Edgar Filing: CORNERSTONE STRATEGIC VALUE FUND INC/ NEW

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DIRECTORS AND CORPORATE OFFICERS
Ralph W. Bradshaw Chairman of the Board of
Directors and President
Gary A. Bentz Director, Vice President and Treasurer
Thomas H. Lenagh Director
Edwin Meese III Director
Scott B. Rogers Director
Andrew A. Strauss Director
Glenn W. Wilcox, Sr. Director
Thomas R. Westle Secretary

STOCK TRANSFER AGENT
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

ADMINISTRATOR INDEPENDENT ACCOUNTANTS
Bear Stearns Funds Tait, Weller & Baker
Management Inc. 1818 Market Street
383 Madison Avenue Suite 2400
New York, NY 10179 Philadelphia, PA 19103

CUSTODIAN LEGAL COUNSEL
Custodial Trust Company Spitzer & Feldman P.C.
101 Carnegie Center 405 Park Avenue
Princeton, NJ 08540 New York, NY 10022

EXECUTIVE OFFICES
383 Madison Avenue
New York, NY 10179

For shareholder inquiries, registered shareholders should call (800) 937-5449.
For general inquiries, please call (212) 272-2093.

[LOGO]
AMERICAN
STOCK EXCHANGE(r)
LISTED
CML(tm)

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 this report.

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CORNERSTONE STRATEGIC
VALUE FUND, INC.

ANNUAL REPORT
DECEMBER 31, 2002

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CONTENTS

Letter to Shareholders 1

Portfolio Summary 4

Schedule of Investments 5

Statement of Assets and Liabilities 9

Statement of Operations 10

Statements of Changes in Net Assets 11

Financial Highlights 12

Notes to Financial Statements 13

Report of Independent Accountants 17

Results of Annual Meeting of Stockholders 18

Tax Information 19

Additional Information Regarding the Fund's Directors and Officers 20

Description of Dividend Reinvestment & Cash Purchase Plan 22

Summary of General Information 24

Shareholder Information 24

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LETTER TO SHAREHOLDERS

January 24, 2003

Dear Fellow Shareholders:

Our annual report for Cornerstone Strategic Value Fund, Inc. (the "Fund"),
covering the year ended December 31, 2002 follows. At the end of the year, the
Fund's net assets were $24.4 million and the Net Asset Value ("NAV") per share
was $6.41. Monthly distributions to shareholders, which were initiated in July,
totaled $0.50 per share for the year, all of which was classified as
return-of-capital. The share price closed at $5.85 and the Fund's price discount
to NAV improved from 12.5% at the beginning of the year to 8.7% at the end of
the year.

Cornerstone Advisors, Inc., our Fund's investment manager, began its stewardship
over the Fund's assets after the first quarter 2001. The manager's goal is to
add value by continuing to outperform the Fund's benchmark. This will be
accomplished by striving to optimize portfolio performance, minimizing expenses
and taking advantage of the Fund's discount to benefit its shareholders.

The focus on improving the discount to NAV provided substantial benefit to
shareholders. The improvement in discount augmented the return from portfolio
performance so that the total investment return for a shareholder who reinvested
his distributions was (20.9)%, outpacing our benchmark S&P 500 Index which
returned (22.1)%.

ECONOMIC AND MARKET SUMMARY

Throughout the year, it paid to keep a long-term view as the markets in 2002
retreated through the first three quarters only to recover some of the losses in
the final period. World crisis in Afghanistan and Iraq alternated headlines with
the progressive uncovering of corporate fraud and greed among some of the
largest companies in America, further burdening an already sickly economy.
Consumer spending and an active market for homes, however, provided steady
encouragement and much needed support.

Like the U.S., most of the major global indices were also down substantially.
Some Asian economies turned in relatively strong performances, but even with the
euro's rise to a three year high against the dollar, many in Europe still
finished behind the weak U.S. numbers.

Those seeking safer investments drove short-term Treasury yields down and prices
up as they sought a haven from volatile equity markets. Deflation replaced
inflation as a cause for concern. Short-term interest rates remained low through
the year as the Federal Reserve reduced its benchmark rate to 1.25%. However,
growing budget deficits and a fragile economy give mixed signals for bonds in
the new year.

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LETTER TO SHAREHOLDERS (CONTINUED)

PORTFOLIO PERFORMANCE

Through most of the period, our Fund's portfolio stayed fully invested. The
Fund's holdings were broadly diversified across and within sectors and, at
various times, utilized closed-end fund and global equity positions. This
approach served us well as many sectors flip-flopped between being leader and
laggard.

Ultimately, not a single major U.S. industry group ended the year with a gain.
Strong consumer spending allowed consumer non-cyclicals to turn in the best
group performance with a single-digit loss. As in 2001, however,
telecommunications and technology once again yielded dismal performances.
Industrials followed close behind and even utilities, which are often viewed as
stable in a storm, left investors with substantial double-digit losses for the
year.

OUTLOOK

After three straight years of market decline, we approach 2003 with cautious
optimism. Some point out that four down years in a row are almost unheard of but
then, they probably are among those who expected positive market returns in
2002. The economy, while certainly not strong, continues to show signs of
recovery, albeit without the hoped for drop in unemployment. Recent bear markets
have ended with steep gains, however, we expect mild growth with up and down
market moves leading to moderate gains for the year.

Recent weakness in the dollar has given a boost to some global markets. In the
short-term, larger companies often benefit most from a falling U.S. dollar as
their competitive positions improve.

A stronger economy is better viewed as a "when" not an "if". Quick positive
resolution in Iraq and North Korea, encouraging earnings reports and bipartisan
cooperation in government may all hasten a recovery from current levels. Recent
actions by the current administration should provide additional stimulus towards
this end. At the end of 2003, the world will still be a dangerous place and
earning disappointments or unresolved international situations may prolong
negative sentiment, but uncertainty also creates investment opportunity.

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LETTER TO SHAREHOLDERS (CONCLUDED)

CREATING VALUE

Our goal is to produce extra value for our shareholders and to this end, recent
additional steps have been taken to benefit the owners of our Fund. The most
significant contribution to Fund performance over the last year has been the
result of actions designed to exploit the Fund's discount. We believe that the
improving discount picture reflects the market's favorable view of our Fund's
direction.

We believe the ongoing repurchase of shares selling below NAV in the open market
has enhanced NAV performance. In addition, these repurchases reduced the supply
of shares available for sale, thus changing the demand/supply balance and
helping to reduce the discount.

The manager attempts to enhance portfolio performance by exploiting pricing
inefficiencies in components of our fully diversified U.S. stock portfolio. The
magnitude and availability of such opportunities are unpredictable and therefore
any resulting portfolio out-performance may vary considerably from year to year.

This year, the Board established a monthly distribution policy with a high fixed
payout. These distributions allow shareholders to receive substantial portions
of their investment in cash or to continue their holdings in the Fund's stock by
reinvesting in new shares. This policy gives flexibility to our owners and we
believe that it will have a continuing positive influence on the level of the
Fund's discount to NAV. Losses in the portfolio allowed the 2002 distributions
to be classified as a return-of-capital, which defers taxes until sufficient
gains are realized in future periods.

Over the past year, diligent attention to Fund operating expenses has reduced
them substantially. In addition, Cornerstone Advisors, Inc. has extended its
voluntary agreement to waive a substantial portion of its management fees to the
extent that monthly operating expenses exceed a monthly rate of 0.1%. This
effort demonstrates how seriously the manager views keeping expenses under
control. It will result in a lower expense ratio than would otherwise be the
case, further adding value. We believe that these steps will also help control
the discount and lead to our Fund having one of the lowest expense ratios among
comparable closed-end funds.

The Fund's Board of Directors, its officers, and its investment manager are
mindful of the trust that the Fund's shareholders have placed in us. We know you
have a choice, we appreciate your support, and we look forward to continuing our
service to you in the future.

Sincerely,

/S/ RALPH W. BRADSHAW
---------------------
Ralph W. Bradshaw Chairman

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CORNERSTONE STRATEGIC VALUE FUND, INC.
PORTFOLIO SUMMARY - AS OF DECEMBER 31, 2002 (UNAUDITED)
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TOP TEN, BY SECTOR
Percent of
Sector Net Assets
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1. Financials 19.8
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2. Healthcare 15.1
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3. Information Technology 12.6
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4. Consumer Discretionary 12.3
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5. Industrials 12.0
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6. Consumer Staples 9.4
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7. Energy 6.2
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8. Telecommunication Services 6.0
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9. Materials 2.8
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10. Utilities 2.1
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TOP TEN HOLDINGS, BY ISSUER

Percent of
Holding Sector Net Assets
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1. Microsoft Corp. Information Technology 4.4
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2. General Electric Co. Industrials 3.2
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3. Exxon Mobil Corp. Energy 3.0
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4. Wal-Mart Stores, Inc. Consumer Discretionary 2.8
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5. American International Group, Inc. Financials 2.7
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6. Citigroup Inc. Financials 2.5
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7. Pfizer Inc. Healthcare 2.4
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8. Johnson & Johnson Healthcare 2.0
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9. Merck & Co. Inc. Healthcare 1.7
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10. International Business Machines Corp. Information Technology 1.7
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CORNERSTONE STRATEGIC VALUE FUND, INC.
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2002
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No. of Value
Description Shares (Note A)
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EQUITY SECURITIES - 99.54%
CLOSED-END DOMESTIC FUNDS - 1.43%

Gabelli Global Multimedia Trust, Inc. 16,000 $ 102,400
John Hancock Bank & Thrift
Opportunity Fund 32,500 245,050
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347,450
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CONSUMER DISCRETIONARY - 12.27%

AOL Time Warner Inc.+ 10,500 137,550
Bed Bath & Beyond Inc.+ 1,000 34,530
Best Buy Co., Inc.+ 1,000 24,150
Carnival Corp. 2,100 52,395
Clear Channel Communications, Inc.+ 2,100 78,309
Comcast Corp., Class A+ 3,882 91,499
Costco Wholesale Corp.+ 1,500 42,090
CVS Corp. 1,500 37,455
Delphi Corp. 2,000 16,100
Ford Motor Co. 6,500 60,450
Fortune Brands, Inc. 1,000 46,510
Gannett Co., Inc. 2,000 143,600
Gap, Inc. (The) 2,700 41,904
General Motors Corp. 1,900 70,034
Goodyear Tire & Rubber Co. (The) 2,500 17,025
Harley-Davidson, Inc. 1,000 46,200
Harrah's Entertainment, Inc.+ 1,500 59,400
Hilton Hotels Corp. 1,500 19,065
Home Depot, Inc. (The) 7,100 170,116
Kohl's Corp.+ 1,000 55,950
Limited Brands 2,500 34,825
Lowe's Companies, Inc. 2,500 93,750
Marriott International, Inc., Class A 1,000 32,870
May Department Stores Co. (The) 1,000 22,980
McDonald's Corp. 4,600 73,968
NIKE, Inc., Class B 1,000 44,470
Office Depot, Inc.+ 2,500 36,900
Omnicom Group Inc. 1,000 64,600
Reebok International Ltd.+ 1,500 44,100
Sabre Holdings Corp.+ 1,000 18,110
Sears, Roebuck and Co. 1,000 23,950
Staples, Inc.+ 1,500 27,450

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No. of Value
Description Shares (Note A)
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CONSUMER DISCRETIONARY (CONTINUED)

Starbucks Corp.+ 1,200 $ 24,456
Target Corp. 3,200 96,000
TJX Companies, Inc. (The) 2,500 48,800
Viacom Inc., non-voting Class B+ 6,000 244,560
Wal-Mart Stores, Inc. 13,300 671,783
Walt Disney Co. (The) 7,200 117,432
Yum! Brands, Inc.+ 1,000 24,220
2,989,556
CONSUMER STAPLES - 9.38%

Albertson's, Inc. 2,500 55,650
Anheuser-Busch Companies, Inc. 3,200 154,880
Archer-Daniels-Midland Co. 2,415 29,946
Coca-Cola Co. (The) 9,000 394,380
Colgate-Palmolive Co. 2,000 104,860
ConAgra Foods, Inc. 1,900 47,519
General Mills, Inc. 2,500 117,375
Gillette Co. (The) 3,800 115,368
J. M. Smucker Co. (The) 96 3,822
Kimberly-Clark Corp. 1,900 90,193
Kroger Co. (The)+ 3,500 54,075
PepsiCo, Inc. 5,100 215,322
Philip Morris Companies Inc. 7,900 320,187
Procter & Gamble Co. (The) 3,800 326,572
Sara Lee Corp. 2,800 63,028
Sysco Corp. 3,300 98,307
Walgreen Co. 3,200 93,408
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2,284,892
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ENERGY - 6.17%

Anadarko Petroleum Corp. 900 43,110
Baker Hughes Inc. 2,500 80,475
CenterPoint Energy, Inc. 2,500 21,250
ChevronTexaco Corp. 3,340 222,043
ConocoPhilips 3,528 170,720
El Paso Corp. 2,500 17,400
Exxon Mobil Corp. 21,000 733,740
Marathon Oil Corp. 2,500 53,225
Occidental Petroleum Corp. 2,500 71,125
Reliant Resources, Inc.+ 1,971 6,307
Schlumberger Ltd. 2,000 84,180
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1,503,575
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See accompanying notes to financial statements
5

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CORNERSTONE STRATEGIC VALUE FUND, INC
SCHEDULE OF INVESTMENTS - DECEMBER 31, 2002 (CONTINUED)
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No. of Value
Description Shares (Note A)
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FINANCIALS - 19.75%

AFLAC Inc. 1,900 $ 57,228
American Express Co. 4,600 162,610
American International Group, Inc. 11,542 667,705
Bank of America Corp. 5,400 375,678
Bank of New York Co., Inc. (The) 2,500 59,900
Bank One Corp. 4,100 149,855
BB&T Corp. 1,600 59,184
Charles Schwab Corp. (The) 5,000 54,250
Citigroup Inc. 17,100 601,749
Fannie Mae 3,700 238,021
Fifth Third Bancorp 2,000 117,100
FleetBoston Financial Corp. 3,900 94,770
Freddie Mac 2,500 147,625
Hartford Financial Services Group, Inc. (The) 2,500 113,575
Household International, Inc. 1,800 50,058
J.P. Morgan Chase & Co. 6,000 144,000
Marsh & McLennan Companies, Inc. 4,000 184,840
MBNA Corp. 4,500 85,590
Mellon Financial Corp. 1,800 46,998
Merrill Lynch & Co., Inc. 3,000 113,850
MetLife, Inc. 2,700 73,008
Moody's Corp. 1,000 41,290
Morgan Stanley 3,500 139,720
National City Corp. 2,200 60,104
PNC Financial Services Group 1,100 46,090
Prudential Financial, Inc. 2,500 79,350
SouthTrust Corp. 2,500 62,125
State Street Corp. 1,000 39,000
SunTrust Banks, Inc. 1,100 62,612
Travelers Property Casualty Corp., Class A+ 738 10,812
Travelers Property Casualty Corp., Class B+ 1,517 22,224
U.S. Bancorp 6,700 142,174
Wachovia Corp. 3,600 131,184
Washington Mutual, Inc. 3,150 108,769
Wells Fargo & Co. 5,800 271,846
----------
4,814,894
----------

No. of Value
Description Shares (Note A)
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HEALTHCARE - 15.07%

Abbott Laboratories 5,300 $ 212,000
Amgen Inc.+ 3,500 169,190
Applied Biosystems Group 2,500 43,850
Baxter International Inc. 2,500 70,000
Biomet, Inc. 2,500 71,650
Boston Scientific Corp.+ 1,500 63,780
Bristol-Myers Squibb Co. 6,000 138,900
Cardinal Health, Inc. 2,500 147,975
Eli Lilly & Co. 4,000 254,000
Genzyme Corp.+ 2,500 73,925
HCA Inc. 2,000 83,000
Healthsouth Corp.+ 2,500 10,500
Johnson & Johnson 9,200 494,132
McKesson Corp. 1,000 27,030
Medtronic, Inc. 4,300 196,080
Merck & Co. Inc. 7,500 424,575
Pfizer Inc. 19,000 580,830
Pharmacia Corp. 4,000 167,200
Schering-Plough Corp. 5,000 111,000
UnitedHealth Group Inc. 1,500 125,250
Wyeth 4,800 179,520
Zimmer Holdings, Inc.+ 710 29,479
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3,673,866
----------
INDUSTRIALS - 11.95%

3M Co. 1,500 184,950
Automatic Data Processing, Inc. 2,000 78,500
Boeing Co. (The) 6,000 197,940
Burlington Northern Santa Fe Corp. 2,500 65,025
Caterpillar Inc. 1,300 59,436
Cendant Corp.+ 2,700 28,296
Concord EFS, Inc.+ 2,500 39,350
Emerson Electric Co. 1,500 76,275
FedEx Corp. 1,000 54,220
First Data Corp. 5,000 177,050
General Electric Co. 31,500 767,025
Genuine Parts Co. 1,000 30,800
Honeywell International Inc. 2,800 67,200
Illinois Tool Works Inc. 1,000 64,860
Lockheed Martin Corp. 1,500 86,625
Masco Corp. 1,700 35,785

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See accompanying notes to financial statements
6

No. of Value
Description Shares (Note A)
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INDUSTRIALS (CONTINUED)

Norfolk Southern Corp. 1,400 $ 27,986
Paychex, Inc. 2,500 69,750
Southwest Airlines Co. 2,700 37,530
Transocean Inc. 2,500 58,000
Tyco International Ltd. 12,500 213,500
Union Pacific Corp. 1,000 59,870
United Parcel Service Inc., Class B 3,500 220,780
United Technologies Corp. 1,700 105,298
Waste Management, Inc. 4,700 107,724
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2,913,775
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INFORMATION TECHNOLOGY - 12.58%

Agere Systems Inc., Class A+ 115 166
Agere Systems Inc., Class B+ 2,830 3,962
Agilent Technologies, Inc.+ 1,800 32,328
Altera Corp.+ 1,500 18,510
Analog Devices, Inc.+ 1,000 23,870
Apple Computer, Inc.+ 2,500 35,825
Applied Materials, Inc.+ 5,400 70,362
Computer Associates International, Inc. 2,500 33,750
Corning Inc.+ 3,000 9,930
Dell Computer Corp.+ 8,300 221,942
EMC Corp.+ 7,000 42,980
Electronic Data Systems Corp. 2,500 46,075
Hewlett-Packard Co. 10,300 178,808
Intel Corp. 22,000 342,540
International Business Machines Corp. 5,400 418,500
Jabil Circuit, Inc.+ 1,500 26,880
Linear Technology Corp. 1,000 25,720
Maxim Integrated Products, Inc. 1,000 33,040
Microsoft Corp.+ 20,600 1,065,020
Micron Technology, Inc.+ 2,500 24,350
Motorola, Inc. 6,600 57,090
Oracle Corp.+ 6,300 68,040
QUALCOMM Inc.+ 2,500 90,975
Sanmina-SCI Corp.+ 2,500 11,225
Siebel Systems, Inc.+ 2,500 18,700

No. of Value
Description Shares (Note A)
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INFORMATION TECHNOLOGY (CONTINUED)

Solectron Corp.+ 3,000 $ 10,650
Sun Microsystems, Inc.+ 10,000 31,100
Texas Instruments Inc. 4,900 73,549
Xilinx, Inc.+ 1,000 20,600
Yahoo! Inc.+ 1,900 31,065
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3,067,552
----------
MATERIALS - 2.80%

Air Products & Chemicals, Inc. 1,000 42,750
Alcoa Inc. 3,100 70,618
Barrick Gold Corp. 2,500 38,525
Dow Chemical Co. (The) 2,700 80,190
E.I. du Pont de Nemours & Co. 3,700 156,880
Georgia-Pacific Corp. 1,000 16,160
International Paper Co. 2,000 69,940
Newmont Mining Corp. 2,500 72,575
Praxair, Inc. 1,500 86,655
Weyerhaeuser Co. 1,000 49,210
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683,503
----------
TELECOMMUNICATIONS SERVICES - 6.03%

ALLTEL Corp. 2,500 127,500
AT&T Corp. 2,400 62,664
AT&T Wireless Services Inc.+ 9,522 53,799
BellSouth Corp. 6,500 168,155
Cisco Systems, Inc.+ 24,400 319,640
Lucent Technologies Inc.+ 10,700 13,482
Nextel Communications Inc., Class A+ 3,000 34,650
SBC Communications Inc. 10,400 281,944
Sprint Corp. (FON Group) 3,000 43,440
Verizon Communications Inc. 9,400 364,250
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1,469,524
----------
UTILITIES - 2.11%

American Electric
Power Co., Inc. 1,200 32,796
Dominion Resources, Inc. 1,000 54,900
Duke Energy Corp. 5,600 109,424
Edison International+ 2,500 29,625
FirstEnergy Corp. 2,500 82,425
Scottish Power plc ADR 4,000 91,680
Southern Co. (The) 2,400 68,136

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See accompanying notes to financial statements.
7

No. of Value
Description Shares (Note A)
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UTILITIES (CONTINUED)

TXU Corp. 1,000 $ 18,680
Xcel Energy, Inc. 2,500 27,500
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515,166
---------
TOTAL EQUITY SECURITIES - 99.54%

(cost - $27,886,890) 24,263,753
----------

Principal
Amount Value
Description (000's) (Note A)
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SHORT-TERM INVESTMENT - 0.49%
REPURCHASE AGREEMENT - 0.49%

Bear, Stearns & Co. Inc.
(Agreement dated 12/31/02 to
be repurchased at $118,466),
1.10%, 01/02/03
(cost - $118,459) (Note F) $118 $ 118,459
---------
TOTAL INVESTMENTS - 100.03%

(cost - $28,005,349) (Notes A, C, G) 24,382,212
----------

LIABILITIES IN EXCESS OF
OTHER ASSETS - (0.03)% (6,403)
----------

NET ASSETS - 100.00% $24,375,809
===========

------------
+ Non-income producing security.
ADR American Depositary Receipts.

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See accompanying notes to financial statements.
8

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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES - DECEMBER 31, 2002
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ASSETS

Investments, at value (Cost $28,005,349) (Notes A, G) $ 24,382,212
Cash collateral received for securities loaned (Note E) 74,594
Receivables:
Investment sold 82,548
Dividends 37,865
Interest 301
Prepaid expenses 6,712
------------
Total Assets 24,584,232
------------

LIABILITIES

Payables:
Upon return of securities loaned (Note E) 74,594
Capital stock repurchased (Note D) 33,971
Investment management fees (Note B) 21,393
Other accrued expenses 78,465
------------
Total Liabilities 208,423
------------
NET ASSETS (applicable to 3,803,597
shares of common stock outstanding) $ 24,375,809
============

NET ASSET VALUE PER SHARE ($24,375,809 / 3,803,597) $ 6.41
============

NET ASSETS CONSISTS OF

Capital stock, $0.01 par value; 3,803,597 shares outstanding
(25,000,000 shares authorized) $ 38,036
Paid-in capital 55,545,628
Cost of 2,239,440 shares repurchased (26,999,661)
Accumulated net realized loss on investments (585,057)
Net unrealized depreciation in value of investments (3,623,137)
------------
Net assets applicable to shares outstanding $ 24,375,809
============

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See accompanying notes to financial statements.

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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENT OF OPERATIONS - FOR THE YEAR ENDED DECEMBER 31, 2002
--------------------------------------------------------------------------------

INVESTMENT LOSS

Income (Note A):

Dividends $ 485,527
Interest 7,651
Less: Foreign taxes withheld (2,301)
-----------
Total Investment Income 490,877
-----------

Expenses:
Investment management fees (Note B) 294,686
Merger fees 68,313
Legal and audit fees (Note B) 67,500
Directors' fees 52,201
Administration fees 50,000
Accounting fees 28,899
NYSE listing fees 25,000
Printing 21,692
Transfer agent fees 10,134
Insurance 9,230
Custodian fees 6,692
Other 6,208
-----------
Total Expenses 640,555
Less: Management fee waivers (Note B) (92,709)
Less: Fees paid indirectly (Note B) (18,188)
-----------
Net Expenses 529,658
-----------
Net Investment Loss (38,781)
-----------

NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS

Net realized loss from investments (116,327)
Net change in unrealized appreciation in value of investments (8,612,397)
-----------
Net realized and unrealized loss on investments (8,728,724)
-----------

NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(8,767,505)
===========

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See accompanying notes to financial statements.

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CORNERSTONE STRATEGIC VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------

For the Years Ended
December 31,
-----------------------------
2002 2001
------------ ------------

DECREASE IN NET ASSETS

Operations:

Net investment loss $ (38,781) $ (244,220)
Net realized gain/(loss) on investments (116,327) 1,031,962
Net change in unrealized appreciation
in value of investments (8,612,397) (9,548,619)
------------ ------------

Net decrease in net assets resulting
from operations (8,767,505) (8,760,877)
------------ ------------

Distributions to shareholders (Note A, G):
Return-of-capital (1,887,643) --
------------ ------------

Capital stock transactions (Note D):
Proceeds from 33,037 shares newly issued
in reinvestment of distributions 194,649 --
Cost of 62,000 and 234,700 shares
repurchased, respectively (419,744) (1,963,446)
------------ ------------

Net decrease in net assets resulting
from capital stock transactions (225,095) (1,963,446)
------------ ------------

Total decrease in net assets (10,880,243) (10,724,323)
------------ ------------

NET ASSETS

Beginning of year 35,256,052 45,980,375
------------ ------------

End of year $ 24,375,809 $ 35,256,052
============ ============

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See accompanying notes to financial statements.

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CORNERSTONE STRATEGIC VALUE FUND, INC.

FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------

Contained below is per share operating performance data for a share of common
stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each 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,
-------------------------------------------------------------------------------
2002 2001 2000 1999 1998 1997 1996 1995
---- ---- ---- ---- ---- ---- ---- ----

PER SHARE OPERATING
PERFORMANCE

Net asset value,
beginning of year $ 9.20 $ 11.31 $ 14.95 $ 14.52 $ 11.53 $ 10.10 $ 10.65 $ 10.73
-------- -------- -------- -------- -------- -------- --------- --------
Net investment income/(loss) (0.01)# (0.06)# (0.94)# (0.09)# (0.09)# (0.05) (0.03) --
Net realized and unrealized
gain/(loss)
on investments and foreign
currency related
translations (2.29) (2.13) (1.81) 4.04 2.96 2.36 0.41 0.42
-------- -------- -------- -------- -------- -------- --------- --------
Net increase/(decrease)
in net assets
resulting from
operations (2.30) (2.19) (2.75) 3.95 2.87 2.31 0.38 0.42
-------- -------- -------- -------- -------- -------- --------- --------
Distributions to shareholders:
Net realized gain on
investments and
foreign currency
related transactions -- -- (1.01) (3.87) -- (0.88) (0.93) (0.50)
Return-of-capital (0.50) -- -- -- -- -- -- -
-------- -------- -------- -------- -------- -------- --------- --------
Total distributions to
shareholders: (0.50) -- (1.01) (3.87) -- (0.88) (0.93) (0.50)
-------- -------- -------- -------- -------- -------- --------- --------
Capital stock transactions:
Anti-dilutive effect
due to capital
stock repurchased 0.02 0.08 0.12 0.35 0.12 -- -- -
Dilutive effect due to
shares issued
in reinvestment
of distributions (0.01) -- -- -- -- -- -- -
-------- -------- -------- -------- -------- -------- --------- --------
Total capital stock
transactions 0.01 0.08 0.12 0.35 0.12 -- -- -
-------- -------- -------- -------- -------- -------- --------- --------
Net asset value, end of year $ 6.41 $ 9.20 $ 11.31 $ 14.95 $ 14.52 $ 11.53 $ 10.10 $ 10.65
======== ======== ======== ======== ======== ======== ========= ========
Market value, end of year $ 5.85 $ 8.05 $ 10.59 $ 14.25 $ 12.88 $ 9.44 $ 7.50 $ 8.38
======== ======== ======== ======== ======== ======== ========= ========
Total investment return (a)(b) (20.85)% (23.98)% (19.28) 40.74% 36.42% 37.62% 0.64% 4.59%
======== ======== ======== ======== ======== ======== ========= ========

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year
(000 omitted) $ 24,376 $ 35,256 $ 45,980 $ 66,204 $ 79,060 $ 67,951 $ 59,520 $ 62,781
Ratio of expenses to average
net assets, net of
fee waivers, if any 1.80%(c) 1.77%(c) 1.72%(c) 1.55%(c) 1.91% 1.74% 1.53% 1.58%
Ratio of expenses to average
net assets, excluding
fee waivers, if any (d) 2.17% 2.11% 1.83% 1.64% -- -- -- --
Ratio of expenses to average
net assets, net of fee
waivers, but excluding
fees paid indirectly,
if any 1.86% 1.95% -- -- -- -- -- --
Ratio of net investment
income/(loss) to average
net assets (0.13)% (0.64)% (1.12)% (0.59)% (0.69)% (0.46)% (0.25)% (0.02)%
Portfolio turnover 29.63% 59.83% 28.26% 101.54% 50.39% 81.56% 120.66% 84.98%

1994 1993
---- ----

PER SHARE OPERATING
PERFORMANCE

Net asset value,
beginning of year $ 12.36 $ 9.43
Net investment income/(loss) (0.03) 0.02
Net realized and unrealized
gain/(loss)
on investments and foreign
currency related
translations (0.64) 3.56
------- --------
Net increase/(decrease)
in net assets
resulting from
operations (0.67) 3.58
------- --------
Distributions to shareholders:
Net realized gain on
investments and
foreign currency
related transactions (0.96) (0.65)
Return-of-capital - --
------- --------
Total distributions to
shareholders: (0.96) (0.65)
------- --------
Capital stock transactions:
Anti-dilutive effect
due to capital
stock repurchased - --
Dilutive effect due to
shares issued
in reinvestment
of distributions - --
------- --------
Total capital stock
transactions - --
------- --------
Net asset value, end of year $ 10.73 $ 12.36
======= ========
Market value, end of year $ 8.50 $ 11.25
======= ========
Total investment return (a)(b) (15.91)% 53.55%
======= ========

RATIOS/SUPPLEMENTAL DATA

Net assets, end of year
(000 omitted) $63,216 $ 72,830
Ratio of expenses to average
net assets, net of
fee waivers, if any 1.75% 1.68%
Ratio of expenses to average
net assets, excluding
fee waivers, if any (d) -- --
Ratio of expenses to average
net assets, net of fee
waivers, but excluding
fees paid indirectly,
if any -- --
Ratio of net investment
income/(loss) to average
net assets (0.25)% 0.16%
Portfolio turnover 81.73% 125.31%

--------------------------------------------------------------------------------

# 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 distributions,
if any, at actual prices pursuant to the Fund's dividend reinvestment
program. Total investment return does not reflect brokerage commissions.
(b) For the year ended December 31, 2000, the Fund paid federal taxes on
realized long-term capital gains. Total investment return, assuming
reinvestment of distributions and federal taxes paid on long-term capital
gains, is (13.88)%.
(c) Expenses are net of fees paid indirectly. (d) Expenses exclude fees paid
indirectly.

--------------------------------------------------------------------------------
See accompanying notes to financial statements.

--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE A. SIGNIFICANT ACCOUNTING POLICIES

Cornerstone Strategic Value Fund, Inc. (the "Fund") was incorporated in Maryland
on May 1, 1987 and commenced investment operations on June 30, 1987. As a result
of an Annual Meeting of Stockholders held on April 19, 2001, the Fund, formerly
known as the Clemente Strategic Value Fund, Inc., changed its name. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is registered under the Investment Company Act of 1940, as amended, as a
closed-end, diversified management investment company.

The following is a summary of significant accounting policies consistently
followed by the Fund:

MANAGEMENT ESTIMATES: The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
("GAAP") requires management to make certain estimates and assumptions that may
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.

PORTFOLIO VALUATION: Investments are stated at value in the accompanying
financial statements. All equity securities shall be valued at the closing price
on the exchange or market on which the security is primarily traded ("Primary
Market"). If the security did not trade on the Primary Market, it shall be
valued at the closing price on another exchange where it trades. If there are no
such sale prices, the value shall be the most recent bid, and if there is no
bid, the security shall be valued at the most recent asked. If no pricing
service is available and there are more than two dealers, the value shall be the
mean of the highest bid and lowest ask. If there is only one dealer, then the
value shall be the mean if bid and ask are available, otherwise the value shall
be the bid. All other securities and assets are valued Directors. Short-term
investments having a maturity of 60 days or less are valued on the basis of
amortized cost. The Board of Directors has established general guidelines for
calculating fair value of not readily marketable securities. At December 31,
2002, 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
New York Stock Exchange is closed.

REPURCHASE AGREEMENTS: The Fund has agreed to purchase securities from financial
institutions subject to the sellers agreement to repurchase them at an
agreed-upon time and price ("repurchase agreements"). The financial institutions
with whom the Fund enters into repurchase agreements are banks and
broker/dealers, which Cornerstone Advisors, Inc. (the Fund's "Manager" or
"Cornerstone") considers creditworthy. The seller under a repurchase agreement
will be required to maintain the value of the securities as collateral, subject
to the agreement at not less than the repurchase price plus accrued interest.
Cornerstone monitors daily, the mark-to-market of the value of the collateral,
and, if necessary, requires the seller to maintain additional securities, so
that the value of the collateral is not less than the repurchase price. Default
by or bankruptcy of the seller would, however, expose the Fund to possible loss
because of adverse market action or delays in connection with the disposition of
the underlying securities.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME: Investment transactions are
accounted for on the trade date. The cost of investments sold is determined by
use of the specific identification 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.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

TAXES: No provision is made for U.S. federal income or excise taxes as it is the
Fund's intention to continue to qualify as a regulated investment company and to
make the requisite distributions to its shareholders which will be sufficient to
relieve it from all or substantially all U.S. federal income and excise taxes.

DISTRIBUTIONS OF INCOME AND GAINS: Effective June 25, 2002, the Fund initiated a
fixed, monthly distribution to shareholders. To the extent that these
distributions exceed the current earnings of the Fund, the balance will be
generated from sales of portfolio securities held by the Fund, which will either
be short-term or long-term capital gains or a tax-free return-of-capital. Prior
thereto, the Fund distributed at least annually to shareholders, substantially
all of its net investment income and net realized short-term capital gains, if
any. The Fund determines annually whether to distribute any net realized
long-term capital gains in excess of net realized short-term capital losses,
including capital loss carryovers, if any. An additional distribution may be
made to the extent necessary to avoid the payment of a 4% U.S. federal excise
tax. Dividends and distributions to shareholders are recorded by the Fund on the
ex-dividend date.

The character of distributions made during the year from net investment income
or net realized gains may differ from their ultimate characterization for U.S.
federal income tax purposes due to U.S. generally accepted accounting
principles/tax differences in the character of income and expense recognition.

NOTE B. AGREEMENTS

Cornerstone serves as the Fund's investment manager with respect to all
investments. As compensation for its investment management services, Cornerstone
receives from the Fund an annual fee, calculated weekly and paid monthly, equal
to 1.00% of the Fund's average weekly net assets. Effective July 1, 2002,
Cornerstone voluntarily agreed to waive its management fees to the Fund to the
extent that monthly operating expenses exceed 0.10% of average net assets
calculated monthly. Such undertaking continued through the end of 2002 and
Cornerstone voluntarily agreed to continue the undertaking until December 31,
2003. For the year ended December 31, 2002, Cornerstone earned $294,686 for
investment management services, of which it waived $92,709.

Included in the Statement of Operations, under the caption FEES PAID INDIRECTLY,
are expense offsets of $18,188 arising from credits earned on portfolio
transactions executed with a broker, pursuant to a directed brokerage
arrangement.

The Fund paid or accrued approximately $78,000, of which $25,000 was
attributable to merger expense, for the year ended December 31, 2002 for legal
services to Spitzer & Feldman P.C., counsel to the Fund. Mr. Westle, a partner
of the firm, serves as secretary of the Fund.

At December 31, 2002, pursuant to regulatory filings, separate shareholders
owned approximately 14% and 37% of the outstanding shares of the Fund based on
Schedule 13D/A and Schedule 13G/A filings with the Securities and Exchange
Commission on December 10, 2002 and February 15, 2002, respectively.

NOTE C. INVESTMENT IN SECURITIES

For the year ended December 31, 2002, purchases and sales of securities, other
than short-term investments, were $8,658,055 and $10,746,617, respectively.

NOTE D. SHARE REPURCHASE PROGRAM

On October 5, 1998, the Fund commenced a share repurchase program for purposes
of enhancing shareholder value and reducing the discount at which the Fund's
shares traded from their net asset value. For the year ended December 31, 2002,
the Fund repurchased 62,000 of its shares for a total cost of $419,744 at a
weighted average discount of 12.93%

--------------------------------------------------------------------------------
14

--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------

from net asset value. The discount of individual repurchases ranged from 6.11%
-17.42%. For the year ended December 31, 2001, the Fund repurchased 234,700 of
its shares for a total cost of $1,963,446 at a weighted average discount of
14.11% from net asset value. The discount of individual repurchases ranged from
6.22% - 26.54%. The Fund expects to continue to repurchase its outstanding
shares at such time and in such amounts as it believes will further the
accomplishment of its foregoing objectives, subject to review by the Board of
Directors. No limit has been placed on the number of shares to be purchased by
the Fund other than those imposed by federal securities laws.

All purchases are made in accordance with federal securities laws, with shares
repurchased held in treasury effective January 1, 2002.

NOTE E. SECURITIES LENDING

To generate additional income, the Fund may lend up to 10% of its total assets.
The Fund receives payments from borrowers equivalent to the dividends and
interest that would have been earned on securities lent while simultaneously
seeking to earn interest on the investment of cash collateral. Loans are subject
to termination by the Fund or the borrower at any time, and are, therefore, not
considered to be illiquid investments. Loans of securities are required at all
times to be secured by collateral equal to at least 100% of the market value of
securities on loan. However, in the event of default or bankruptcy of the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. In the event that the borrower fails to return
securities, and collateral maintained by the lender is insufficient to cover the
value of loaned securities, the borrower is obligated to pay the amount of the
shortfall (and interest thereon) to the Fund. However, there can be no assurance
the Fund can recover this amount. The value of securities on loan to brokers and
the related collateral received at December 31, 2002, was $72,038 and $74,594,
respectively. Any cash collateral received is reinvested into repurchase
agreements, which in turn is collateralized by various U.S. Government and
Agency securities.

During the year ended December 31, 2002, the Fund earned $503 in securities
lending income which is included under the caption INTEREST in the Statement of
Operations.

NOTE F. COLLATERAL FOR REPURCHASE AGREEMENT

Listed below is the collateral associated with the repurchase agreement with
Bear, Stearns & Co. Inc. outstanding at December 31, 2002.

PRINCIPAL
AMOUNT MARKET
ISSUER (000'S) MATURITY VALUE
------ ------- -------- -----
United States Treasury Bond,
(interest only) $295 2/15/20 $122,074
========

NOTE G. FEDERAL INCOME TAXES

Income and capital gains distributions are determined in accordance with federal
income tax regulations, which may differ from GAAP. These differences are
primarily due to differing treatments of losses deferred due to wash sales and
Post-October losses (as later defined), and excise tax regulations.

At December 31, 2002, the components of distributable earnings on a tax basis,
for the Fund were as follows:

Capital loss carryforward $ (585,057)
Unrealized depreciation (3,623,137)
------------
Total loss $ (4,208,194)
============

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, 2002, the Fund did not realize any of these losses.

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CORNERSTONE STRATEGIC VALUE FUND, INC.

NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
--------------------------------------------------------------------------------

At December 31, 2002, the Fund had a capital loss carryforward for U.S. federal
income tax purposes of $585,057 of which $142,060 expires in 2009 and $442,997
expires in 2010.

At December 31, 2002, the identified cost for federal income tax purposes, as
well as the gross unrealized appreciation from investments for those securities
having an excess of value over cost, gross unrealized depreciation from
investments for those securities having an excess of cost over value and the net
unrealized depreciation from investments were $28,005,349, $1,038,321,
$(4,661,458) and $(3,623,137), respectively.

At December 31, 2002, the Fund reclassified $38,781 from net investment loss to
paid-in capital, to adjust for current period permanent book/tax differences.
Net assets were not affected by these reclassifications. All 2002 distributions
were return-of-capital for tax purposes. There were no distributions during
2001.

--------------------------------------------------------------------------------

REPORT OF INDEPENDENT ACCOUNTANTS

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, 2002, and the related statement of operations, the statement
of changes in net assets and the financial highlights for the year 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 audit. The statement
of changes in net assets for the year ended December 31, 2001 and the financial
highlights for each of the nine years in the period then ended have been audited
by other auditors, whose report dated February 18, 2002 expressed an unqualified
opinion on such financial statement and financial highlights.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2002 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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, 2002, the results of
its operations, the changes in its net assets, and the financial highlights for
the year then ended, in conformity with accounting principles generally accepted
in the United States of America.

TAIT, WELLER & BAKER

Philadelphia, Pennsylvania
February 12, 2003

--------------------------------------------------------------------------------
17

RESULTS OF ANNUAL MEETING OF STOCKHOLDERS (UNAUDITED)

On October 11, 2002, the Annual Meeting of Stockholders of Cornerstone Strategic
Value Fund, Inc. (the "Fund") was held and the following matters were voted
upon:

1. To approve the Merger Agreement and Plan of Reorganization.

FOR AGAINST ABSTAIN
1,919,366 692,855 14,159

2. To elect two Class I Directors until the year 2005 Annual Meeting.

NAME OF CLASS I DIRECTORS FOR ABSTAIN
Ralph W. Bradshaw 2,956,909 701,896
Edwin Meese III 2,957,182 701,623

3. To ratify the selection by the Board of Directors of Tait, Weller &
Baker as the Fund's independent accountants for the year ending
December 31, 2002.

FOR AGAINST ABSTAIN
3,117,568 531,322 9,915

4. To consider and vote upon the stockholder proposal to open-end the Fund.

FOR AGAINST ABSTAIN
939,486 1,672,100 14,794

--------------------------------------------------------------------------------

See accompanying notes to financial statements.
18

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, 2002) as to the U.S. federal
tax status of distributions received by the Fund's shareholders in respect of
such fiscal year. During the year ended December 31, 2002 the following
distributions per share were paid by the Fund:

Payment Date: 7/31/02 8/30/02 9/30/02 10/31/02 11/29/02 12/31/02
Return-of-Capital: $ 0.0825 $ 0.0825 $ 0.0825 $ 0.0825 $ 0.0825 $ 0.0825

These distributions represent a return of your investment. As return-of-capital
distributions, they are not taxed as ordinary income dividends and are sometimes
referred to as tax-free dividends or nontaxable distributions. A
return-of-capital distribution reduces the cost basis of your shares in the
Fund. Notification for calendar year 2002 was mailed in January 2003. The
notification along with Form 1099-DIV reflects the amount to be used by calendar
year taxpayers on their U.S. federal income tax returns.

Foreign shareholders generally will not be subject to U.S. withholding tax on
the amount of their non-taxable distributions.

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 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 OFFICERS
(UNAUDITED)

NAME AND POSITION(S) PRINCIPAL OCCUPATION POSITION WITH ADDRESS
(AGE) HELD WITH FUND OVER LAST 5 YEARS FUND SINCE
-------------------------------------------------------------------------------------------------------------------------------

Ralph W. Bradshaw* (52) Chairman of the President, Director and Shareholder of 1998; current term
One West Pack Square Board of and Cornerstone Advisors, Inc.; Financial ends at the 2005 Annual
Suite 1650 President Consultant; Vice President, Deep Discount Meeting
Asheville, NC 28801 Advisors, Inc. (1993-1999); Previous
Director The Austria Fund, Inc.; Director
of The SMALLCap Fund, Inc., Progressive
Return Fund, Inc. and Cornerstone Total
Return Fund, Inc.

Thomas H. Lenagh (80) Director Chairman of the Board of Inrad Corp.; 1987; current term ends at
13 Allen's Corner Rd. Independent Financial Adviser; Director the 2003 Annual Meeting.
Flemington, NJ 08822 of Cornerstone Total Return Fund, Inc.,
Progressive Return Fund, Inc., Gintel Fund,
The Adams Express Company and Petroleum
and Resources Corporation.

Edwin Meese III (71) Director Distinguished Fellow, The Heritage 2001; current term ends at
The Heritage Foundation Foundation, Washington, D.C.; Distinguished the 2005 Annual Meeting.
214 Massachusetts Ave. NE Visiting Fellow at the Hoover Institution,
Washington, D.C. 20002 Stanford University; Distinguished Senior
Fellow at the Institute of United States Studies,
University of London; Formerly U.S. Attorney
General under President Ronald Reagan; Director
of Cornerstone Total Return Fund, Inc. and
Progressive Return Fund, Inc.

Scott B. Rogers (47) Director Chief Executive Officer, Asheville Buncombe 2000; current term ends at
30 Cumberland Ave. Community Christian Ministry; President, ABCCM the 2003 Annual Meeting.
Asheville, NC 28801 Doctor's Medical Clinic; Director, Southeastern
Jurisdiction Urban Networkers; Director, A-B
Vision Board, Appointee, NC Governor's
Commission on Welfare to Work; Chairman and
Director, Recycling Unlimited; Director,
Interdenominational Ministerial Alliance; Director
of Cornerstone Total Return Fund, Inc. and
Progressive Return Fund, Inc. .

ADDITIONAL INFORMATION REGARDING THE FUND'S DIRECTORS AND OFFICERS
(UNAUDITED) (CONCLUDED)

Andrew A. Strauss (49) Director Attorney and senior member of Strauss & 2000; current term ends at
77 Central Avenue Suite F Associates, P.A., Attorneys, Asheville and the 2004 Annual Meeting.
Asheville, NC 28801 Hendersonville, NC; previous President of
White Knight Healthcare, Inc. and LMV Leasing,
Inc., a wholly owned subsidiary of Xerox Credit
Corporation; Director of Cornerstone Total Return
Fund, Inc., Progressive Return Fund, Inc., The
SMALLCap Fund, Inc., Memorial Mission Hospital
Foundation, Deerfield Episcopal Retirement
Community and Asheville Symphony.

Glenn W. Wilcox, Sr. (71) Director Chairman of the Board and Chief Executive 2000; current term ends at
One West Pack Square Officer of Wilcox Travel Agency, Inc.; the 2004 Annual Meeting.
Suite 1700 Director, Champion Industries, Inc.; Chairman
Asheville, NC 28801 of Tower Associates, Inc. (a real estate venture);
Director, Wachovia Corp.; Board Trustee and
Chairman, Appalachian State University; Board
Trustee and Director, Mars Hill College;
Director of The SMALLCap Fund, Inc., Cornerstone
Total Return Fund, Inc. and Progressive Return
Fund, Inc.

Gary A. Bentz* (46) Director, Chief Financial Officer and Shareholder of Director since 2002; current
One West Pack Square Vice President Cornerstone Advisors, Inc.; Previous Director of term ends at the 2003 Annual
Suite 1650 and Treasurer The Austria Fund, Inc.; Financial Consultant, Meeting; Vice President and
Asheville, NC 28801 Certified Public Accountant; Chief Financial Treasurer since 2001.
Officer of Deep Discount Advisors, Inc.
(1993-2000);
Director, Vice President and Treasurer of
Progressive Return Fund, Inc. and
Cornerstone Total Return Fund, Inc.

Thomas R. Westle (49) Secretary Partner, Spitzer & Feldman P.C. (May 2000
405 Park Avenue 1998-present); Secretary of Cornerstone Total
New York, NY 10022 Return Fund, Inc. and Progressive Return Fund, Inc.

----------------
* Designates a director who is an "interested person" of the Fund as defined by
the Investment Company Act of 1940. Mssrs. Bradshaw and Bentz are interested
persons of the Fund by virtue of their current positions with the Investment
Manager of the Fund.

DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN
(UNAUDITED)

Shareholders who have Shares registered directly in their own names
automatically participate in the Fund's Dividend Reinvestment & Cash Purchase
Plan (the "Plan"), unless and until an election is made to withdraw from the
Plan on behalf of such participating shareholders. Shareholders who do not wish
to have distributions automatically reinvested should so notify American Stock
Transfer & Trust Co. (the "Agent") at 59 Maiden Lane, New York, NY 10038. Under
the Plan, all of the Fund's dividends and other distributions to shareholders
are reinvested in full and fractional Shares as described below.

When the Fund declares an income dividend or a capital gain or other
distribution (each, a "Dividend" and collectively, "Dividends"), the Agent, on
the shareholders' behalf, will: (i) receive additional authorized shares from
the Fund either newly issued or repurchased from shareholders by the Fund and
held as treasury stock ("Newly Issued Shares") or, (ii) at the sole discretion
of the Board of Directors, be authorized to purchase outstanding shares on the
open market, on the American Stock Exchange or elsewhere, with cash allocated to
it by the Fund ("Open Market Purchases").

Shares acquired by the Agent in Open Market Purchases will be allocated to the
reinvesting shareholders based on the average cost of such Open Market
Purchases. Alternatively, the Agent will allocate Newly Issued Shares to the
reinvesting shareholders at a price equal to the average closing price of the
Fund over the five trading days preceding the payment date of such dividend.

Registered shareholders who acquire their shares through Open Market Purchases
and who do not wish to have their Dividends automatically reinvested should so
notify the Fund in writing. If a Shareholder has not elected to receive cash
Dividends and the Agent does not receive notice of an election to receive cash
Dividends prior to the record date of any dividend, the shareholder will
automatically receive such Dividends in additional Shares.

Participants in the Plan may withdraw from the Plan by providing written notice
to the Agent at least 30 days prior to the applicable Dividend payment date.
When a participant withdraws from the Plan, or upon termination of the Plan as
provided below, certificates for whole shares credited to his/her account under
the Plan will, upon request, be issued. Whether or not a participant requests
that certificates for whole shares be issued, a cash payment will be made for
any fraction of a Share credited to such account.

The Agent will maintain all shareholder accounts in the Plan and furnish written
confirmations of all transactions in the accounts, including information needed
by shareholders for personal and tax records. The Agent will hold shares in the
account of each Plan participant in non-certificated form in the name of the
participant, and each shareholder's proxy will include those shares purchased
pursuant to the Plan. Each participant, nevertheless, has the right to receive
certificates for whole shares owned. The Agent will distribute all proxy
solicitation materials to participating shareholders.

In the case of shareholders, such as banks, brokers or nominees, that hold
shares for others who are beneficial owners participating in the Plan, the Agent
will administer the Plan on the basis of the number of shares certified from
time to time by the record shareholder as representing the total amount of
shares registered in the Shareholder's name and held for the account of
beneficial owners participating in the Plan.

There will be no charge to participants for reinvesting Dividends other than
their share of brokerage commissions as discussed below. The Agent's fees for
administering the Plan and

DESCRIPTION OF DIVIDEND REINVESTMENT & CASH PURCHASE PLAN
(UNAUDITED) (CONCLUDED)

handling the reinvestment of Dividends will be paid by the Fund. Each
participant's account will be charged a pro-rata share of brokerage commissions
incurred with respect to the Agent's Open Market Purchases in connection with
the reinvestment of Dividends.

Brokerage charges for purchasing small amounts of shares for individual accounts
through the Plan are expected to be less than the usual brokerage charges for
such transactions because the Agent will be purchasing shares for all the
participants in blocks and pro-rating the lower commission that may be
attainable.

The automatic reinvestment of Dividends will not relieve participants of any
income tax that may be payable on such Dividends. Participants who receive
shares pursuant to the Plan as described above will recognize taxable income in
the amount of the fair market value of those shares. In the case of non-U.S.
participants whose Dividends are subject to U.S. income tax withholding and in
the case of participants subject to 30% federal backup withholding, the Agent
will reinvest Dividends after deduction of the amount required to be withheld.

The Fund reserves the right to amend or terminate the Plan by written notice to
participants. All correspondence concerning the Plan should be directed to the
Agent at the address referred to in the first paragraph of this section.

SUMMARY OF GENERAL INFORMATION

The Fund - Cornerstone Strategic Value Fund, Inc. is a closed-end, diversified
investment company whose shares trade on the American Stock Exchange. Its
investment objective is to seek long-term capital appreciation through
investment in equity securities of companies listed in the United States. The
Fund is managed by Cornerstone Advisors, Inc.

SHAREHOLDER INFORMATION

Effective February 21, 2003, the Fund is listed on the American Stock Exchange
(symbol "CLM"). The share price is published in: THE NEW YORK TIMES (daily)
under the designation "CornerStrt" and THE WALL STREET JOURNAL (daily) and
BARRON'S (each Monday) under the designation "CornstnStrat." The net asset value
per share is published under "Closed-End Funds" each Sunday in THE NEW YORK
TIMES and each Monday in THE WALL STREET JOURNAL and BARRON'S under the
designation "CrnstnStrV."

NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(C) OF THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, THAT CORNERSTONE STRATEGIC VALUE FUND, INC. MAY
FROM TIME TO TIME PURCHASE SHARES OF ITS CAPITAL STOCK IN THE OPEN MARKET.

The following is a description of Cornerstone Strategic Value Fund, Inc.'s (the
"Fund") policies regarding disclosure of nonpublic personal information that you
provide to the Fund or that the Fund collects from other sources. In the event
that you hold shares of the Fund through a broker-dealer or other financial
intermediary, the privacy policy of the financial intermediary would govern how
your nonpublic personal information would be shared with unaffiliated third
parties.

CATEGORIES OF INFORMATION THE FUND COLLECTS. The Fund collects the following
nonpublic personal information about you:

1. Information from the Consumer: this category includes information the
Fund receives from you on or in applications or other forms,
correspondence, or conversations (such as your name, address, phone
number, social security number, assets, income and date of birth); and
2. Information about the Consumer's transactions: this category includes
information about your transactions with the Fund, its affiliates, or
others (such as your account number and balance, payment history, parties
to transactions, cost basis information, and other financial
information).

CATEGORIES OF INFORMATION THE FUND DISCLOSES. The Fund does not disclose any
nonpublic personal information about their current or former shareholders to
unaffiliated third parties, except as required or permitted by law. The Fund is
permitted by law to disclose all of the information it collects, as described
above, to its service providers (such as the Fund's custodian, administrator and
transfer agent) to process your transactions and otherwise provide services to
you.

CONFIDENTIALITY AND SECURITY. The Fund restricts access to your nonpublic
personal information to those persons who require such information to provide
products or services to you. The Fund maintains physical, electronic and
procedural safeguards that comply with federal standards to guard your nonpublic
personal information.

CORNERSTONE STRATEGIC VALUE FUND, INC.