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, 2011
Item 1. Report to Shareholders.
SMALL CAP VALUE FUND, INC.
ANNUAL REPORT
DECEMBER 31, 2011
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 2011 with a Net Asset Value per share of $22.29 and
ended with a Net Asset Value per share of $21.87, after paying a
dividend of $0.1992 on December 28, 2011.
The total return of the Fund for 2011 was down (0.99)% versus up 1.00%
for the S&P 600 Index and down(4.19)% for the Russell 2000 Small Cap
Value Index.
The turnover rate of the Fund in 2011, like 2010, was higher than we
would usually expect. This is primarily due to the fact the Fund has
very large tax loss carryforwards and therefore we are less sensitive
to realize shorter term moves in individual stocks relative to concern
of generating higher taxed short-term gains. Normally the Fund seeks
to generate long term gains by holding positions at least one year.
While this higher trading activity results in higher brokerage
charges(which remain very low), taking advantage of some of these
shorter term moves in individual stocks should contribute to
performance of the Fund.
The Fund continues to own many companies that have little or no net
debt on their balance sheets and valuations that are very compelling.
We continue to 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
December 31, 2011 are listed on the following page.
We look forward to a prosperous 2012.
Sincerely,
Steven Adams
Portfolio Manager
SMALL CAP VALUE FUND, INC.
Top Ten Holdings and Asset Allocation
December 31, 2011
Top Ten Holdings*
(% of Net Assets)
ViroPharma Inc. 7.05%
Diamond Foods 6.00%
Stillwater Mining Co. 5.92%
Aeropostale 5.55%
AmSurg Corp. 5.42%
Tellabs, Inc. 5.05%
Coventry Healthcare 4.96%
Cooper Tire & Rubber 4.95%
Omnivision Technologies 4.48%
Skechers USA, Inc. 4.42%
------
53.80%
Asset Allocation
(% of Net Assets)
Pharmaceutical Preparation 7.05%
Food Preparations 6.00%
Misc. Metal Ores 5.92%
Retail Apparel 5.55%
Hospitals 5.42%
Telephone and Telegraph Apparatus 5.05%
Services-Offices, Clinics of Doctors of Medicine 4.96%
Fabricated Rubber Products 4.95%
Semi Conductors & Related Devices 4.48%
Footwear 4.42%
Retail-Computer & Computer Software 4.35%
Retail-Nonstore Retailers 4.33%
Educational Services 4.30%
Electric Components 4.24%
Industrial Inorganic Chemicals 4.17%
Sawmills and Planing Mills 4.13%
Telephone Communications 4.13%
Greeting Cards 3.35%
Biological Products, Except Diagnostic Substances 3.19%
Radio, TV & Consumer Electronic Stores 3.17%
Colleges, Universities, and Professional Schools 2.60%
Short term investments 4.23%
Other Assets less liabilities, net 0.01%
-------
100.00%
*Portfolio holdings are subject to change and are not recommendations
of individual stocks
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, 2011.
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
Year Year
End End
2010 2011
------- ------
Small Cap Value Fund $11,261 $11,160
S&P 600 Small Cap Index $12,448 $12,572
$13,000|
$12,000| # * *
$11,000| * * # #
$10,000| # * # * #
$ 9,000| *
$ 8,000| * #
$ 7,000|
$ 6,000| #
___________________________________________________________________
Inception 2005 2006 2007 2008 2009 2010 2011
(12/16/2005)
# = Small Cap Value Fund * = S&P 600 Small Cap Index
15 Day Annual Annual Annual Annual
Return Return Return Return Return
2005 2006 2007 2008 2009
------ ------ ------ ------ ------
Small Cap Value Fund (1.09%) 24.76% (18.87%) (41.49)% 42.46%
S&P 600 Index (1.21%) 15.49% ( 0.30%) (30.99)% 25.56%
Compounded
Annual Annual Average
Return Return Annual
2010 2011 Return since Inception
------ ----------------------
Small Cap Value Fund 34.85% (0.99)% 1.82%
S&P 600 Index 26.32% 1.00% 3.86%
SMALL CAP VALUE FUND, INC.
EXPENSES
DECEMBER 31, 2011
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, 2011 and held for the entire six month
period to December 31, 2011.
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, 2011,
June 30, 2011 December 31, 2011 December 31, 2011
----------------- ------------- -----------------
Actual $ 1,000 $ 946 $ 4.66
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.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2011
ASSETS
Investment securities, at fair
value (cost $9,032,400) $ 9,711,163
Dividends receivable 9,131
-----------
Total assets 9,720,294
-----------
LIABILITIES
Advisory fees payable 7,460
-----------
Total liabilities 7,460
-----------
NET ASSETS ?
Equivalent to $21.87 per
share based on 444,112 shares
of common stock issued and outstanding;
100,000,000 shares authorized,
$0.001 par value $ 9,712,834
============
NET ASSETS CONSIST OF:
Common stock $ 444
Paid-in capital 17,305,860
Net unrealized appreciation
of investments 678,763
Accumulated investment loss (8,894)
Accumulated net realized loss (8,263,339)
------------
Net assets $ 9,712,834
============
See accompanying notes to these financial statements
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2011
DESCRIPTION SHARES FAIR VALUE
----------- ------ ------------
COMMON STOCKS ? 95.76%
Pharmaceutical Preparation-7.05%
ViroPharma, Inc. (a) 25,000 $ 684,750
Food Preparations-6.00%
Diamond Foods 18,060 582,796
Misc. Metal Ores-5.92%
Stillwater Mining Co. (a) 55,000 575,300
Retail Apparel-5.55%
Aeropostale (a) 35,375 539,469
Hospitals-5.42%
AmSurg Corp. (a) 20,200 526,008
Telephone and Telegraph Apparatus-5.05%
Tellabs, Inc. 121,360 490,295
Services-Offices, Clinics of Doctors
of Medicine-4.96%
Coventry Healthcare (a) 15,865 481,820
Fabricated Rubber Products-4.95%
Cooper Tire & Rubber 34,314 480,739
Semi Conductors & Related Devices-4.48%
Omnivision Technologies (a) 35,555 435,016
Footwear-4.42%
Skechers USA, Inc. (a) 35,435 429,472
Retail-Computer & Computer Software
Stores-4.35%
GameStop (a) 17,500 422,275
Retail-Nonstore Retailers-4.33%
Nutrisystem Inc. 32,500 420,225
Educational Services-4.30%
Devry Inc. 10,855 417,483
Electric Components-4.24%
Power-One Inc. (a) 105,263 411,578
Industrial Inorganic Chemicals-4.17%
Olin 20,626 405,301
- Continued -
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2011
DESCRIPTION SHARES FAIR VALUE
----------- ------ -----------
Sawmills and Planing Mills-4.13%
Universal Forest Products 13,000 $ 401,310
Telephone Communications-4.13%
Neutral Tandem (a) 37,500 400,875
Greeting Cards-3.35%
American Greetings 26,000 325,260
Biological Products, Except Diagnostic
Substances-3.19%
PDL Biopharma 50,000 310,000
Radio, TV & Consumer Electronic Stores-3.17%
RadioShack Corp. 31,713 307,933
Colleges, Universities, and Prof
Schools-2.60%
Corinthian Colleges Inc. (a) 116,485 252,772
--------
Total common stocks (cost $8,621,914) 9,300,677
- Continued -
SMALL CAP VALUE FUND, INC.
SCHEDULE OF INVESTMENTS, continued
DECEMBER 31, 2011
SHARES FAIR VALUE
SHORT-TERM INVESTMENTS ? 4.23% ------ ---------
Schwab Money Market Fund-current interest
at 0.01%
410,486 $ 410,486
--------
Total short-term investments (cost $410,486) 410,486
--------
Total investment securities ? 99.99% (cost $9,032,400) 9,711,163
Other assets less liabilities ? 0.01% 1,671
--------
Net assets ? 100.00% $ 9,712,834
============
(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, 2011
INVESTMENT INCOME
Dividends $ 225,005
Interest 97
------------
Total investment income 225,102
------------
EXPENSES ?
Advisory fees 137,449
------------
Net investment income 87,653
------------
GAIN (LOSS) ON INVESTMENTS ?
Net realized gain on investments 1,811,691
Net change in unrealized appreciation of securities (2,083,504)
------------
Net realized gain and
unrealized loss on investments (271,813)
------------
Net decrease in net assets resulting from operations $ (184,160)
============
See accompanying notes to these financial statements
SMALL CAP VALUE FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
Dec. 31, 2011 Dec. 31, 2010
INCREASE(DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income(loss) $ 87,653 $ (8,894)
Net realized gain(loss) on investments 1,811,691 (835,183)
Net change in unrealized appreciation
of securities (2,083,504) 6,187,685
----------- ------------
Net increase(decrease) in net assets
resulting from operations (184,160) 5,343,608
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (87,653) 0
----------- ------------
Total Distributions (87,653) 0
CAPITAL SHARE TRANSACTIONS-NET (8,403,408) (4,335,442)
----------- ------------
TOTAL INCREASE(DECREASE) IN NET ASSETS (8,675,221) 1,008,166
NET ASSETS, beginning of year 18,388,055 17,379,889
----------- ------------
NET ASSETS, end of year $9,712,834 $18,388,055
=========== ============
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 YEAR
ENDING:
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
2011 2010 2009 2008 2007
------ ------ ------ ------ ------
Net asset value,
beginning of year $22.29 $16.53 $11.62 $19.90 $24.58
------ ------- ------ ------ ------
Income(loss) from investment
operations:
Net investment
income (loss) 0.20 (0.01) 0.02 0.32 (0.01)
Net realized and
unrealized
gains (losses)on (0.42) 5.77 4.91 (8.28) (4.64)
investments
----- ------- ------ ------ ------
Total income (loss)from
investment operations(0.22) 5.76 4.93 (7.96) (4.64)
---- ------- ------- ------- ------
Less distributions from:
Net investment income (0.20) 0.00 (0.02) (0.32) (0.04)
Net realized gains 0.00 0.00 (0.00) (0.00) (0.00)
------ ------- ------- ------ -----
Total distributions (0.20) 0.00 (0.02) (0.32) (0.04)
------ ------- ------- ------ -----
Net asset value,
end of year $ 21.87 $ 22.29 $ 16.53 $ 11.62 $ 19.90
======= ======== ====== ======= ======
Total Return (0.99)% 34.85% 42.43% (41.49)% (18.87)%
Ratios & Supplemental Data:
Net assets, end, of year
(in 1,000?s) $9,713 $18,388 $17,380 $16,225 $26,574
Ratio of expenses to 0.96% 0.97% 0.94% 0.94% 0.95%
average net assets (a)
Ratio of net investment 0.61% (0.05)% 0.16% 0.20% 0.00%
Income(loss) to average
net assets
Portfolio turnover rate 69.29% 80.53% 29.12% 23.30% 72.70%
(a) The Fund?s actual expenses are calculated daily at 0.95% of net
asset value (NAV).
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 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 U.S.
generally accepted accounting principles 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.
Dividends are paid upon Board approval by the end of each calendar
year.
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, 2011, 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.
Subsequent events
Subsequent events were evaluated through February 14, 2012, the date
in which these financials were available to be issued.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
3. FAIR VALUE OF INVESTMENTS
In accordance with U.S. generally accepted accounting principles
(?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 - observable inputs, other than quoted prices (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, 2011:
Investments Other
in Financial
Level Securities Instruments *
----- ---------- ------------
Level 1:
Common Stock $ 9,300,677 $ 0
Short term investments 410,486 0
----------- ------------
Total Level 1: 9,711,163 0
Level 2 0 0
Level 3 0 0
----------- ------------
Total $ 9,711,163 $ 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, 2011, the Fund
did not own any other financial instruments.
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
4. 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, 2011 December 31, 2010
------------------- ---------------------
Shares Amount Shares Amount
Shares sold 3,519 $ 71,700 74,665 $1,489,500
Shares issued in
reinvestment of
dividends 4,058 87,653 0 0
------ -------- --------- ----------
7,577 159,353 74,665 1,489,500
Shares redeemed (388,262) (8,562,761) (301,064) (5,824,942)
------ -------- --------- ----------
Net (decrease) (380,685) (8,403,408) (226,398) (4,335,442)
Beginning of year 824,797 $25,709,712 1,051,195 $30,045,154
------ -------- ------- ----------
End of year 444,112 $17,306,304 824,797 $25,709,712
========= ========== ========= ==========
5. INVESTMENT TRANSACTIONS
The aggregate cost of purchases and proceeds from sales of
investment securities, excluding short-term investments, aggregated
$10,148,235 and $17,126,870, respectively, for the year ended
December 31, 2011. The aggregate cost of investment securities,
excluding short term investments, for federal income tax purposes
was $8,621,914 as of December 31, 2011. 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, 2011.
As of December 31, 2011 and 2010, the aggregate unrealized
appreciation and depreciation of investment securities was as
follows:
Description 2011 2010
----------- ------- ------
Unrealized appreciation $ 1,474,120 $ 3,561,176
Unrealized depreciation (795,357) ( 798,909)
------------ -----------
Net unrealized appreciation
(depreciation) $ 678,763 $ 2,762,267
============ ============
SMALL CAP VALUE FUND, INC.
NOTES TO FINANCIAL STATEMENTS
6. DISTRIBUTION TO SHAREHOLDERS
On December 28, 2011 a distribution of $0.1992 per share aggregating
$87,653 was paid to the shareholders of record on that date from net
investment income.
7. 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 2011, as computed pursuant to the investment
advisory agreement, totaled $137,449, of which $7,460 was payable on
December 31, 2011.
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.
8. ACCOUNTING FOR UNCERTAIN TAX POSITIONS
As of December 31, 2011, open Federal tax years, subject to
examination, include the tax years ended December 31, 2008 through
December 31, 2010. The Fund has no examination in progress.
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 10,
2010. In approving the Advisory Agreement for 2010, 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, #M1120, 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 54 since 2000, Tech Co. Dividend Fund,
prior Inc.
Yolawnde F. Malone Director 1 Yr CPA/Tax Specialist- Stock
Age 48 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 48 Partner Inc.
INTERESTED DIRECTORS
Laura S. Adams Director, 1 Yr President of Fund, Stock
Age 50 President Member of Adams Dividend Fund,
Secretary 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, 2011, and the related statement of operations for the
year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights
for each of the five years in the period ended. These financial
statements and financial highlights are the responsibility of the
Fund?s management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial
highlights are free of material misstatement. 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, 2011, 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,
2011, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the each of the five years in
the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
PMB Helin Donovan, LLP
Dallas, Texas
February 14, 2012
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 2/14/12
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 2/14/12