outstanding.
(a) Total investment return at market value is based on the changes in
market price of a share during the year and assumes reinvestment of
dividends and distributions, if any, at actual prices pursuant to the
Fund's dividend reinvestment plan. Total investment return does not
reflect brokerage commissions.
(b) Expenses are net of fees paid indirectly.
(c) Expenses exclude the reduction for fees paid indirectly.
See accompanying notes to financial statements.
7
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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NOTE A. SIGNIFICANT ACCOUNTING POLICIES
Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. 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.
The following is a summary of significant accounting policies consistently
followed by the Fund:
MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued as determined in good
faith by the Board of Directors. Short-term investments having a maturity of 60
days or less are valued on the basis of amortized cost. Securities and assets
for which market quotations are not readily available are valued at their fair
value as determined in good faith under procedures established by and under the
general supervision of the Board. Fair valuation methodologies and procedures
may include, but are not limited to: analysis and review of financial and
non-financial information abut the company; comparisons to the valuation and
changes in valuation of similar securities, including reference to special
reports prepared by analysts and or reports published in the financial press,
the financial conditions and prospects of the issuer available, including
considering any recent management or capital structure changes or other recent
events that may impact the price of the security; and evaluation of any other
information that could be indicative of the value of the security. At December
31, 2006, the Fund held no securities valued in good faith by the Board of
Directors. The net asset value per share of the Fund is calculated weekly and on
the last business day of the month with the exception of those days on which the
American Stock Exchange, LLC is closed.
In September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which
clarifies the definition of fair value and requires companies to expand their
disclosure about the use of fair value to measure assets and liabilities in
interim and annual periods subsequent to initial recognition. Adoption of SFAS
157 requires the use of the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. At this time, the Fund is in the
process of reviewing SFAS 157 against its current valuation policies to
determine future applicability.
REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks
================================================================================
8
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CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
and broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Investment
Manager" or "Cornerstone") considers creditworthy. The seller under a repurchase
agreement will be required to maintain the value of the securities as
collateral, subject to the agreement at not less than the repurchase price plus
accrued interest. Cornerstone monitors daily, the mark-to-market of the value of
the collateral, and, if necessary, requires the seller to maintain additional
securities, so that the value of the collateral is not less than the repurchase
price. Default by or bankruptcy of the seller would, however, expose the Fund to
possible loss because of adverse market action or delays in connection with the
disposition of the underlying securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification method for both financial reporting and
income tax purposes. Interest income is recorded on an accrual basis; dividend
income is recorded on the ex-dividend date.
TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.
In June 2006, the Financial Accounting Standards Board issued FASB
Interpretation No. ("FIN") 48, Accounting for Uncertainty in Income Taxes. FIN
48 is effective for financial statements issued for fiscal years beginning after
December 15, 2006. FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. The Fund does not expect the
FASB's issuance of FIN 48 to materially impact the Fund's financial condition or
results of operations.
DISTRIBUTIONS TO SHAREHOLDERS: Effective June 25, 2002, the Fund initiated a
fixed, monthly distribution to shareholders. On November 29, 2006, this
distribution policy was updated to provide for the annual resetting of the
monthly distribution amount per share, beginning in 2007, based on the Fund's
net asset value on the last business day in each October. The terms of the
distribution policy will be reviewed and approved at least annually by the
Fund's Board of Directors and can be modified at their discretion. To the extent
that these distributions exceed the current earnings of the Fund, the balance
will be generated from sales of portfolio securities held by the Fund, which
will either be short-term or long-term capital gains or a tax-free
return-of-capital. To the extent these distributions are not represented by net
investment income and capital gains, they will not represent yield or investment
return on the Fund's investment portfolio. The Fund plans to maintain this
distribution policy even if regulatory requirements would make part of a
return-of-capital, necessary to maintain the distribution, taxable to
shareholders and to disclose that portion of the distribution that is classified
as ordinary income. Although it has no current intention to do so, the Board may
terminate this distribution policy at any time and such termination may have an
adverse effect on the market price for the Fund's common shares. The Fund
determines annually whether to distribute any net realized long-term capital
gains in excess of net realized short-term capital losses, including capital
loss carryovers, if any. To the extent that the Fund's taxable income in any
calendar year exceeds the aggregate amount distributed pursuant to this
distribution policy, an additional distribution may be made to avoid the payment
of a 4% U.S. federal excise tax, and to the extent that the aggregate amount
distributed in any calendar year exceeds the Fund's taxable income, the amount
of that excess may constitute a return-of-capital for tax purposes. A
return-of-capital distribution reduces the cost basis of an investor's shares in
the Fund. Dividends and distributions to shareholders are recorded by the Fund
on the ex-dividend date.
================================================================================
9
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
NOTE B. AGREEMENTS
Cornerstone serves as the Fund's Investment Manager with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund, an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. During the year ended December
31, 2006, Cornerstone voluntarily agreed to waive its management fees from the
Fund to the extent that the Fund's net monthly operating expenses (including
basic legal fees but excluding other legal expenses) exceed a rate of 0.10% of
average net assets. For the year ended December 31, 2006, Cornerstone earned
$1,352,257 for investment management services, of which it waived $134,059. The
Investment Manager may discontinue such undertaking at any time during the
fiscal year without notice to fund shareholders.
Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $33,228 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.
The Fund paid or accrued approximately $44,878 for the year ended December 31,
2006 for legal services to Blank Rome LLP ("Blank"), counsel to the Fund. Thomas
R. Westle, partner of Blank, serves as Secretary of the Fund.
NOTE C. INVESTMENT IN SECURITIES
For the year ended December 31, 2006, purchases and sales of securities, other
than short-term investments, were $14,329,537 and $34,033,824 respectively.
NOTE D. SECURITIES LENDING
To generate additional income, the Fund may lend up to 33-1/3% of its total
assets. The Fund receives payments from borrowers equivalent to the dividends
and interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers at
December 31, 2006, was $2,730,234. During the year ended December 31, 2006, the
Fund earned $33,496 in securities lending income which is included under the
caption SECURITIES LENDING in the Statement of Operations.
NOTE E. FEDERAL INCOME TAXES
Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations. The tax
character of dividends and distributions paid during the years ended December
31, for the Fund were as follows:
ORDINARY INCOME RETURN-OF-CAPITAL
--------------- -----------------
2006 2005 2006 2005
---- ---- ---- ----
$1,150,839 $980,195 $25,065,536 --
LONG-TERM CAPITAL GAINS
-----------------------
2006 2005
---- ----
-- $24,369,995
================================================================================
10
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------
At December 31, 2006 the components of distributable earnings on a tax basis,
for the Fund were as follows:
Accumulated net realized loss $ (5,257,673)
Unrealized appreciation 29,101,846
------------
Total distributable earnings $ 23,844,173
============
Under current tax law, certain capital losses realized after October 31 within a
taxable year may be deferred and treated as occurring on the first day of the
following tax year ("Post-October losses"). For the tax period ended December
31, 2006, the Fund did not incur Post-October losses.
At December 31, 2006, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $5,257,673 of which $2,513,030 expires in 2008,
$1,281,365 expires in 2009, $693,207 expires in 2010, $635,700 expires in 2011,
and $134,371 expires in 2012.
At December 31, 2006, the identified cost for federal income tax purposes, as
well as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized appreciation from investments were $110,036,317, $30,273,165,
$1,171,319 and $29,101,846, respectively.
================================================================================
11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors
Cornerstone Strategic Value Fund, Inc.
New York, New York
We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2006, the related statement of operations for the year then
ended, the statement 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 the Fund's
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, 2006, 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
Cornerstone Strategic Value Fund, Inc. as of December 31, 2006, 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 7, 2007
================================================================================
12
2006 TAX INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. (the "Fund") is required by Subchapter M
of the Internal Revenue Code of 1986, as amended, to advise its shareholders
within 60 days of the Fund's year end (December 31, 2006) as to the U.S. federal
tax status of the dividends and distributions received by the Fund's
shareholders in respect of such fiscal year. As indicated in this notice,
significant portions of the Fund's distributions for 2006 were comprised of a
return-of-capital; accordingly these distributions do NOT represent yield or
investment return on the Fund's portfolio.
During the year ended December 31, 2006 the following dividends and
distributions per share were paid by the Fund:
SOURCES OF DIVIDENDS AND DISTRIBUTIONS
(PER SHARE AMOUNTS)
PAYMENT DATES: 1/31/06 2/28/06 3/31/06 4/28/06 5/31/06 6/30/06
-------- -------- -------- -------- -------- --------
Ordinary Income(1) $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038
Return-of-Capital(2) $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832
-------- -------- -------- -------- -------- --------
Total: $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870
======== ======== ======== ======== ======== ========
PAYMENT DATES: 7/31/06 8/31/06 9/29/06 10/31/06 11/30/06 12/29/06
-------- -------- -------- -------- -------- --------
Ordinary Income(1) $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038 $ 0.0038
Return-of-Capital(2) $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832 $ 0.0832
-------- -------- -------- -------- -------- --------
Total: $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870 $ 0.0870
======== ======== ======== ======== ======== ========
----------------------------------------------------------------------------------------------------------
(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.
The Fund has met the requirements to pass through all of its (100%) ordinary
income dividends as qualified dividends, which are subject to a maximum federal
tax rate of 15%. 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, shareholders
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.
Foreign shareholders 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.
Shareholders are strongly advised to consult their own tax advisers with respect
to the tax consequences of their investment in the Fund.
================================================================================
13
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED)
NUMBER OF
PORTFOLIOS IN
NAME AND POSITION FUND COMPLEX
ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE DIRECTORS
-------------------------------------------------------------------------------------------------------------------
Ralph W. Chairman of the President, Cornerstone Advisors, Inc.; 1998 2
Bradshaw** Board of Financial Consultant; President and
(Dec. 1950) Directors and Director of Cornerstone Total Return
President Fund, Inc.
William A. Director and Vice Director and Stockholder of Cornerstone 2004 2
Clark** President Advisors, Inc.; Director and Vice
(Oct. 1945) President of Cornerstone Total Return
Fund, Inc.; former financial consultant of
Deep Discount Advisors, Inc.
Glenn W. Director; Audit Chairman of the Board and Chief 2000 2
Wilcox, Sr. Committee Executive Officer of Wilcox Travel
(Dec. 1931) Chairman, Agency, Inc.; Director of Cornerstone
Nominating and Total Return Fund, Inc.
Corporate
Governance
Committee
Member
Thomas H. Director; Audit, Independent Financial Adviser; Director 1987 2
Lenagh Nominating and of Photonics Products Group; Director
(Nov. 1924) Corporate of Cornerstone Total Return Fund, Inc.;
Governance Director of Adams Express and
Committee Petroleum and Resources; Retired
Member Treasurer and Investment Manager of
Ford Foundation.
Edwin Director; Audit, Distinguished Fellow, The Heritage 2001 2
Meese III Nominating and Foundation Washington D.C.;
(Dec. 1931) Corporate Distinguished Visiting Fellow at the
Governance Hoover Institution, Stanford University;
Committee Senior Adviser, Revelation L.P.; formerly
Member U.S. Attorney General under President
Ronald Reagan; Director of Cornerstone
Total Return Fund, Inc.
================================================================================
14
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONTINUED)
NUMBER OF
PORTFOLIOS IN
NAME AND POSITION FUND COMPLEX
ADDRESS* POSITION(S) PRINCIPAL OCCUPATION WITH FUND OVERSEEN BY
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE DIRECTORS
-------------------------------------------------------------------------------------------------------------------
Scott B. Rogers Director; Audit, Chairman, Board of Health Partners, 2000 2
(July 1955) Nominating and Inc.; Chief Executive Officer, Asheville
Corporate Buncombe Community Christian
Governance Ministry; and President, ABCCM
Committee Doctor's Medical Clinic; Appointee, NC
Member Governor's Commission on Welfare to
Work; Director of Cornerstone Total
Return Fund, Inc.
Andrew A. Director; Attorney and senior member of Strauss 2000 2
Strauss Chairman of & Associates, P.A., Attorneys, Asheville
(Nov. 1953) Nominating and and Hendersonville, NC; previous
Corporate President of White Knight Healthcare,
Governance Inc. and LMV Leasing, Inc., a wholly
Committee and owned subsidiary of Xerox Credit
Audit Committee Corporation; Director of Cornerstone
Member Total Return Fund, Inc.
================================================================================
15
ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS
AND CORPORATE OFFICERS (UNAUDITED) (CONCLUDED)
NAME AND POSITION
ADDRESS* POSITION PRINCIPAL OCCUPATION WITH FUND
(BIRTH DATE) HELD WITH FUND OVER LAST 5 YEARS SINCE
--------------------------------------------------------------------------------------------------------------
Gary A. Bentz Chief Compliance Chairman and Chief Financial Officer of 2004
(June 1956) Officer Cornerstone Advisors, Inc.; previous Director,
Vice President and Treasurer of the Fund and
Cornerstone Total Return Fund, Inc.; Financial
Consultant, C.P.A., Chief Compliance Officer
of Cornerstone Total Return Fund, Inc.
Thomas R. Westle Secretary Partner, Blank Rome LLP, a law firm; 2000
405 Lexington Avenue previous partner, Spitzer & Feldman P.C.,
New York, NY 10174 a law firm; Secretary of Cornerstone
(Dec. 1953) Total Return Fund, Inc.
Jodi B. Levine Treasurer Associate Director, Bear, Stearns & Co. Inc.; 2004
(Aug. 1969) Treasurer of Cornerstone Total Return
Fund, Inc.
------------------------------------------------------------------------------------------------------------------
* The mailing address of each Director and/or Officer with respect to the Fund's operation is 383 Madison Ave.
-23rd Floor, New York, NY 10179 unless otherwise indicated.
** Designates a director who is an "interested person" of the Fund as defined by the Investment Company Act of 1940,
as amended. Messrs. Bradshaw and Clark are interested persons of the Fund by virtue of their current positions
with the Investment Manager of the Fund.
================================================================================
16
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. operates a Dividend Reinvestment Plan
(the "Plan"), sponsored and administered by American Stock Transfer & Trust
Company (the "Agent"), pursuant to which the Fund's income dividends or capital
gains or other distributions (each, a "Distribution" and collectively,
"Distributions"), net of any applicable U.S. withholding tax, are reinvested in
shares of the Fund. American Stock Transfer & Trust Company serves as the Agent
that administers the Plan for the shareholders in the Plan.
Shareholders automatically participate in the Fund's Plan, unless and until an
election is made to withdraw from the Plan on behalf of such participating
shareholder. Shareholders who do not wish to have Distributions automatically
reinvested should so notify the Agent at P.O. Box 922, Wall Street Station, New
York, New York 10269-0560. Under the Plan, the Fund's Distributions to
shareholders are reinvested in full and fractional shares as described below.
When the Fund declares a Distribution the Agent, on the shareholder's behalf,
will (i) receive additional authorized shares from the Fund either newly issued
or repurchased from shareholders by the Fund and held as treasury stock ("Newly
Issued Shares") or (ii) purchase outstanding shares on the open market, on the
American Stock Exchange, LLC or elsewhere, with cash allocated to it by the Fund
("Open Market Purchases").
The method for determining the number of shares to be received when
Distributions are reinvested will vary depending upon whether the net asset
value of the Fund's shares is higher or lower than its market price. If the net
asset value of the Fund's shares is lower than its market price, the number of
Newly Issued Shares received will be determined by dividing the amount of the
Distribution either by the Fund's net asset value per share or by 95% of its
market price, whichever is higher. If the net asset value of the Fund's shares
is higher than its market price, shares acquired by the Agent in Open Market
Purchases will be allocated to the reinvesting shareholders based on the average
cost of such Open Market Purchases.
Whenever the Fund declares a Distribution and the net asset value of the Fund's
shares is higher than its market price, the Agent will apply the amount of such
Distribution payable to Plan participants of the Fund in Fund shares (less such
Plan participant's pro rata share of brokerage commissions incurred with respect
to Open Market Purchases in connection with the reinvestment of such
Distribution) to the purchase on the open market of Fund shares for such Plan
participant's account. Such purchases will be made on or after the payable date
for such Distribution, and in no event more than 30 days after such date except
where temporary curtailment or suspension of purchase is necessary to comply
with applicable provisions of federal securities laws. The Agent may aggregate a
Plan participant's purchases with the purchases of other Plan participants, and
the average price (including brokerage commissions) of all shares purchased by
the Agent shall be the price per share allocable to each Plan participant.
Registered shareholders who do not wish to have their Distributions
automatically reinvested should so notify the Fund in writing. If a shareholder
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 shareholder will automatically receive such Distributions
in additional shares.
Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Distribution payment date.
When a Participant withdraws from the Plan, or upon suspension or termination of
the Plan at the sole discretion of the Fund's Board of Directors, certificates
for whole shares credited to his or her account under the Plan will, upon
request, be issued. Whether or not a participant requests that certificates for
whole shares be issued, a cash payment will be made for any fraction of a share
credited to such account.
The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records.
================================================================================
17
DESCRIPTION OF DIVIDEND REINVESTMENT PLAN (UNAUDITED) (CONCLUDED)
The Agent will hold shares in the account of the Plan participant in
non-certificated form in the name of the participant, and each shareholder's
proxy will include those shares purchased pursuant to the Plan. Each
participant, nevertheless, has the right to receive certificates for whole
shares owned. The Agent will distribute all proxy solicitation materials to
participating shareholders.
In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the shareholder's name and held for the account of
beneficial owners participating in the Plan.
Neither the Agent nor the Fund shall have any responsibility or liability beyond
the exercise of ordinary care for any action taken or omitted pursuant to the
Plan, nor shall they have any duties, responsibilities or liabilities except
such as expressly set forth herein. Neither shall they be liable hereunder for
any act done in good faith or for any good faith omissions to act, including,
without limitation, failure to terminate a participants account prior to receipt
of written notice of his or her death or with respect to prices at which shares
are purchased or sold for the participants account and the terms on which such
purchases and sales are made, subject to applicable provisions of the federal
securities laws.
All correspondence concerning the Plan should be directed to the Agent at P.O.
Box 922, Wall Street Station, New York, New York 10269-0560. Certain
transactions can be performed online at www.amstock.com or by calling the toll
free number 877-864-4833.
================================================================================
18
PROXY VOTING AND PORTFOLIO HOLDINGS INFORMATION (UNAUDITED)
Information regarding how the Cornerstone Strategic Value Fund, Inc. (the
"Fund") voted proxies related to its portfolio securities during the 12-month
period ended June 30 of each year as well as the policies and procedures that
the Fund uses to determine how to vote proxies relating to its portfolio
securities are available by calling (212) 272-3550 or on the website of the
Securities and Exchange Commission, http://www.sec.gov.
This report incorporates a Summary Schedule of Investments for the Fund. A
complete Schedule of Investments for the Fund may be obtained free of charge by
contacting the Fund at (212) 272-3550.
The Fund files a complete schedule of its portfolio holdings for the first and
third quarters of its fiscal year with the SEC on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov and may be reviewed and
copied at the SEC's Public Reference Room in Washington, DC. Information on the
operation of the SEC's Public Reference Room may be obtained by calling (202)
551-8090.
PRIVACY POLICY NOTICE (UNAUDITED)
The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.
CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:
1. Information from the Consumer: this category includes information the
Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address phone
number, social security number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your trans- actions with the Fund, its affiliates,
or others (such as your account number and balance, payment history,
parties to transactions, cost basis information, and other financial
information).
CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.
CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.
================================================================================
19
SUMMARY OF GENERAL INFORMATION (UNAUDITED)
Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified investment
company whose shares trade on the American Stock Exchange, LLC. Its investment
objective is to seek long-term capital appreciation through investment primarily
in equity securities of U.S. and non-U.S. companies. The Fund is managed by
Cornerstone Advisors, Inc.
SHAREHOLDER INFORMATION (UNAUDITED)
The Fund is listed on the American Stock Exchange, LLC (symbol "CLM"). The share
price is published in: THE NEW YORK TIMES (daily) under the designation
"CornerStrt" and THE WALL STREET JOURNAL (daily) and BARRON'S (each Monday)
under the designation "CornstnStrat." The net asset value per share is available
weekly and may be obtained by contacting the Fund at the general inquiry phone
number.
--------------------------------------------------------------------------------
NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
This report, including the financial statements herein, is sent to the
shareholders of the Fund for their information. It is not a prospectus, circular
or representation intended for use in the purchase or sale of shares of the Fund
or of any securities mentioned in the report.
--------------------------------------------------------------------------------
================================================================================
20
CORNERSTONE STRATEGIC VALUE FUND, INC.
ITEM 2. CODE OF ETHICS.
(a) 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 accounting officer, and persons performing similar functions.
(c) and (d). During the period covered by this report, there was no amendment
to, and no waiver granted from, any provision of the code of ethics that applies
to the Registrant's principal executive officer, principal accounting officer,
and persons performing similar functions.
(f)(1) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit
(EX-99.CODE ETH) a copy of its code of ethics that applies to its principal
executive officer, principal financial officer, and persons performing similar
functions.
(f)(3) The Registrant undertakes to provide to any person without charge, upon
request, a copy of its code of ethics. This can be accomplished by calling the
Registrant at (212)272-3550.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's board of directors has determined that it does not have
an audit committee financial expert serving on its audit committee.
(a)(2) Not applicable
(a)(3) At this time, the registrant believes that the experience provided by
each member of the audit committee together offer the registrant adequate
oversight for the registrant's level of financial complexity.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) through (d). The information
in the table below is provided for services rendered to the registrant by its
independent registered public accounting firm, Tait, Weller & Baker LLP for the
Registrant's fiscal years ended December 31, 2006 and December 31, 2005.
2006 2005
------- -------
Audit Fees $16,400 $15,600
Audit-related Fees -- --
Tax Fees (1) $ 3,300 $ 3,100
All Other Fees -- --
------- -------
Total $19,700 $18,700
======= =======
(1) Tax services in connection with the registrant's excise tax calculations and
review of the registrant's applicable tax returns.
(e)(1) Audit Committee Pre-Approval Policies and Procedures.
Before the auditor is (i) engaged by the Registrant to render audit,
audit related or permissible non-audit services to the Registrant or (ii) with
respect to non-audit services to be provided by the auditor to the Registrant's
investment adviser or any entity in the investment Registrant complex, if the
nature of the services provided relate directly to the operations or financial
reporting of 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 minimis thresholds
are not exceeded, as such thresholds are set forth by the Audit Committee and in
accordance with applicable SEC rules and regulations.
(e)(2) None of the services provided to the Registrant described in paragraphs
(b)-(d) of Item 4 were pre-approved by the Audit Committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) There were no non-audit fees billed by Tait, Weller & Baker LLP for services
rendered to the Registrant, the Registrant's investment advisor (not including
any sub-advisor whose role is primarily portfolio management and is
subcontracted with or overseen by another investment advisor) or any entity
controlling, controlled by, or under common control with the investment advisor
that provides ongoing services to the Registrant for the Registrant's last two
fiscal years (December 31, 2005 and December 31, 2006).
(h) No disclosures are required by this Item 4(h).
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, as amended. Glenn Wilcox (Chair), Edwin Meese, Thomas
Lenagh, Andy Strauss and Scott Rogers are the members of the Registrant's audit
committee.
(b) Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS -- DECEMBER 31, 2006
--------------------------------------------------------------------------------
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
EQUITY SECURITIES - 99.59%
CLOSED-END FUNDS - 1.10%
Adams Express Company 49,500 $ 686,565
General American Investors Company 3,000 111,360
Liberty All-Star Equity Fund 67,300 557,917
Liberty All-Star Growth Fund, Inc. 26,300 141,231
-----------
1,497,073
-----------
CONSUMER DISCRETIONARY - 10.94%
Amazon.com, Inc. * 5,500 217,030
Bed Bath & Beyond Inc. ^ * 4,200 160,020
Best Buy Co., Inc. ^ 3,625 178,314
Black & Decker Corporation (The) 3,000 239,910
Carnival Corporation 11,800 578,790
Clear Channel Communications, Inc. ^ 6,300 223,902
Coach, Inc. * 3,500 150,360
Comcast Corporation, Special Class A * 19,037 805,836
D.R. Horton, Inc. 7,000 185,430
Federated Department Stores, Inc. 11,052 421,413
Fortune Brands, Inc. ^ 3,500 298,865
Gannett Co., Inc. 3,500 211,610
Gap, Inc. (The) 12,200 237,900
Goodyear Tire & Rubber Company (The) * 4,500 94,455
Harley-Davidson, Inc. 4,400 310,068
Hilton Hotels Corporation 6,200 216,380
Home Depot, Inc. (The) 23,100 927,696
J.C. Penney Company, Inc. 4,500 348,120
Johnson Controls, Inc. 2,500 214,800
Kohl's Corporation * 2,500 171,075
Lowe's Companies, Inc. 22,400 697,760
Marriott International, Inc., Class A 4,200 200,424
Mattel, Inc. 5,500 124,630
McDonald's Corporation 15,100 669,383
News Corporation, Class A 23,000 494,040
NIKE, Inc., Class B 7,300 722,919
Omnicom Group Inc. ^ 4,100 428,614
Sears Holdings Corporation * 503 84,469
Staples, Inc. 10,800 288,360
Starbucks Corporation * 10,800 382,536
Target Corporation 11,800 673,190
Time Warner Inc. ^ 76,000 1,655,280
TJX Companies, Inc. (The) 3,000 85,440
Toyota Motor Corporation ADR 2,500 335,775
Univision Communications Inc., Class A * 7,000 247,940
Viacom Inc., Class B * 11,950 490,308
1
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Walt Disney Company (The) 20,200 692,254
Wyndham Worldwide Corp * 3,100 99,262
Yum! Brands, Inc. 6,000 352,800
-----------
14,917,358
-----------
CONSUMER STAPLES - 9.43%
Altria Group, Inc. 22,300 1,913,786
Anheuser-Busch Companies, Inc. 6,200 305,040
Archer-Daniels-Midland Company 9,460 302,342
Campbell Soup Company 2,000 77,780
Coca-Cola Company (The) 27,000 1,302,750
Colgate-Palmolive Company 5,900 384,916
ConAgra Foods, Inc. 4,400 118,800
Costco Wholesale Corporation 6,500 343,655
CVS Corporation 14,000 432,740
General Mills, Inc. 12,000 691,200
H.J. Heinz Company 4,000 180,040
Kimberly-Clark Corporation 5,500 373,725
Kroger Co. (The) 13,800 318,366
PepsiCo, Inc. ^ 21,100 1,319,805
Procter & Gamble Company (The) 41,297 2,654,158
Sara Lee Corporation 16,000 272,480
Sysco Corporation ^ 5,800 213,208
Walgreen Co. 14,300 656,227
Wal-Mart Stores, Inc. 21,600 997,488
-----------
12,858,506
-----------
ENERGY - 9.81%
Anadarko Petroleum Corp. 2,600 113,152
Baker Hughes Incorporated 10,600 791,396
BJ Services Company 3,500 102,620
Chevron Corporation 24,532 1,803,838
ConocoPhillips ^ 17,974 1,293,229
Devon Energy Corporation 5,000 335,400
Exxon Mobil Corporation 73,500 5,632,305
Halliburton Company 6,700 208,035
Marathon Oil Corp. 7,500 693,750
Occidental Petroleum Corporation 16,000 781,280
Schlumberger Limited 22,000 1,389,520
XTO Energy, Inc. 5,000 235,250
-----------
13,379,775
-----------
FINANCIALS - 21.35%
AFLAC Incorporated 7,000 322,000
Allstate Corporation (The) 9,300 605,523
American Express Company 19,600 1,189,132
American International Group, Inc. 28,331 2,030,199
Aon Corporation 4,900 173,166
Bank of America Corporation ^ 59,138 3,157,378
Bank of New York Company, Inc. (The) 11,400 448,818
BB&T Corporation 4,000 175,720
2
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Bear Stearns Companies, Inc. (The) 2,500 406,950
Charles Schwab Corporation (The) 6,000 116,040
Chubb Corporation (The) 4,100 216,931
Citigroup Inc. ^ 49,300 2,746,010
Fannie Mae 9,300 552,327
Franklin Resources, Inc. 3,700 407,629
Freddie Mac 10,400 706,160
Goldman Sachs Group, Inc. (The) 7,300 1,455,255
Hartford Financial Services Group, Inc. (The) 6,000 559,860
JPMorgan Chase & Co. 40,132 1,938,376
Lehman Brothers Holdings Inc. 7,200 562,464
Marsh & McLennan Companies, Inc. ^ 6,000 183,960
Merrill Lynch & Co., Inc. 7,200 670,320
Metlife, Inc. 15,200 896,952
Morgan Stanley 15,500 1,262,165
National City Corporation 12,700 464,312
PNC Financial Services Group, Inc. 4,600 340,584
Prudential Financial, Inc. 10,700 918,702
Realogy Corporation * 7,000 212,240
St. Paul Travelers Companies, Inc. (The) 9,476 508,766
State Street Corporation 3,500 236,040
SunTrust Banks, Inc. 7,600 641,820
U.S. Bancorp 28,401 1,027,832
UnumProvident Corporation 8,100 168,318
Wachovia Corporation 19,600 1,116,220
Washington Mutual, Inc. 15,550 707,370
Wells Fargo & Company 48,400 1,721,104
Western Union Company ^ 11,324 253,884
-----------
29,100,527
-----------
HEALTHCARE - 11.80%
Abbott Laboratories 28,000 1,363,880
Aetna Inc. ^ 6,000 259,080
Amgen Inc. * 18,900 1,291,059
Applera Corporation 8,000 293,520
Baxter International Inc. 5,000 231,950
Becton, Dickinson and Company 6,900 484,035
Biogen Idec Inc. * 5,500 270,545
Boston Scientific Corporation * 15,551 267,166
Bristol-Myers Squibb Company 25,500 671,160
Cardinal Health, Inc. 5,450 351,144
Caremark Rx, Inc. 9,000 513,990
Eli Lilly and Company 4,700 244,870
Gilead Sciences, Inc. * 3,500 227,255
Hospira, Inc. * 3,700 124,246
IMS Health Incorporated 7,400 203,352
Johnson & Johnson 40,900 2,700,218
McKesson Corporation 5,300 268,710
Medco Health Solutions, Inc. ^ * 6,687 357,353
Medtronic, Inc. 19,000 1,016,690
3
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Merck & Co. Inc. 20,000 872,000
Pfizer Inc. 36,060 933,954
Schering-Plough Corporation ^ 12,500 295,500
UnitedHealth Group Incorporated 17,000 913,410
WellPoint Inc. * 11,500 904,935
Wyeth 20,200 1,028,584
-----------
16,088,606
-----------
INDUSTRIALS - 10.73%
3M Co. 9,400 732,542
Boeing Company (The) 9,200 817,328
Burlington Northern Santa Fe Corporation 2,900 214,049
Caterpillar Inc. 11,800 723,694
CSX Corporation 14,300 492,349
Danaher Corporation ^ 3,500 253,540
Emerson Electric Co. 12,000 528,840
FedEx Corp. 4,500 488,790
General Dynamics Corporation 6,200 460,970
General Electric Company 105,400 3,921,934
Honeywell International Inc. 12,500 565,500
Illinois Tool Works Inc. 13,300 614,327
Ingersoll-Rand Company Ltd. Class A 7,000 273,910
Lockheed Martin Corporation 4,000 368,280
Masco Corporation ^ 4,200 125,454
Norfolk Southern Corporation 10,000 502,900
Northrop Grumman Corporation 5,000 338,500
Rockwell Automation, Inc. 2,500 152,700
Southwest Airlines Co. 5,700 87,324
Textron Inc. 4,500 421,965
Tyco International Ltd. 10,397 316,069
Union Pacific Corporation 2,000 184,040
United Parcel Service, Inc., Class B 9,600 719,808
United Technologies Corporation ^ 11,000 687,720
Waste Management, Inc. 17,300 636,121
-----------
14,628,654
-----------
INFORMATION TECHNOLOGY - 14.93%
Adobe Systems Incorporated * 6,700 275,504
Agilent Technologies Inc. * 4,500 156,825
Analog Devices, Inc. 3,500 115,045
Apple Computer, Inc. * 3,000 254,520
Applied Materials, Inc. ^ 33,800 623,610
Automatic Data Processing, Inc. 12,400 610,700
Cisco Systems, Inc. * 82,900 2,265,657
Corning Incorporated * 8,000 149,680
Dell Inc. * 4,700 117,923
eBay Inc. * 17,000 511,190
Electronic Arts Inc. * 5,000 251,800
Electronic Data Systems Corporation 5,000 137,750
EMC Corporation * 200,648 2,648,554
First Data Corporation 15,824 403,828
4
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Google Inc., Class A ^ * 2,500 1,151,200
Hewlett-Packard Company 19,900 819,681
Intel Corporation 82,500 1,670,625
International Business Machines Corporation 12,600 1,224,090
Linear Technology Corporation ^ 4,000 121,280
Micron Technology, Inc. * 11,500 160,540
Microsoft Corporation 109,200 3,260,712
Motorola, Inc. 34,700 713,432
Oracle Corporation * 44,272 758,822
QUALCOMM Inc. 17,000 642,430
Sun Microsystems, Inc. * 7,500 40,650
Symantec Corporation * 5,000 104,250
Texas Instruments Incorporated 23,900 688,320
Yahoo! Inc. * 18,800 480,152
-----------
20,358,770
-----------
MATERIALS - 2.46%
Air Products & Chemicals, Inc. 1,000 70,280
Alcoa Inc. 16,900 507,169
Dow Chemical Company (The) 15,400 615,076
E. I. du Pont de Nemours and Company 14,800 720,908
International Paper Company 10,500 358,050
Monsanto Company 10,160 533,705
Newmont Mining Corporation 7,000 316,050
Praxair, Inc. 3,000 177,990
Rohm and Hass Company 1,000 51,120
-----------
3,350,348
-----------
REAL ESTATE INVESTMENT TRUST - 0.48%
Simon Property Group, Inc. ^ 6,500 658,385
-----------
658,385
-----------
TELECOMMUNICATIONS SERVICES - 3.05%
ALLTEL Corporation 4,000 241,920
AT&T Inc. 31,364 1,121,263
BellSouth Corporation 19,000 895,090
Sprint Nextel Corporation ^ 30,446 575,125
Verizon Communications Inc. 35,600 1,325,744
-----------
4,159,142
-----------
UTILITIES - 3.51%
American Electric Power Company, Inc. 5,500 234,190
CenterPoint Energy, Inc. 10,000 165,800
Dominion Resources, Inc. 4,600 385,664
Duke Energy Corporation ^ 15,800 524,718
Edison International ^ 6,500 295,620
Exelon Corporation 6,000 371,340
FirstEnergy Corp. 5,000 301,050
FPL Group, Inc. 4,000 217,680
PG&E Corporation ^ 9,000 425,970
Progress Energy, Inc. ^ 3,500 171,780
Public Service Enterprise Group Incorporated 6,000 398,280
5
NO. OF
DESCRIPTION SHARES VALUE
--------------------------------------------------------------------------------
Southern Company (The) 11,900 438,634
TXU Corp. 12,400 672,204
Williams Companies, Inc. (The) 7,000 182,840
-----------
4,785,770
-----------
TOTAL EQUITY SECURITIES
(cost - $106,625,134) 135,782,914
-----------
PRINCIPAL
AMOUNT
(000'S)
SHORT-TERM INVESTMENTS - 2.46%
REPURCHASE AGREEMENTS - 2.46%
Bear, Stearns and Co., Inc. + ++
(Agreement dated 12/29/2006 to be
repurchased at $2,107,246), 2.6565%,
1/2/2007, collateralized by $2,169,076
in U.S. Treasury Bond Strips) $ 2,107 2,106,624
Bear, Stearns and Co., Inc. + ++
(Agreement dated 12/29/2006 to be
repurchased at $642,579), 5.3130%,
1/2/2007, collateralized by $661,422
in U.S. Treasury Bond Strips) 642 642,200
Bear, Stearns and Co., Inc.
(Agreement dated 12/29/2006 to be
repurchased at $606,752), 4.8500%,
1/2/2007, collateralized by $624,947
in U.S. Treasury Bond Strips) 606 606,425
------------
3,355,249
------------
TOTAL SHORT-TERM INVESTMENTS
(cost - $3,355,249) 3,355,249
------------
TOTAL INVESTMENTS - 102.05% 139,138,163
(cost - $109,980,383) 139,138,163
------------
LIABILITIES IN EXCESS OF OTHER ASSETS - (2.05)% (2,793,834)
------------
NET ASSETS - 100.00% $136,344,329
============
--------------
ADR American Depositary Receipt
* Non-income producing security.
+ Stated interest rate, before rebate earned by borrower of securities on
loan.
++ Represents investment purchased with collateral received for securities on
loan.
^ Security or a portion thereof is out on loan.
6
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
CORNERSTONE STRATEGIC VALUE FUND, INC.
NEW YORK, NEW YORK
We have audited the accompanying statement of assets and liabilities of
Cornerstone Strategic Value Fund, Inc., including the schedule of investments as
of December 31, 2006, the related statement of operations for the year then
ended, the statement 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 the Fund's
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, 2006, 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
Cornerstone Strategic Value Fund, Inc. as of December 31, 2006, 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.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule of investments in securities
as of December 31, 2006 appearing in Item 6 of this Form N-CSR is presented for
the purpose of additional analysis and is not a required part of the basic
financial statements. This additional information is the responsibility of the
Fund's management. Such information has been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
TAIT, WELLER & BAKER LLP
PHILADELPHIA, PENNSYLVANIA
FEBRUARY 7, 2007
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Registrant and Cornerstone Advisors, Inc. share the same Proxy
Voting Policies and Procedures. The respective Proxy Voting Policies and
Procedures of the Registrant and Adviser are attached as EXHIBIT99.VOTEREG
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a)(1) All information contained in this item and its subparts is as of the date
of this filing, unless otherwise noted. Ralph W. Bradshaw and William A. Clark
are employees of Cornerstone Advisors, Inc. (the Investment Manager) and
portfolio managers of the Fund. Mr. Bradshaw has acted as the portfolio manager
since 2001. Mr. Clark has acted as the portfolio manager since 2003. Ralph W.
Bradshaw's occupation for the last five years is President of Cornerstone
Advisors, Inc. and a Financial Consultant. William A. Clark's occupation for the
last five years is Director and Stockholder of Cornerstone Advisors, Inc. and a
former financial consultant of Deep Discount Advisors, Inc.
(a)(2)(i) Ralph W. Bradshaw and William A. Clark
(a)(2)(ii)(A) Registered Investment Companies - Ralph W. Bradshaw and William A.
Clark each manage one other registered closed-end fund (Cornerstone Total Return
Fund, Inc.) As of December 31, 2006, the total assets of Cornerstone Total
Return Fund, Inc. was $53.4 million.
(a)(2)(ii)(B) Not applicable
(a)(2)(ii)(C) Not applicable
(a)(2)(iii) None. Ralph W. Bradshaw and William A. Clark manage no accounts
where the Advisory Fee is based on the performance of the account.
(a)(2)(iv) None.
(a)(3) As of the most recent fiscal year end December 31, 2006, the compensation
paid to both Ralph W. Bradshaw and William A. Clark was fixed.
(a)(4) The dollar range of equity securities owned in the registrant
beneficially by each portfolio manager is as follows: for Ralph W. Bradshaw it
is in the range of $50,001-$100,000 and for William A. Clark it is over
$100,000.
(b) None.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
None.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive officer and principal financial officer
have evaluated the Registrant's disclosure controls and procedures as of a date
within 90 days of this filing and have concluded that the Registrant's
disclosure controls and procedures are effective, as of such date, in ensuring
that information required to be disclosed by the registrant in this Form N-CSR
was recorded, processed, summarized, and reported timely.
(b) The Registrant's principal executive officer and principal financial officer
are aware of no changes in the Registrant's internal control over financial
reporting that occurred during the Registrant's last fiscal half-year that has
materially affected, or is reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of Ethics attached as EX-99.CODE ETH.
(a)(2) Separate certifications of Principal Executive and Financial Officers
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 attached as
EX-99.CERT.
(b) Certification of Principal Executive and Financial Officers pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 furnished as EX-99.906 CERT.
(99) Proxy Voting Policies of the Registrant and Adviser attached as
EX-99.VOTEREG.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /S/ RALPH W. BRADSHAW
-------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: March 9, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Cornerstone Strategic Value Fund, Inc.
By: /S/ RALPH W. BRADSHAW
-------------------------
Name: Ralph W. Bradshaw
Title: Principal Executive Officer
Date: March 9, 2007
By: /S/ JODI B. LEVINE
----------------------
Name: Jodi B. Levine
Title: Principal Financial Officer
Date: March 9, 2007