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: 811-21782
Small Cap Value Fund, Inc.
(Exact name of registrant as specified in charter)
8150 N. Central Expressway #M1120 Dallas, Texas 75206
(Address of principal executive offices)
Laura S. Adams
8150 N. Central Expressway #M1120 Dallas, Texas 75206
(Name and address of agent for service)
Registrants telephone number, including area code: 800-704-6072
Date of fiscal year end: December 31
Date of Reporting Period: December 31, 2009
Item 1. Report to Shareholders.
SMALL CAP VALUE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2009
Small Cap Value Fund, Inc.
8150 N. Central Expressway #M1120
Dallas, Texas 75206
1-800-704-6072
Fund Symbol: SCAPX
Dear shareholders of Small Cap Value Fund, Inc.,
The Fund began 2009 with a Net Asset Value per share of $11.62 and
ended with a Net Asset Value per share of $16.53, after declaring and
distributing a dividend of $.0233 per share.
The total return of the Fund for 2009 was 42.43% versus 25.56% for the
S&P 600 and 27.16% for the Russell 2000 Small Cap Value Index.
The relative outperformance we experienced in 2009 was greater than the
relative underperformance in 2008.
Our Fund continues to own many companies that have little or no net
debt on their balance sheets and valuations that are very compelling.
We feel that as credit markets continue to stabilize capital will flow
back into the type of securities in our portfolio.
The top holdings and industry group exposures of the Fund as of
12/31/09 are listed on the following page.
We look forward to continued absolute and relative results in 2010.
Sincerely,
Steven Adams
Portfolio Manager
SMALL CAP VALUE FUND, INC.
Top Ten Holdings and Asset Allocation
December 31, 2009
Top Ten Holdings*
(% of Net Assets)
ViroPharma Inc. 7.75%
Olin 6.55%
Coventry Health Care Inc. 5.87%
Dress Barn 5.81%
Silicon Graphics 5.75%
Trinity Industries 5.02%
Nicor 4.84%
Patterson-UTI Energy 4.71%
Cooper Tire Rubber 4.21%
Western Refining, Inc. 4.12%
------
54.63%
Asset Allocation
(% of Net Assets)
Women?s Clothing Stores 9.48%
Railroad Equipment 8.72%
Drilling Oil and Gas Wells 8.58%
Pharmaceutical Preparation 7.75%
Petroleum Refining 7.58%
Industrial Organic Chemicals 6.55%
Sawmills and Planing Mills 6.08%
Services-Offices, Clinics of Doctors of Medicine 5.87%
Electronic Computers 5.75%
Natural Gas Distribution 4.84%
Fabricated Rubber Products 4.21%
Hospital and Medical Service Plans 4.03%
Footwear 3.74%
Heavy Construction Equipment Rental and Leasing 2.96%
Misc. Fabricated Wire Products 2.59%
Computer Integrated Systems Design 2.33%
Primary Batteries, Dry and Wet 2.27%
Gypsum Products 1.21%
Other Assets less liabilities, net 5.45%
-------
100.00%
*Portfolio holdings are subject to change and are not recommendations
of individual stocks
SMALL CAP VALUE FUND, INC.
EXPENSES
DECEMBER 31, 2009
As a shareholder of the Fund you incur ongoing costs including
management fees and other operating expenses. This example is intended
to help you understand your ongoing costs (in dollars) of investing in
the Fund and to compare these costs with the ongoing costs of investing
in other mutual funds. This example is based on an investment of
$1,000 invested on June 30, 2009 and held for the entire six month
period to December 31, 2009.
Actual Expenses
The first line of the table below provides information about actual
account values and actual expenses. You may use the information in
this line, together with the amount you invested at the beginning of
the period, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,500
account value divided by $1,000 equals 8.5), then multiply this result
by the number in the first line under the heading ?Expenses Paid During
Period? to estimate the expenses you paid on your account during the
period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about
hypothetical account values and hypothetical expenses based on the
Fund?s actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the Fund?s actual return. The
hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing costs of investing
in the Fund to other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight
your ongoing costs only and do not reflect any transactional costs such
as sales charges (loads), redemption fees, or exchange fees.
Therefore, the second line of the table is useful in comparing ongoing
costs only.
Expenses Paid
Beginning Ending During Period*
Account Value Account Value June 30, 2009,
June 30, 2009 December 31, 2009 December 31, 2009
----------------- ------------- -----------------
Actual $ 1,000 $ 1,312 $ 5.54
Hypothetical** $ 1,000 $ 1,020 $ 4.84
*Expenses are equal to the Fund's annualized expense ratio of 0.95%,
multiplied by the average account value over the period, multiplied by
184 days/365 days to reflect the one-half year period.
** Hypothetical return assumes 5% return before expenses.
SMALL CAP VALUE FUND, INC.
PERFORMANCE SUMMARY
The graph below represents the changes in value for an initial $10,000
investment in the Small Cap Value Fund from its inception(the beginning
of investment operations), December 16, 2005 through December 31, 2009.
These changes are then compared to a $10,000 investment in the S&P 600
Small Cap Index for the same period. Returns shown include the
reinvestment of all dividends. Past performance is not predictive of
future performance. Investment return and principal value will
fluctuate, so that your shares, when redeemed, may be worth more or
less than the original cost.
Inception Year Year Year Year Year
End End End End End
(12/16/05) 2005 2006 2007 2008 2009
--------- ------ ------- ------- ------ ------
Small Cap Value Fund $10,000 $9,891 $12,340 $10,010 $5,862 $8,351
S&P 600 Small Cap Index $10,000 $9,879 $11,409 $11,374 $7,849 $9,855
$13,000|
$12,000| #
$11,000| * *
$10,000| # * # * #
$ 9,000| *
$ 8,000| * #
$ 7,000|
$ 6,000| #
_________________________________________________________
Inception 2005 2006 2007 2008 2009
(12/16/2005)
# = Small Cap Value Fund
* = S&P 600 Small Cap Index
Compounded
15 Day Annual Annual Annual Annual Average
Return Return Return Return Return Annual
2005 2006 2007 2008 2009 Return
------ ------ ------ ------ ------- -------
Small Cap Value Fund (1.09%) 24.76% (18.87%) (41.49)% 42.46% (4.36)%
S&P 600 Index (1.21%) 15.49% ( 0.30%) (30.99)% 25.56% (0.47)%
SMALL CAP VALUE FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2009
ASSETS
Investment securities, at fair
value (cost $20,805,060) $ 17,379,642
Dividends receivable 13,338
-----------
Total assets 17,392,980
-----------
LIABILITIES
Advisory fees payable 13,091
-----------
Total liabilities 13,091
-----------
NET ASSETS ?
Equivalent to $16.53 per
share based on 1,051,195 shares
of common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 17,379,889
============
NET ASSETS CONSIST OF:
Common stock $ 1,051
Paid-in capital 30,044,103
Net unrealized depreciation
of investments (3,425,418)
Net undistributed realized (9,239,847)
losses
- ------------
Net assets $ 17,379,889
============
See accompanying notes to these financial statements.
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2009
DESCRIPTION SHARES FAIR VALUE
- ----------- ------ ----------
COMMON STOCKS ? 94.55%
Railroad Equipment-8.72%
FreightCar America 32400 $ 642,492
Trinity Industries 50000 872,000
-------
1,514,492
Heavy Construction Equipment Rental
and Leasing-2.96%
H & E Equipment (a) 49005 514,552
Misc. Fabricated Wire Products-2.59%
Insteel Industries 34600 449,800
Sawmills and Planing Mills-6.08%
Louisiana-Pacific (a) 51330 358,283
Universal Forest Products 19000 699,390
-------
1,057,673
Gypsum Products-1.21%
USG Corp (a) 15000 210,750
Women?s Clothing Stores-9.48%
Bebe stores 101710 637,722
Dress Barn (a) 43700 1,009,033
-------
1,646,755
Fabricated Rubber Products-4.21%
Cooper Tire Rubber 36500 731,825
Footwear-3.74%
Kenneth Cole (a) 44855 432,851
K-Swiss (a) 21935 218,034
-------
650,885
Industrial Organic Chemicals-6.55%
Olin 65000 1,138,800
- - Continued -
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2009
DESCRIPTION SHARES FAIR VALUE
- ----------- ------ ---------
Natural Gas Distribution-4.84%
Nicor 20000 $ 842,000
Drilling Oil and Gas Wells-8.58%
Patterson-UTI Energy 53350 818,923
Pioneer Drilling (a) 85030 671,737
--------
1,490,660
Petroleum Refining-7.58%
Western Refining Inc (a) 152000 715,920
Frontier Oil Corp 50000 602,000
--------
1,317,920
Hospital and Medical Service Plans-4.03%
Amerigroup Corp (a) 26000 700,960
Pharmaceutical Preparation-7.75%
ViroPharma (a) 160470 1,346,343
Primary Batteries, Dry and Wet-2.27%
China BAK Battery (a) 142200 395,316
Computer Integrated Systems Design-2.33%
Cogent (a) 39000 405,210
Electronic Computers-5.75%
Silicon Graphics (a) 142500 998,925
Services-Offices, Clinics of Doctors
of Medicine-5.87%
Coventry Health Care (a) 42000 1,020,180
--------
Total common stocks (cost $19,858,464) $ 16,433,046
- - Continued -
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2009
SHARES FAIR VALUE
SHORT-TERM INVESTMENTS ? 5.45% ------ ---------
Schwab Money Market Fund-current interest
at 0.01%
946596 $ 946,596
--------
Total short-term investments (cost $946,596) 946,596
--------
Total investment securities ? 100.00% (cost $20,805,060) 17,379,642
Other assets less liabilities ? (0.00)% 247
--------
Net assets ? 100.00% $ 17,379,889
============
(a) Presently non-income producing
See accompanying notes to these financial statements.
SMALL CAP VALUE FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
INVESTMENT INCOME
Dividends $ 170,366
Interest 335
------------
Total investment income 170,701
------------
EXPENSES ?
Advisory fees 146,243
------------
Net investment income 24,458
------------
GAIN (LOSS) ON INVESTMENTS ?
Net realized loss on investments (3,952,001)
Net change in unrealized depreciation of securities 8,955,245
------------
Net realized loss and
unrealized gain on investments 5,003,244
- ------------
Net increase in net assets resulting from operations $ 5,027,702
============
See accompanying notes to these financial statements.
SMALL CAP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
Dec. 31, 2009 Dec. 31, 2008
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 24,458 $ 44,831
Net realized loss on investments (3,952,001) (5,287,846)
Net change in unrealized depreciation
of securities 8,955,245 (5,915,150)
----------- ------------
Net increase(decrease) in net assets
resulting from operations 5,027,702 (11,158,165)
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (24,458) (44,831)
Net realized gains - -
----------- ------------
Total Distributions (24,548) (44,831)
CAPITAL SHARE TRANSACTIONS-NET (3,848,335) 854,232
----------- ------------
TOTAL INCREASE(DECREASE) IN NET ASSETS 1,154,909 (10,348,764)
NET ASSETS, beginning of year 16,224,980 26,573,744
----------- ------------
NET ASSETS, end of year $17,379,889 $16,224,980
=========== ============
See accompanying notes to these financial statements.
SMALL CAP VALUE FUND, INC.
FINANCIAL HIGHLIGHTS
PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD ENDED:
YEAR YEAR YEAR YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED
2009 2008 2007 2006 2005(a)
------ -------- -------- -------- --------
Net asset value,
beginning of period $ 11.62 $ 19.90 $ 24.58 $ 19.87 $ 20.21
------ -------- -------- -------- --------
Income from investment
operations:
Net investment
Income (loss) 0.02 0.32 (0.01) 0.35 0.07
Net realized and
unrealized
gains (losses)on 4.91 (8.28) (4.64) 4.57 (0.34)
investments
----- -------- -------- -------- --------
Total income (loss)from
investment operations 4.93 (7.96) (4.64) 4.92 (0.27)
- ---- -------- -------- -------- --------
Less distributions from:
Net investment income (0.02) (0.32) (0.04) (0.13) (0.07)
Net realized gains (0.00) (0.00) (0.00) (0.08) (0.00)
------ -------- -------- --------- ---------
Total distributions (0.02) (0.32) (0.04) (0.21) (0.07)
----- -------- -------- --------- ---------
Net asset value,
end of period $ 16.53 $ 11.62 $ 19.90 $ 24.58 $ 19.87
======= ======== ======== ======== ========
Total Return (c) 42.43% (41.49)% (18.87)% 24.76% (1.09)%
Ratios & Supplemental Data:
Net assets, end, of period
(in 1,000?s) $17,380 $16,225 $26,574 $6,080 $1,021
Ratio of expenses to 0.94% 0.94% 0.95% 0.85% 0.95%
average net assets (b)
Ratio of net investment 0.16% 0.20% 0.00% 1.42% (8.02)%
income to average
net assets
Portfolio turnover rate 29.12% 23.30% 72.70% 24.65% 0.00%
(a) Calculation of per share data and ratios represents the period
from December 16, 2005 (date investment operations commenced)
through December 31, 2005.
(b) The Fund?s actual expenses are calculated daily at 0.95% of net
asset value (NAV).
(c) Total return has not been annualized for the period ended Dec. 31,
2005.
See accompanying notes to these financial statements.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Small Cap Value Fund, Inc. (the ?Fund?) was incorporated in the
State of Texas on June 16, 2005 and is registered under the
Investment Company Act of 1940 as a non-diversified, open-end
management investment company. The investment objective of the
Fund is to achieve growth by investing primarily in small
capitalization common stocks. The Fund had no operations until
June 24, 2005, when it sold 7,500 shares of its common stock to its
original shareholder, Mrs. Laura S. Adams. Investment operations
commenced on December 16, 2005. The effective date of the Fund?s
Registration under the Securities Act of 1933 was October 27, 2005.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases in net assets from operations during the reporting
period. Actual results could differ from these estimates.
Security Valuation
Securities listed on a national securities exchange or in the over-
the-counter market are valued at the last quoted sales price on the
day of valuation, or if no quoted sales price was reported on that
date, the last quoted bid price. Short-term investments are valued
at cost which approximates fair value. Securities for which
quotations are not readily available are valued at their estimated
fair value as determined in good faith by the Fund?s Board of
Directors.
Securities Transactions and Investment Income
Securities transactions are recorded on a trade-date basis.
Dividend income is recorded on the ex-dividend date and interest
income is recorded on the accrual basis. Realized gains and losses
are determined on a specific identification basis of the securities
sold. Unrealized gains and losses resulting from the appreciation
and depreciation of securities carrying values are included in the
statement of operations.
Distribution of Income and Gains
The Fund declares and pays dividends annually from net investment
income and from net realized gains, if any. Distributions from
realized gains for book purposes may include short-term capital
gains, which are included in ordinary income for tax purposes.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
Federal Income Taxes
The Fund?s policy is to continue to comply with the requirements of
the Internal Revenue Code that are applicable to regulated
investment companies and to distribute all of its taxable income,
including any realized gains on investments, to its shareholders.
The Fund also intends to distribute sufficient net investment
income and net capital gains, if any, so that it will not be
subject to excise tax on undistributed income and gains.
Therefore, no federal income tax or excise provision is required.
Net investment income (loss), net realized gains (losses) and the
cost of investments in securities may differ for financial
statement and income tax purposes. The character of distributions
from net investment income (loss) or net realized gains (losses)
may differ from their ultimate characterization for income tax
purposes. At December 31, 2009, there were no material
differences. Also, due to the timing of dividend distributions,
the year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
New Accounting Pronouncements
Per generally accepted accounting principles ('GAAP') the Fund
evaluates its tax positions taken on previously filed tax returns
or expected to be taken on future returns. These positions must
meet a 'more likely than not' standard that, based on the technical
merits, have a more than fifty percent likelihood of being
sustained upon examination. In evaluating whether a tax position
has met the recognition threshold, the Fund must presume that the
position will be examined by the appropriate taxing authority that
has full knowledge of all relevant information. Tax positions not
deemed to meet the 'more-likely-than-no' threshold are recorded as
a tax expense in the current year.
GAAP requires the Fund to analyze all open tax years, as defined by
the Statute of Limitations, for all major jurisdictions. Open tax
years are those that are open for exam by taxing authorities.
Major jurisdiction for the Fund include Federal. As of December
31, 2009, open Federal tax years include the tax years ended
December 31, 2006 through December 31, 2009. The Fund has no
examination in progress.
The Fund has reviewed all open tax years and major jurisdictions.
As a result, the Fund has determined there is no effect to the
Fund's financial position or results of operations. There is no
tax liability resulting from unrecognized tax benefits relating to
uncertain income tax positions taken or expected to be taken on the
tax return for the fiscal year-end December 31, 2009. The Fund is
also not aware of any tax positions for which it is reasonably
possible that the total amounts of unrecognized tax benefits will
significantly change in the next twelve months.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
In accordance with GAAP, fair value is defined as the price that the
Fund would receive to sell an asset or pay to transfer a liability
in an orderly transaction between market participants at the
measurement date. GAAP also establishes a framework for measuring
fair value, and a three-level hierarchy for fair value measurements
based upon the transparency of inputs to the valuation of an asset
or liability. Inputs may be observable or unobservable and refer
broadly to the assumptions that market participants would use in
pricing the asset or liability. Observable inputs reflect the
assumptions market participants would use in pricing the asset or
liability based on market data obtained from sources independent of
the Fund. Unobservable inputs reflect the Fund's own assumptions
about the assumptions that market participants would use in pricing
the asset or liability developed based on the best information
available in the circumstances. Each investment is assigned a level
based upon the observability of the inputs which are significant to
the overall valuation. The three-tier hierarchy of inputs is
summarized below.
Level 1 - quoted prices in active markets for identical investments.
Level 2 - other significant observable inputs (including quoted
prices for similar investments, interest rates, prepayment speeds,
credit risk, etc.)
Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The following table summarizes the valuation of the Fund's
investments by the above fair value hierarchy levels as of December
31, 2009:
Investments Other
in Financial
Level Securities Instruments *
----- ---------- ------------
Level 1:
Common Stock $16,433,046 $ 0
Short term investments 946,596 0
----------- ------------
Total Level 1: 17,379,642 0
Level 2 0 0
Level 3 0 0
----------- ------------
Total $17,379,642 $ 0
=========== ============
* Other financial instruments are derivative instruments not
reflected in the Portfolio of Investments, such as futures forwards
and swap contracts, which are valued at the unrealized appreciation
depreciation on the instrument. As of December 31, 2009, the Fund
did not own any other financial instruments.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
Subsequent events are defined as events or transactions that occur
after the balance sheet date, but before the financial statements
are issued. There are two types of subsequent events: recognized
subsequent events, which provide additional evidence about
conditions that existed at the balance sheet date, and non-
recognized subsequent events, which provide evidence about
conditions that did not exist at the balance sheet date, but arose
before the financial statements were issued. Recognized subsequent
events are required to be recognized in the financial statements,
and non-recognized subsequent events are required to be disclosed.
GAAP requires entities to disclose the date through which subsequent
events have been evaluated, and the basis for that date. This is
consistent with current practice and did not have any impact on the
Fund?s financial statements. Subsequent events were evaluated
through February 10, 2010, the date in which these financials were
issued.
3. CAPITAL SHARE TRANSACTIONS
Capital Share transactions in the Fund?s $0.001 par value common
stock were as follows:
Year Ended Year Ended
December 31, 2009 December 31, 2008
------------------- ---------------------
Shares Amount Shares Amount
Shares sold 124,316 $1,779,000 117,826 $1,565,000
Shares issued in
reinvestment of
dividends 1,472 24,458 3,992 44,831
------ -------- --------- ----------
125,788 1,803,458 121,818 1,609,831
Shares redeemed 470,706 5,651,793 60,846 754,203
------ -------- --------- ----------
Net increase
(decrease) (344,918) (3,848,335) 60,972 855,628
Beginning of year 1,396,113 33,893,489 1,335,141 33,037,861
------ -------- ------- ----------
End of year 1,051,195 $30,045,154 1,396,113 $33,893,489
========= ========== ========= ==========
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from sales of investment
securities, excluding short-term investments, aggregated $4,540,218
and $9,263,484, respectively, for the year ended December 31, 2009.
The aggregate cost of investment securities, excluding money market
funds, for federal income tax purposes was $19,858,464 as of
December 31, 2009. There were no differences between the financial
reporting basis and the income tax basis in the cost or net
unrealized appreciation (depreciation) of the Fund?s investments as
of December 31, 2009.
As of December 31, 2009 and 2008, the aggregate unrealized
appreciation and depreciation of investment securities was as
follows:
Description 2009 2008
- ----------- ------- ------
Unrealized appreciation $ 2,007,373 $ 610,048
Unrealized depreciation (5,432,791) (12,990,711)
------------ -----------
Net unrealized depreciation $ (3,425,418) $ (12,380,663)
============ ============
5. DISTRIBUTION TO SHAREHOLDERS
On December 28, 2009 a distribution of $0.0233 per share
aggregating $24,458 was paid to the shareholders of record on that
date from net investment income.
6. ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund and the Advisor are under common control and the existence
of that control may create operating results and financial position
different than if they were autonomous.
The Fund has an investment advisory agreement with Adams Asset
Advisors, LLC (the ?Advisor?) to provide investment advisory
services to the Fund. Laura S. Adams is the managing member of the
Advisor and is an officer, director and shareholder of the Fund.
Under the terms of the agreement, the Fund will pay the Advisor a
monthly fee at the annual rate of 0.95% of the Fund?s average daily
net assets. The fee is computed daily and payable monthly. The
Advisor has contractually agreed to pay all operating expenses of
the Fund, except brokerage fees and commissions, interest, taxes and
extraordinary expenses.
The advisory fee for 2009, as computed pursuant to the investment
advisory agreement, totaled $146,243, of which $13,091 was payable
on December 31, 2009.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
The Advisor acts as the transfer agent for the Fund, with Fidelity
Investments as the sub-transfer agent. There are no fees associated
with these services.
The Fund acts as its own custodian, effective September 1, 2008, and
is in compliance per requirements of Rule 17f-2. There are no fees
associated with these services.
Additional Information (Unaudited)
Proxy Voting Information
Small Cap Value Fund, Inc. management is responsible for exercising the
voting rights associated with the securities held by the Fund. A
description of our philosophy on fulfilling this responsibility is
available without charge, upon request, by calling 1-800-704-6072.
Quarterly Filing of Portfolio Holdings
The Fund files a complete schedule of portfolio holdings with the
Securities and Exchange Commission (SEC) for the first and third
quarters of each fiscal year on Form N-Q. The Fund?s Form N-Q?s are
available on the SEC?s website at http://www.sec.gov, and can also be
reviewed and copied at the SEC?s public reference room in Washington
D.C. Information on the operation of the Public Reference Room may be
obtained by calling 1-800-SEC-0330.
Approval of Investment Advisory Contract
The Board of Directors, including all Directors that are independent,
held a separate, in-person meeting, specifically called for the purpose
of reviewing and re-approving the Advisory Agreement on February 19,
2009. In approving the Advisory Agreement for 2009, the Directors
considered the following:
1) Nature, extent and quality of services provided by the Advisor ?
The Directors reviewed the nature, quality and scope of current
services provided by the Advisor under the Advisory Agreement.
This includes portfolio management, supervision of Fund
operations, compliance and regulatory matters.
2) Investment performance ? The Directors reviewed the performance of
the Fund, as compared to market benchmarks. This review focused
on investment strategy and long term performance potential.
3) Cost of services to the Fund and profitability of the Advisor ?
The Directors considered the Fund?s management fee and total
expense ratio relative to industry averages. The Directors
determined that the Advisor is receiving a fee that is in line
with fees charged for separate accounts and that the Advisor is
operating profitably, is viable and should remain an ongoing
entity.
4) Economies of Scale ? The Directors considered information
regarding economies of scale with respect to management of the
Fund and noted that the Fund and its shareholders are already
experiencing and benefitting from an expense ratio that would be
expected from that of funds with significantly larger asset bases.
5) Conclusions ? Based on the above review and discussions, the
Directors concluded that it is in the best interest of the Fund
and the shareholders to approve the Advisory Agreement.
Additional Information (Unaudited)
Board of Directors Information
The business and affairs of the Fund are managed under the direction of
the Board of Directors of the Fund. Information pertaining to the
Directors of the Fund are set forth below. The SAI of the Fund
includes additional information about the Directors of the Fund and is
available, without charge, by calling 800-704-6072. Each Director may
be contacted by writing to that Director c/o Small Cap Value Fund,
Inc., 8150 N. Central Expressway, #101, Dallas, Texas 75206.
INDEPENDENT DIRECTORS
Name and Age Position Term Principal Occupation Other Public
Past five years Directorships
- ------------------- -------- ---- --------------------- -------------
Vicky L. Hubbard Director 1 Yr Private Investor Stock
Age 52 Since 2000 Dividend Fund,
Inc.
Yolawnde F. Malone Director 1 Yr CPA/Tax Specialist- Stock
Age 46 Family Legacy Trust, Dividend Fund,
Tax mngr Cain Waters Inc.
prior, Tolleson Wealth
mgmt tax specialist prior
Melissa D. Gordon, Director 1 Yr Pathologist, North Stock
M.D. Dallas Pathology Dividend Fund,
Age 46 Inc.
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Yr President of Fund, Stock
Age 48 President Managing Member of Dividend Fund,
Secretary Adams Asset Advisors, Inc.
Treasurer Private investor
prior
Report of Independent Registered Public Accounting Firm
To the Shareholders and
Board of Directors of
Small Cap Value Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Small Cap Value Fund, Inc., including the schedule of investments, as
of December 31, 2009, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights
for each of the four years in the period then ended and for the period
from December 16, 2005 (the date the investment operations commenced)
through December 31, 2005. 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. 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, 2009, 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 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 Small Cap Value Fund, Inc. as of December 31,
2009, the results of its operations for the year then ended, the
changes in net assets for the two years in the period ended, and the
financial highlights for the four years in the period then ended and
for the period from December 16, 2005 (the date the investment
operations commenced) through December 31, 2005, in conformity with
accounting principles generally accepted in the United States of
America.
PMB Helin Donovan, LLP
Austin, Texas
February 10, 2010
Item 2. Code of Ethics. The registrant, as of the end of the period
covered by this report, has adopted a code of ethics that applies to
all officers and employees of the Fund. The registrant has not made
any amendments to its code of ethics or granted any waivers or
exceptions to the code during the covered period.
Item 3. Audit Committee Financial Expert. The entire Board of
Directors, in effect, acts as the audit committee. The Board has two
financial experts serving on the Board. Laura Adams and Yolawnde
Malone are the financial experts. Mrs. Adams is an ?interested?
Director and Mrs. Malone is an ?independent? Director.
Item 4. Principal Accountant fees and services. As part of the
Registrants contract with the Investment Advisor of the Fund, the
Investment Advisor is responsible for paying all accountant and related
audit fees as part of the Advisory fee paid by the Fund.
Item 5. Audit Committee of listed Registrants. (Not applicable for
open end investment companies)
Item 6. Schedule of Investments. Schedule of Investments is included
as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of proxy voting policies and procedures for closed-
end management investment companies. (Not applicable)
Item 8. Portfolio Managers of Closed-End Management Investment
Companies. Not Applicable to open-end investment companies.
Item 9. Purchase of equity securities by closed-end management
investment companies. (Not applicable)
Item 10. Submission of Matters to a vote of security holders. (None)
Item 11. Controls and Procedures
a) The Fund?s president has concluded that the Fund?s disclosure
controls and procedures are sufficient to ensure that information
required to be disclosed by the Fund in this Form N-CSR was
recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission?s rules and
forms, based upon such officers? evaluation of these controls and
procedures as of a date within 90 days of the filing date of the
report.
b) There were no significant changes or corrective actions with
regard to deficiencies or material weaknesses in the Fund?s internal
controls or in other factors that could significantly affect the
Fund?s internal controls subsequent to the date of their evaluation.
Item 12. Exhibits.
a) (1)Code of Ethics-Filed with Form N-CSR and is hereby incorporated
by reference
(2)Certifications pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002- Attached
b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002- Attached
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.
Small Cap Value Fund
By /s/ Laura S. Adams
- --------------------------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/10/10
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 dates indicated.
Small Cap Value Fund
By /s/ Laura S. Adams
- --------------------------------------
Laura S. Adams
President
Principal Executive Officer and Principal Financial Officer
Date 2/10/10