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 811-5912
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MFS SPECIAL VALUE TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) SPECIAL VALUE TRUST
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
4/30/07
MFV-SEM
MFS(R) SPECIAL VALUE TRUST
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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PORTFOLIO MANAGERS' PROFILES 3
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PERFORMANCE SUMMARY 4
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 6
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PORTFOLIO OF INVESTMENTS 7
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STATEMENT OF ASSETS AND LIABILITIES 20
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STATEMENT OF OPERATIONS 21
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STATEMENTS OF CHANGES IN NET ASSETS 23
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FINANCIAL HIGHLIGHTS 24
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NOTES TO FINANCIAL STATEMENTS 26
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 36
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 37
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PROXY VOTING POLICIES AND INFORMATION 37
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QUARTERLY PORTFOLIO DISCLOSURE 37
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CONTACT INFORMATION BACK COVER
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TRUST OBJECTIVE: The Trust seeks to maintain an annual distribution rate of
10% based on its average daily net asset value, while seeking opportunities
for capital appreciation.
New York Stock Exchange Symbol: MFV
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. As of mid-May 2007, it
had returned another 8% and continued to reach new highs. But the Dow's upward
rise has not been without hiccups. After hitting new records in February, the
Dow lost 5.8% between February 20 and March 5, as stocks were sold off around
the globe. As we have said before, markets are volatile, and investors should
make sure they have an investment plan that can carry them through the peaks
and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are cyclical. In our view, investors who
remain committed to a long-term plan are more likely to achieve their financial
goals. We believe you should not let the headlines guide you in your investment
decisions and should be cautious about overreacting to short-term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss. Investing
and planning for the long term require diligence and patience, two traits that
in our experience are essential to capitalizing on the many opportunities the
financial markets can offer -- through both up and down economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 63.3%
Common Stocks 24.1%
Floating Rate Loans 3.8%
Cash & Other Net Assets 5.8%
Preferred Stocks 3.0%
TOP TEN HOLDINGS (i)
Owens-Illinois, Inc. 2.9%
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Warner Chilcott Ltd., "A" 2.2%
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Pall Corp. 2.2%
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Tyco International Ltd. 2.0%
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ION Media Networks, Inc., 14.25% 1.8%
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Tenet Healthcare Corp. 1.8%
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Amgen, Inc. 1.7%
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Nortel Networks Corp. 1.6%
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Anadarko Petroleum Corp. 1.6%
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Boston Scientific Corp. 1.5%
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CREDIT QUALITY OF BONDS (r)
AAA 0.2%
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AA 0.1%
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A 0.1%
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BBB 2.3%
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BB 19.8%
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B 50.3%
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CCC 23.8%
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C 0.1%
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Not Rated 3.3%
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PORTFOLIO FACTS
Average Duration (d)(i) 3.6
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Average Life (i)(m) 7.4 yrs
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Average Maturity (i)(m) 7.9 yrs
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Average Credit Quality of Rated
Securities (long-term) (a) B
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Average Credit Quality of Rated
Securities (short-term) (a) A-1
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate with
general changes in interest rates, e.g., if rates rise 1.00%, a bond with a
5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre- refunded or pre-paid to an earlier date or which have a mandatory
put date prior to the stated maturity. The average life shown takes into
account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based on
the rating assigned by Fitch, Inc. For those portfolios that hold a security
which is not rated by any of the three agencies, the security is considered
Not Rated. Holdings in U.S. Treasuries and government agency mortgage-backed
securities, if any, are included in the "AAA"-rating category. Percentages
are based on the total market value of investments as of 4/30/07.
Percentages are based on net assets as of 4/30/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
John F. Addeo, CFA, is Vice President of MFS Investment Management (R)
(MFS(R)) and portfolio manager of the high-yield bond portfolios of our mutual
funds, variable annuities, offshore accounts and closed-end funds. John joined
MFS as a research analyst in 1998. He became Vice President in 1999, associate
portfolio manager in 2000, and portfolio manager in 2001. He has been a
portfolio manager of the trust since January 2002. John received a Bachelor of
Science degree from Siena College in 1984. He holds the Chartered Financial
Analyst (CFA) designation.
Kenneth J. Enright, CFA, is Senior Vice President of MFS Investment
Management(R) (MFS(R)) and a portfolio manager of the value and total return,
or balanced, portfolios of our mutual funds, variable annuities, and offshore
investment products. Ken joined MFS in 1986 as a research analyst. He was
named Assistant Vice President in 1987 and Vice President in 1988. He followed
business services, coal, natural gas, oil, retail store, and supermarket
stocks as an analyst prior to being named portfolio manager in 1993. He was
named Senior Vice President in 1999 and Director of Value Portfolio
Management. He has been a portfolio manager of the trust since August 2004.
Ken is a graduate of Boston State College and received an M.B.A. degree from
Babson College. He is a member of The Boston Security Analysts Society, Inc.,
and holds the Chartered Financial Analyst (CFA) designation.
David P. Cole, CFA, is Vice President of MFS Investment Management(R) (MFS(R))
and a co-portfolio manager on the firm's high-yield portfolios. David joined
MFS in 2004 after working for five years as a High Yield Analyst for Franklin
Templeton Investments. Prior to this, he served as a Financial Economist/
Treasury Market Analyst for Thomson Financial Services and three years as an
Economist for Standard and Poor's. David has a bachelor's degree from Cornell
University and an M.B.A from University of California, Berkeley. He holds the
Chartered Financial Analyst (CFA) designation.
Note to Shareholders: Effective October 9, 2006, David Cole replaced Scott
Richards as a manager of the portfolio.
PERFORMANCE SUMMARY THROUGH 4/30/07
All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their
original cost. More recent returns may be more or less than those shown. Past
performance is no guarantee of future results.
PRICE SUMMARY
Six months ended 4/30/07
Date Price
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Net Asset Value 4/30/07 $10.04
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10/31/06 $9.52
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New York Stock Exchange Price 4/30/07 $11.09
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2/06/07 (high) (t) $11.50
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12/18/06 (low) (t) $10.26
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10/31/06 $10.91
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TOTAL RETURNS VS BENCHMARKS
Six months ended
4/30/07
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New York Stock Exchange Price (r) 6.55%
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Net Asset Value (r) 10.55%
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Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 6.89%
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Russell 1000 Value Index (f) 9.79%
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(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period November 1, 2006 through April 30, 2007.
INDEX DEFINITIONS
Lehman Brothers U.S. High-Yield Corporate Bond Index - measures the universe
of non-investment grade, fixed rate debt. Eurobonds and debt issues from
countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela,
etc.) are excluded.
Russell 1000 Value Index - constructed to provide a comprehensive barometer
for the value securities in the large-cap segment of the U.S. equity universe.
Companies in this index generally have lower price-to-book ratios and lower
forecasted growth values.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. When trust shares trade at a premium, buyers pay more than the net
asset value underlying trust shares, and shares purchased at a premium would
receive less than the amount paid for them in the event of the trust's
liquidation. As a result, the total returns that are calculated based on the
net asset value and New York Stock Exchange prices can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes
as a return of capital will reduce each shareholder's basis in his or her
shares and, to the extent the return of capital exceeds such basis, will be
treated as gain to the shareholder from a sale of shares. Returns of
shareholder capital have the effect of reducing the trust's assets and may
increase the trust's expense ratio.
The trust's target annual distribution rate is calculated based on the trust's
average daily net asset value, not a fixed share price, and the trust's
dividend amount will fluctuate with changes in the trust's average daily net
assets.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The trust offers a Dividend Reinvestment and Cash Purchase Plan that allows
you to reinvest either all of the distributions paid by the trust or only the
long-term capital gains. Purchases are made at the market price unless that
price exceeds the net asset value (the shares are trading at a premium). If
the shares are trading at a premium, purchases will be made at a discounted
price of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments may be made in
any amount over $100 in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the transaction expenses, including
commissions. The automatic reinvestment of distributions does not relieve you
of any income tax that may be payable (or required to be withheld) on
the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
Effective May 1, 2007, Computershare Trust Company, N.A. (the Transfer Agent
for the trust) became the agent for the plan.
PORTFOLIO OF INVESTMENTS
4/30/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by
broad-based asset classes.
Bonds - 62.8%
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ISSUER SHARES/PAR VALUE ($)
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Aerospace - 1.1%
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Bombardier, Inc., 8%, 2014 (n) $ 225,000 $ 236,250
Hawker Beechcraft Acquisition, 9.75%, 2017 (n) 140,000 150,150
Vought Aircraft Industry, Inc., 8%, 2011 340,000 343,400
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$ 729,800
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Airlines - 0.8%
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Continental Airlines, Inc., 6.795%, 2018 $ 285,118 $ 284,405
Continental Airlines, Inc., 8.307%, 2018 203,712 213,898
Continental Airlines, Inc., 7.566%, 2020 53,915 55,128
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$ 553,431
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Apparel Manufacturers - 1.1%
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Levi Strauss & Co., 9.75%, 2015 $ 345,000 $ 378,638
Propex Fabrics, Inc., 10%, 2012 395,000 364,388
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$ 743,026
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Asset Backed & Securitized - 2.7%
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Anthracite CDO Ltd., 6%, 2037 (z) $ 450,000 $ 400,289
Asset Securitization Corp., FRN, 8.6366%, 2029 (z) 700,000 751,863
Falcon Franchise Loan LLC, FRN, 4.1216%, 2025 (i)(z) 538,664 75,747
Morgan Stanley Capital I, Inc., FRN, 1.4083%, 2039 (i)(n) 697,506 39,126
Preferred Term Securities XII Ltd., 9.8%, 2033 (e)(z) 225,000 190,125
Preferred Term Securities XVI Ltd., 14%, 2035 (e)(z) 300,000 261,000
Preferred Term Securities XVII Ltd., 9.3%, 2035 (e)(z) 187,000 151,470
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$ 1,869,620
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Automotive - 3.6%
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Ford Motor Credit Co., 8.625%, 2010 $ 125,000 $ 127,967
Ford Motor Credit Co., 7%, 2013 174,000 164,533
Ford Motor Credit Co., 8%, 2016 230,000 224,934
Ford Motor Credit Co. LLC, 9.75%, 2010 735,000 777,758
Ford Motor Credit Co., FRN, 8.105%, 2012 125,000 123,289
General Motors Corp., 8.375%, 2033 566,000 511,523
Goodyear Tire & Rubber Co., 9%, 2015 420,000 463,050
TRW Automotive, Inc., 7%, 2014 (n) 95,000 94,050
TRW Automotive, Inc., 7.25%, 2017 (n) 25,000 24,813
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$ 2,511,917
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Broadcasting - 4.8%
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Allbritton Communications Co., 7.75%, 2012 $ 350,000 $ 359,625
Clear Channel Communications, Inc., 5.5%, 2014 370,000 328,064
Inmarsat Finance II PLC, 0% to 2008, 10.375% to 2012 360,000 342,000
Intelsat Bermuda Ltd., 9.25%, 2016 125,000 137,500
Intelsat Bermuda Ltd., 11.25%, 2016 345,000 393,731
Intelsat Bermuda Ltd., FRN, 8.8719%, 2015 95,000 97,138
Intelsat Ltd., 0% to 2010, 9.25% to 2015 180,000 151,200
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 135,000 144,281
LBI Media Holdings, Inc., 0% to 2008, 11% to 2013 875,000 800,625
Umbrella Acquisition, Inc., 9.75%, 2015 (n)(p) 520,000 521,950
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$ 3,276,114
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Building - 2.0%
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Builders FirstSource, Inc., FRN, 9.61%, 2012 $ 115,000 $ 116,869
Interface, Inc., 10.375%, 2010 180,000 198,900
Interface, Inc., 9.5%, 2014 170,000 185,300
Nortek Holdings, Inc., 0% to 2009, 10.75% to 2014 737,000 552,750
NTK Holdings, Inc., 8.5%, 2014 205,000 202,438
Ply Gem Industries, Inc., 9%, 2012 150,000 135,375
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$ 1,391,632
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Business Services - 1.0%
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Nortel Networks Ltd., 10.75%, 2016 (n) $ 105,000 $ 118,125
Northern Telecom Corp., 6.875%, 2023 75,000 70,219
SunGard Data Systems, Inc., 10.25%, 2015 470,000 517,000
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$ 705,344
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Cable TV - 2.9%
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CCH I Holdings LLC, 11%, 2015 $ 473,000 $ 502,563
CCH II Holdings LLC, 10.25%, 2010 240,000 255,600
CCO Holdings LLC, 8.75%, 2013 95,000 99,631
CSC Holdings, Inc., 6.75%, 2012 215,000 214,731
Kabel Deutschland Gmbh, 10.625%, 2014 230,000 257,025
NTL Cable PLC, 9.125%, 2016 173,000 184,678
Telenet Group Holdings N.V., 0% to 2008, 11.5% to 2014(n) 510,000 478,125
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$ 1,992,353
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Chemicals - 3.6%
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Equistar Chemicals LP, 10.625%, 2011 $ 40,000 $ 42,200
Innophos, Inc., 8.875%, 2014 230,000 240,925
KI Holdings, Inc., 0% to 2009, 9.875% to 2014 547,000 464,950
Koppers, Inc., 9.875%, 2013 150,000 162,750
Lyondell Chemical Co., 11.125%, 2012 340,000 362,100
Momentive Performance Materials, Inc., 11.5%, 2016 (n) 570,000 607,763
Mosaic Co., 7.625%, 2016 (n) 230,000 245,525
Nalco Co., 8.875%, 2013 320,000 342,400
Rockwood Specialties Group, Inc., 10.625%, 2011 4,000 4,220
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$ 2,472,833
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Consumer Goods & Services - 2.8%
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Affinion Group, Inc., 11.5%, 2015 $ 195,000 $ 214,500
Del Laboratories, Inc., 8%, 2012 225,000 210,938
GEO Group, Inc., 8.25%, 2013 210,000 219,713
Jarden Corp., 7.5%, 2017 195,000 199,631
Kar Holdings, Inc., 10%, 2015 (z) 315,000 326,419
Playtex Products, Inc., 9.375%, 2011 65,000 67,113
Realogy Corp., 10.5%, 2014 (z) 110,000 110,138
Realogy Corp., 12.375%, 2015 (z) 185,000 185,000
Visant Holding Corp., 8.75%, 2013 245,000 257,863
Vitro S.A., 8.625%, 2012 (n) 4,000 4,146
Vitro S.A., 9.125%, 2017 (n) 121,000 126,748
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$ 1,922,209
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Containers - 1.0%
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Berry Plastics Holding Corp., 8.875%, 2014 $ 225,000 $ 231,750
Graham Packaging Co. LP, 9.875%, 2014 265,000 274,275
Owens-Brockway Glass Container, Inc., 8.25%, 2013 160,000 168,800
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$ 674,825
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Electronics - 1.2%
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Avago Technologies Finance, 11.875%, 2015 $ 205,000 $ 234,213
Freescale Semiconductor, Inc., 10.125%, 2016 (n) 390,000 393,900
NXP B.V./NXP Funding LLC, 7.875%, 2014 (n) 85,000 88,400
NXP B.V./NXP Funding LLC, 9.5%, 2015 (n) 80,000 84,000
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$ 800,513
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Emerging Market Quasi-Sovereign - 0.5%
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Gazprom OAO, 9.625%, 2013 $ 60,000 $ 71,520
Naftogaz Ukraine, 8.125%, 2009 100,000 101,240
Pemex Project Funding Master Trust, 8.625%, 2022 143,000 180,323
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$ 353,083
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Emerging Market Sovereign - 0.7%
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Federative Republic of Brazil, 8.875%, 2019 $ 242,000 $ 307,340
Republic of Argentina, FRN, 0.6245%, 2035 306,993 46,663
Republic of Ecuador, 10%, 2030 96,000 89,040
Republic of Panama, 6.7%, 2036 28,000 29,610
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$ 472,653
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Energy - Independent - 2.1%
----------------------------------------------------------------------------------------------------------------
Chaparral Energy, Inc., 8.875%, 2017 (n) $ 285,000 $ 292,125
Chesapeake Energy Corp., 6.375%, 2015 425,000 425,531
Chesapeake Energy Corp., 6.875%, 2016 80,000 81,400
Energy Partners Ltd., 9.75%, 2014 (z) 125,000 127,188
Hilcorp Energy I, 9%, 2016 (n) 190,000 203,300
Hilcorp Energy I LP, 7.75%, 2015 (n) 70,000 70,350
Mariner Energy, Inc., 8%, 2017 45,000 45,281
Plains Exploration & Production Co., 7%, 2017 200,000 200,250
-----------
$ 1,445,425
----------------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
----------------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 11%, 2016 $ 180,000 $ 206,550
HRP Myrtle Beach Operations, FRN, 10.07%, 2012 (z) 155,000 155,775
Marquee Holdings, Inc., 0% to 2009, 12% to 2014 415,000 366,238
-----------
$ 728,563
----------------------------------------------------------------------------------------------------------------
Financial Institutions - 1.6%
----------------------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875%, 2011 $ 478,000 $ 479,607
General Motors Acceptance Corp., 6.75%, 2014 621,000 612,401
-----------
$ 1,092,008
----------------------------------------------------------------------------------------------------------------
Food & Beverages - 0.8%
----------------------------------------------------------------------------------------------------------------
ARAMARK Corp., 8.5%, 2015 (n) $ 285,000 $ 298,181
Dole Foods Co., Inc., 8.875%, 2011 240,000 243,000
-----------
$ 541,181
----------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.7%
----------------------------------------------------------------------------------------------------------------
Jefferson Smurfit Corp., 8.25%, 2012 $ 210,000 $ 212,363
JSG Funding PLC, 7.75%, 2015 30,000 30,750
Millar Western Forest Products Ltd., 7.75%, 2013 285,000 252,938
-----------
$ 496,051
----------------------------------------------------------------------------------------------------------------
Gaming & Lodging - 4.0%
----------------------------------------------------------------------------------------------------------------
Great Canadian Gaming Corp., 7.25%, 2015 (n) $ 205,000 $ 208,331
Greektown Holdings, 10.75%, 2013 (n) 280,000 300,300
Harrah's Entertainment, Inc., 5.75%, 2017 550,000 456,500
Majestic Star Casino LLC, 9.75%, 2011 320,000 307,200
MTR Gaming Group, Inc., 9%, 2012 80,000 84,000
NCL Corp. Ltd., 10.625%, 2014 360,000 358,200
Pinnacle Entertainment, Inc., 8.25%, 2012 195,000 200,363
Station Casinos, Inc., 6.5%, 2014 310,000 291,788
Wimar Opco LLC, 9.625%, 2014 (n) 295,000 299,425
Wynn Las Vegas LLC, 6.625%, 2014 230,000 230,575
-----------
$ 2,736,682
----------------------------------------------------------------------------------------------------------------
Industrial - 0.9%
----------------------------------------------------------------------------------------------------------------
Blount, Inc., 8.875%, 2012 $ 190,000 $ 199,500
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 380,000 398,050
-----------
$ 597,550
----------------------------------------------------------------------------------------------------------------
Insurance - 0.1%
----------------------------------------------------------------------------------------------------------------
USI Holdings Corp., 9.75%, 2015 (z) $ 50,000 $ 51,000
----------------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
----------------------------------------------------------------------------------------------------------------
Case Corp., 7.25%, 2016 $ 95,000 $ 99,869
Case New Holland, Inc., 9.25%, 2011 120,000 126,150
Case New Holland, Inc., 7.125%, 2014 215,000 225,750
-----------
$ 451,769
----------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 5.0%
----------------------------------------------------------------------------------------------------------------
Accellent, Inc., 10.5%, 2013 $ 240,000 $ 246,600
Advanced Medical Optics, Inc., 7.5%, 2017 (n) 105,000 108,150
CDRV Investors, Inc., 0% to 2010, 9.625% to 2015 345,000 301,875
DaVita, Inc., 6.625%, 2013 80,000 80,300
DaVita, Inc., 7.25%, 2015 150,000 153,375
Hanger Orthopedic Group, 10.25%, 2014 155,000 166,238
HCA, Inc., 6.375%, 2015 365,000 318,006
HCA, Inc., 9.25%, 2016 (n) 620,000 675,800
HealthSouth Corp., 10.75%, 2016 (n) 345,000 376,050
Psychiatric Solutions, Inc., 7.75%, 2015 230,000 235,175
Tenet Healthcare Corp., 9.25%, 2015 235,000 235,000
U.S. Oncology, Inc., 10.75%, 2014 350,000 391,125
Vanguard Health Holding II, 9%, 2014 140,000 145,075
-----------
$ 3,432,769
----------------------------------------------------------------------------------------------------------------
Metals & Mining - 2.3%
----------------------------------------------------------------------------------------------------------------
Arch Western Finance LLC, 6.75%, 2013 $ 130,000 $ 129,025
Chaparral Steel Co., 10%, 2013 155,000 173,406
FMG Finance Ltd., 10.625%, 2016 (n) 420,000 491,400
Freeport-McMoRan Copper & Gold, 8.25%, 2015 175,000 189,219
Freeport-McMoRan Copper & Gold, 8.375%, 2017 295,000 322,656
PNA Group, Inc., 10.75%, 2016 (n) 245,000 269,500
-----------
$ 1,575,206
----------------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.7%
----------------------------------------------------------------------------------------------------------------
Atlas Pipeline Partners LP, 8.125%, 2015 $ 210,000 $ 218,400
Colorado Interstate Gas Co., 5.95%, 2015 95,000 95,942
El Paso Performance-Linked Trust, 7.75%, 2011 (n) 140,000 149,100
-----------
$ 463,442
----------------------------------------------------------------------------------------------------------------
Network & Telecom - 1.6%
----------------------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc., 8.375%, 2014 $ 235,000 $ 240,581
Global Crossing UK Finance, 10.75%, 2014 180,000 196,650
Nordic Telephone Co. Holdings, 8.875%, 2016 (n) 105,000 112,875
Qwest Corp., 8.875%, 2012 175,000 193,375
Time Warner Telecom Holdings, Inc., 9.25%, 2014 210,000 225,750
Windstream Corp., 8.625%, 2016 95,000 104,263
-----------
$ 1,073,494
----------------------------------------------------------------------------------------------------------------
Oil Services - 0.6%
----------------------------------------------------------------------------------------------------------------
Basic Energy Services, Inc., 7.125%, 2016 $ 165,000 $ 163,763
Compagnie Generale de Geophysique-Veritas, 7.75%, 2017 110,000 116,325
Hanover Compressor Co., 9%, 2014 125,000 135,000
-----------
$ 415,088
----------------------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 0.5%
----------------------------------------------------------------------------------------------------------------
Centercredit International, 8.625%, 2014 $ 100,000 $ 95,875
Russian Standard Finance S.A., 8.625%, 2011 (n) 101,000 102,136
Russian Standard Finance S.A., 8.625%, 2011 150,000 151,688
-----------
$ 349,699
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.5%
----------------------------------------------------------------------------------------------------------------
Warner Chilcott Corp., 8.75%, 2015 $ 319,000 $ 338,938
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 2.7%
----------------------------------------------------------------------------------------------------------------
American Media Operations, Inc., 10.25%, 2009 $ 383,000 $ 360,978
Dex Media, Inc., 0% to 2008, 9% to 2013 310,000 292,175
Dex Media, Inc., 0% to 2008, 9% to 2013 210,000 197,925
Idearc, Inc., 8%, 2016 (n) 475,000 495,188
Nielsen Finance LLC, 0% to 2011, 12.5% to 2016(z) 355,000 256,488
R.H. Donnelley Corp., 8.875%, 2016 240,000 260,400
-----------
$ 1,863,154
----------------------------------------------------------------------------------------------------------------
Restaurants - 0.1%
----------------------------------------------------------------------------------------------------------------
Denny's Corp. Holdings, Inc., 10%, 2012 $ 100,000 $ 106,750
----------------------------------------------------------------------------------------------------------------
Retailers - 1.4%
----------------------------------------------------------------------------------------------------------------
Buhrmann U.S., Inc., 7.875%, 2015 $ 180,000 $ 179,100
Couche-Tard, Inc., 7.5%, 2013 170,000 175,525
Eye Care Centers of America, 10.75%, 2015 145,000 161,675
Jean Coutu Group (PJC), Inc., 7.625%, 2012 115,000 122,081
Neiman Marcus Group, Inc., 9%, 2015 (p) 165,000 181,913
Neiman Marcus Group, Inc., 10.375%, 2015 140,000 157,325
-----------
$ 977,619
----------------------------------------------------------------------------------------------------------------
Specialty Stores - 0.7%
----------------------------------------------------------------------------------------------------------------
GSC Holdings Corp., 8%, 2012 $ 180,000 $ 191,925
Michaels Stores, Inc., 11.375%, 2016 (n) 175,000 192,500
Payless ShoeSource, Inc., 8.25%, 2013 125,000 131,563
-----------
$ 515,988
----------------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.0%
----------------------------------------------------------------------------------------------------------------
Centennial Communications Corp., 10%, 2013 $ 30,000 $ 32,475
Centennial Communications Corp., 10.125%, 2013 140,000 151,200
Rural Cellular Corp., 9.75%, 2010 213,000 219,923
Wind Acquisition Finance S.A., 10.75%, 2015 (n) 225,000 259,875
-----------
$ 663,473
----------------------------------------------------------------------------------------------------------------
Tobacco - 0.5%
----------------------------------------------------------------------------------------------------------------
Reynolds American, Inc., 7.3%, 2015 $ 340,000 $ 363,039
----------------------------------------------------------------------------------------------------------------
Transportation - 0.4%
----------------------------------------------------------------------------------------------------------------
PT Arpeni Pratama Ocean Line Tbk., 8.75%, 2013 (n) $ 275,000 $ 290,469
----------------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.2%
----------------------------------------------------------------------------------------------------------------
Edison Mission Energy, 7.75%, 2016 $ 160,000 $ 168,400
Midwest Generation LLC, 8.75%, 2034 145,000 160,225
Mirant Americas Generation, Inc., 8.5%, 2021 750,000 793,125
Mission Energy Holding Co., 13.5%, 2008 130,000 142,025
NGC Corp. Capital Trust, 8.316%, 2027 275,000 265,375
NRG Energy, Inc., 7.375%, 2016 430,000 446,663
Reliant Resources, Inc., 9.25%, 2010 200,000 209,750
-----------
$ 2,185,563
----------------------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $40,985,624) $43,224,273
----------------------------------------------------------------------------------------------------------------
Common Stocks - 24.1%
----------------------------------------------------------------------------------------------------------------
Biotechnology - 1.7%
----------------------------------------------------------------------------------------------------------------
Amgen, Inc. (a)(l) 18,200 $ 1,167,348
----------------------------------------------------------------------------------------------------------------
Cable TV - 0.2%
----------------------------------------------------------------------------------------------------------------
Comcast Corp., "A" (a) 2,900 $ 77,314
Time Warner Cable, Inc. (a)(l) 2,300 84,686
-----------
$ 162,000
----------------------------------------------------------------------------------------------------------------
Chemicals - 0.6%
----------------------------------------------------------------------------------------------------------------
Huntsman Corp. (l) 20,800 $ 407,680
----------------------------------------------------------------------------------------------------------------
Construction - 1.3%
----------------------------------------------------------------------------------------------------------------
Masco Corp. (l) 33,700 $ 916,977
----------------------------------------------------------------------------------------------------------------
Containers - 2.9%
----------------------------------------------------------------------------------------------------------------
Owens-Illinois, Inc. (a) 65,600 $ 1,973,904
----------------------------------------------------------------------------------------------------------------
Electrical Equipment - 1.9%
----------------------------------------------------------------------------------------------------------------
Tyco International Ltd. (l) 41,200 $ 1,344,356
----------------------------------------------------------------------------------------------------------------
Energy - Independent - 1.9%
----------------------------------------------------------------------------------------------------------------
Anadarko Petroleum Corp. 23,200 $ 1,082,512
Chesapeake Energy Corp. (l) 2,600 87,750
Foundation Coal Holdings, Inc. (l) 3,430 135,108
-----------
$ 1,305,370
----------------------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.7%
----------------------------------------------------------------------------------------------------------------
Sally Beauty Holdings, Inc. (a)(l) 51,200 $ 502,784
----------------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.1%
----------------------------------------------------------------------------------------------------------------
Louisiana-Pacific Corp. (l) 2,000 $ 39,420
----------------------------------------------------------------------------------------------------------------
Machinery & Tools - 0.0%
----------------------------------------------------------------------------------------------------------------
Titan International, Inc. (l) 1,000 $ 28,180
----------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.8%
----------------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp. (a)(l) 164,600 $ 1,221,332
----------------------------------------------------------------------------------------------------------------
Medical Equipment - 3.7%
----------------------------------------------------------------------------------------------------------------
Boston Scientific Corp. (a)(l) 68,400 $ 1,056,096
Pall Corp. (l) 35,400 1,485,030
-----------
$ 2,541,126
----------------------------------------------------------------------------------------------------------------
Network & Telecom - 1.6%
----------------------------------------------------------------------------------------------------------------
Nortel Networks Corp. (a)(l) 47,729 $ 1,092,040
----------------------------------------------------------------------------------------------------------------
Oil Services - 1.3%
----------------------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 13,630 $ 871,366
----------------------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 1.2%
----------------------------------------------------------------------------------------------------------------
Countrywide Financial Corp. (l) 21,500 $ 797,220
----------------------------------------------------------------------------------------------------------------
Pharmaceuticals - 2.2%
----------------------------------------------------------------------------------------------------------------
Warner Chilcott Ltd., "A" (a)(l) 91,400 $ 1,540,090
----------------------------------------------------------------------------------------------------------------
Pollution Control - 0.1%
----------------------------------------------------------------------------------------------------------------
Waste Management, Inc. (l) 1,400 $ 52,374
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
----------------------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (a) 53,266 $ 0
----------------------------------------------------------------------------------------------------------------
Telephone Services - 0.2%
----------------------------------------------------------------------------------------------------------------
Adelphia Business Solutions, Inc. (a) 40,000 $ 0
Windstream Corp. (l) 9,100 133,042
-----------
$ 133,042
----------------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.7%
----------------------------------------------------------------------------------------------------------------
NRG Energy, Inc. (a)(l) 6,227 $ 491,684
----------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $14,576,044) $16,588,293
----------------------------------------------------------------------------------------------------------------
Floating Rate Loans - 3.7% (g)(r)
----------------------------------------------------------------------------------------------------------------
Automotive - 0.9%
----------------------------------------------------------------------------------------------------------------
Ford Motor Co., Term Loan B, 8.36%, 2013 $ 380,830 $ 383,419
General Motors Corp., Term Loan B, 7.73%, 2013 74,157 74,667
Mark IV Industries, Inc., Second Lien Term Loan, 11.10%, 2011 129,863 131,054
-----------
$ 589,140
----------------------------------------------------------------------------------------------------------------
Broadcasting - 0.3%
----------------------------------------------------------------------------------------------------------------
Univision Communications, Inc., Term Loan B, 7.61%, 2014 $ 224,347 $ 223,927
----------------------------------------------------------------------------------------------------------------
Building - 0.2%
----------------------------------------------------------------------------------------------------------------
Roofing Supply Group, Inc., Term Loan, 2013 (o) $ 159,946 $ 153,548
----------------------------------------------------------------------------------------------------------------
Cable TV - 0.1%
----------------------------------------------------------------------------------------------------------------
Charter Communications Operating LLC, Term Loan, 7.35%, 2014 $ 50,948 $ 50,864
----------------------------------------------------------------------------------------------------------------
Containers - 0.5%
----------------------------------------------------------------------------------------------------------------
Altivity Packaging LLC, Second Lien Term Loan, 10.32%, 2013 $ 90,909 $ 92,424
Altivity Packaging LLC, Second Lien Term Loan, 10.32%, 2013 284,091 288,826
-----------
$ 381,250
----------------------------------------------------------------------------------------------------------------
Energy - Independent - 0.5%
----------------------------------------------------------------------------------------------------------------
Sandridge Energy, Inc., Term Loan B, 8.63%, 2015 $ 327,000 $ 336,810
----------------------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.3%
----------------------------------------------------------------------------------------------------------------
Gulfside Casino, Term Loan B, 10.34%, 2012 $ 230,973 $ 232,706
----------------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.0%
----------------------------------------------------------------------------------------------------------------
HCA, Inc., Term Loan B, 7.6%, 2012 $ 22,521 $ 22,749
----------------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.7%
----------------------------------------------------------------------------------------------------------------
Idearc, Inc., Term Loan B, 7.35%, 2014 $ 452,552 $ 455,420
----------------------------------------------------------------------------------------------------------------
Specialty Stores - 0.2%
----------------------------------------------------------------------------------------------------------------
Michaels Stores, Inc., Term Loan, 8.13%, 2013 $ 120,719 $ 121,549
----------------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE LOANS (IDENTIFIED COST, $2,545,029) $ 2,567,963
----------------------------------------------------------------------------------------------------------------
Preferred Stocks - 3.0%
----------------------------------------------------------------------------------------------------------------
Broadcasting - 3.0%
----------------------------------------------------------------------------------------------------------------
ION Media Networks, Inc., 14.25% (a)(p) 158 $ 1,223,019
Spanish Broadcasting Systems, Inc., "B", 10.75% (a)(p) 775 848,625
-----------
$ 2,071,644
----------------------------------------------------------------------------------------------------------------
Real Estate - 0.0%
----------------------------------------------------------------------------------------------------------------
HRPT Properties Trust, "B", REIT, 8.75% (l) 200 $ 5,048
----------------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $2,064,332) $ 2,076,692
----------------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.4% (y)
----------------------------------------------------------------------------------------------------------------
American Express Credit Corp., 5.29%, due 5/01/07 $ 252,000 $ 252,000
New Center Asset Trust, 5.29%, due 5/01/07 2,758,000 2,758,000
----------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST $ 3,010,000
----------------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 15.1%
----------------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 10,365,758 $10,365,758
----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $73,546,787) (k) $77,832,979
----------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (13.1)% (9,003,274)
----------------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $68,829,705
----------------------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(e) The rate shown represents a current effective yield.
(g) The rate shown represents a weighted average coupon rate on settled positions at period end.
(i) Interest only security for which the trust receives interest on notional principal (Par amount). Par amount
shown is the notional principal and does not reflect the cost of the security.
(k) As of April 30, 2007, the trust held securities fair valued in accordance with the policies adopted by the
Board of Trustees, aggregating $42,203,278 and 54.22% of market value. An independent pricing service
provided an evaluated bid for 53.81% of the market value.
(l) All or a portion of this security is on loan.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be
sold in the ordinary course of business in transactions exempt from registration, normally to qualified
institutional buyers. At period end, the aggregate value of these securities was $8,408,126 representing
12.2% of net assets.
(o) All or a portion of this position has not settled. Upon settlement date, interest rates will be determined.
(p) Payment-in-kind security.
(r) Remaining maturities of floating rate loans may be less than stated maturities shown as a result of
contractual or optional prepayments by the borrower. Such prepayments cannot be predicted with certainty.
These loans may be subject to restrictions on resale. Floating rate loans generally have rates of interest
which are determined periodically by reference to a base lending rate plus a premium.
(y) The rate shown represents an annualized yield at time of purchase.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal
restrictions on resale. These securities generally may be resold in transactions exempt from registration
or to the public if the securities are subsequently registered. Disposal of these securities may involve
time-consuming negotiations and prompt sale at an acceptable price may be difficult. The trust holds the
following restricted securities:
CURRENT
ACQUISITION ACQUISITION MARKET TOTAL % OF
RESTRICTED SECURITIES DATE COST VALUE NET ASSETS
-------------------------------------------------------------------------------------------------------------
Anthracite CDO Ltd., 6%, 2037 5/14/02 $303,729 $ 400,289
Asset Securitization Corp., FRN,
8.6366%, 2029 1/25/05 604,160 751,863
Energy Partners Ltd., 9.75%, 2014 4/18/07 125,000 127,188
Falcon Franchise Loan LLC, FRN,
4.1216%, 2025 1/29/03 102,326 75,747
HRP Myrtle Beach Operations, FRN, 10.07%, 2012 3/23/06 155,000 155,775
Kar Holdings Inc., 10%, 2015 4/13/07 - 4/24/07 322,681 326,419
Nielsen Finance LLC, 0% to 2011, 12.5% to 2016 4/03/07 251,063 256,488
Preferred Term Securities XII Ltd.,
17%, 2033 1/07/05 236,250 190,125
Preferred Term Securities XVI Ltd.,
17%, 2035 12/08/04 300,000 261,000
Preferred Term Securities XVII Ltd.,
14%, 2035 3/09/05 187,000 151,470
Realogy Corp., 10.5%, 2014 4/05/07 108,665 110,138
Realogy Corp., 12.375%, 2015 4/05/07 181,570 185,000
USI Holdings Corp., 9.75%, 2015 4/26/07 50,000 51,000
-------------------------------------------------------------------------------------------------------------
Total Restricted Securities $3,042,502 4.4%
===================
UNFUNDED LOAN COMMITMENTS
As of April 30, 2007, the portfolio had unfunded loan commitments of $8,814, which could be extended at the option of
the borrower, pursuant to the following loan agreements:
UNFUNDED UNREALIZED
LOAN APPRECIATION
BORROWER COMMITMENT (DEPRECIATION)
---------------------------------------------------------------------------------------------------------
Univision Communications, Delayed Draw Term Loan, 2014 $8,814 $(17)
SWAP AGREEMENTS AT 4/30/07
UNREALIZED
NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION
EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS
3/20/12 USD 200,000 Merrill Lynch (1) 3.70% (fixed rate) $(2,856)
International
6/20/12 USD 200,000 Morgan Stanley 3.76% (fixed rate) (2) (1,064)
6/20/12 USD 200,000 Morgan Stanley (3) 2.75% (fixed rate) (702)
6/20/12 USD 200,000 Goldman Sachs (4) 1.49% (fixed rate) (1,926)
3/20/17 USD 35,000 JPMorgan Chase (5) 0.78% (fixed rate) 439
3/20/17 USD 35,000 JPMorgan Chase (5) 0.80% (fixed rate) 386
3/20/17 USD 30,000 Merrill Lynch (5) 0.81% (fixed rate) 309
International
-------
$(5,414)
=======
(1) Trust to receive notional amount upon a defined credit default event by Lear Corp., 5.75%, 8/01/14.
(2) Trust to pay notional amount upon a defined credit default event by Bowater, Inc., 6.5%, 6/15/13.
(3) Trust to receive notional amount upon a defined credit default event by Smurfit Stone Container Corp., 7.50%, 6/01/13.
(4) Trust to receive notional amount upon a defined credit default event by Constellation Brands 8%, 2/15/08.
(5) Trust to receive notional amount upon a defined credit default event by Waste Management, Inc., 7.375%, 8/01/10.
At April 30, 2007, the trust had sufficient cash and/or other liquid securities to cover any commitments under these derivative
contracts.
The following abbreviations are used in this report and are defined:
CDO Collateralized Debt Obligation
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
REIT Real Estate Investment Trust
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 4/30/07 (unaudited)
This statement represents your trust's balance sheet, which details the assets and liabilities
comprising the total value of the trust.
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value, including $10,081,771 of securities on
loan (identified cost, $73,546,787) $77,832,979
Cash 4,181
Receivable for investments sold 1,724,059
Interest and dividends receivable 887,412
Unrealized appreciation on credit default swaps 1,134
Other assets 27,956
------------------------------------------------------------------------------------------------------
Total assets $80,477,721
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Distributions payable $51,241
Payable for investments purchased 1,007,848
Unrealized depreciation on credit default swaps 6,548
Unrealized depreciation on unfunded loan commitments 17
Collateral for securities loaned, at value 10,365,758
Payable to affiliates
Management fee 6,708
Transfer agent and dividend disbursing costs 8,223
Administrative services fee 228
Payable for independent trustees' compensation 135,409
Accrued expenses and other liabilities 66,036
------------------------------------------------------------------------------------------------------
Total liabilities $11,648,016
------------------------------------------------------------------------------------------------------
Net assets $68,829,705
------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------
Paid-in capital $69,948,143
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 4,280,750
Accumulated net realized gain (loss) on investments and foreign
currency transactions (3,802,742)
Accumulated distributions in excess of net investment income (1,596,446)
------------------------------------------------------------------------------------------------------
Net assets $68,829,705
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (7,113,952 issued, less
256,600 treasury shares) 6,857,352
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $68,829,705 / 6,857,352
shares of beneficial interest outstanding) $10.04
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 4/30/07 (unaudited)
This statement describes how much your trust earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by trust operations.
NET INVESTMENT INCOME
------------------------------------------------------------------------------------------------------
Income
Interest $2,185,227
Dividends 114,459
------------------------------------------------------------------------------------------------------
Total investment income $2,299,686
------------------------------------------------------------------------------------------------------
Expenses
Management fee $305,183
Transfer agent and dividend disbursing costs 7,872
Administrative services fee 10,136
Independent trustees' compensation 12,396
Custodian fee 23,628
Shareholder communications 31,800
Auditing fees 25,229
Legal fees 722
Miscellaneous 18,521
------------------------------------------------------------------------------------------------------
Total expenses $435,487
------------------------------------------------------------------------------------------------------
Fees paid indirectly (19,988)
Reduction of expenses by investment adviser (167)
------------------------------------------------------------------------------------------------------
Net expenses $415,332
------------------------------------------------------------------------------------------------------
Net investment income $1,884,354
------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,045,023
Swap transactions 13,639
Foreign currency transactions (22,172)
------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $2,036,490
------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $2,902,165
Swap transactions (5,414)
Translation of assets and liabilities in foreign currencies 7,024
Unfunded loan commitments (17)
------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $2,903,758
------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $4,940,248
------------------------------------------------------------------------------------------------------
Change in net assets from operations $6,824,602
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/07 10/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
-------------------------------------------------------------------------------------------------------
Net investment income $1,884,354 $3,800,930
Net realized gain (loss) on investments and foreign
currency transactions 2,036,490 (895,884)
Net unrealized gain (loss) on investments and foreign
currency translation 2,903,758 2,662,409
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $6,824,602 $5,567,455
-------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------
From net investment income $(1,721,577) $(4,028,876)
From paid-in capital -- (2,511,845)
From other sources (1,596,446) --
-------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(3,318,023) $(6,540,721)
-------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $278,711 $540,115
-------------------------------------------------------------------------------------------------------
Total change in net assets $3,785,290 $(433,151)
-------------------------------------------------------------------------------------------------------
NET ASSETS
-------------------------------------------------------------------------------------------------------
At beginning of period 65,044,415 65,477,566
At end of period (including accumulated distributions in
excess of net investment income of $1,596,446 and $162,777,
respectively) $68,829,705 $65,044,415
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in the
table represent the rate by which an investor would have earned (or lost) on an investment in the trust share class (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value,
beginning of period $9.52 $9.66 $10.12 $9.80 $7.50 $8.63
-------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.28 $0.56 $0.60 $0.59 $0.59 $0.71
Net realized and unrealized gain
(loss) on investments and
foreign currency 0.72 0.26 (0.04) 0.74 2.56 (0.86)
-------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations $1.00 $0.82 $0.56 $1.33 $3.15 $(0.15)
-------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.25) $(0.59) $(0.72) $(0.58) $(0.57) $(0.98)
From net realized gain on
investments and foreign
currency transactions -- -- -- -- (0.28) --
From paid-in capital -- (0.37) (0.30) (0.43) -- --
From other sources (0.23) -- -- -- -- --
-------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.48) $(0.96) $(1.02) $(1.01) $(0.85) $(0.98)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $10.04 $9.52 $9.66 $10.12 $9.80 $7.50
-------------------------------------------------------------------------------------------------------------------------------
Per share market value,
end of period $11.09 $10.91 $10.85 $11.60 $10.40 $7.25
-------------------------------------------------------------------------------------------------------------------------------
Total return at market
value (%) 6.55(n) 10.88 2.77 22.56(b) 58.07 (43.54)
-------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------------------
Expenses before expense
reductions (f) 1.31(a) 1.37 1.37 1.28 1.34 1.56
Expenses after expense
reductions (f) 1.31(a) 1.37 1.37 1.28 N/A N/A
Net investment income 5.69(a) 5.82 5.95 5.82 6.75 8.39
Portfolio turnover 37 72 47 72 94 137
Net assets at end of
period (000 omitted) $68,830 $65,044 $65,478 $67,939 $65,195 $49,622
-------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(b) The trust's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales. The
non-recurring accrual did not have a material impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Special Value Trust (the trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as a closed-end diversified management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in high-yield securities rated below investment grade. Investments
in high-yield securities involve greater degrees of credit and market risk than
investments in higher-rated securities and tend to be more sensitive to
economic conditions. The trust can invest in foreign securities, including
securities of emerging market issuers. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment. The markets of emerging markets
countries are generally more volatile than the markets of developed countries
with more mature economies. All of the risks of investing in foreign securities
previously described are heightened when investing in emerging markets
countries.
INVESTMENT VALUATIONS - Equity securities, including restricted equity
securities, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the market
or exchange on which they are primarily traded. For securities held short for
which there were no sales reported for the day, the position is generally
valued at the last quoted daily ask quotation as reported by an independent
pricing service on the market or exchange on which such securities are
primarily traded. Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated or
composite bid as reported by an independent pricing service. Short-term
instruments with a maturity at issuance of 60 days or less may be valued at
amortized cost, which approximates market value. Forward foreign currency
contracts are generally valued at the mean of bid and asked prices for the time
period interpolated from rates reported by an independent pricing service for
proximate time periods. Swaps are generally valued at an evaluated bid as
reported by an independent pricing service. Open-end investment companies are
generally valued at their net asset value per share. Securities and other
assets generally valued on the basis of information from an independent pricing
service may also be valued at a broker-dealer bid quotation. Values obtained
from pricing services can utilize both dealer-supplied valuations and
electronic data processing techniques, which take into account factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data. The values of foreign securities and other assets and liabilities
expressed in foreign currencies are converted to U.S. dollars using the mean of
bid and asked prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the trust's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the trust's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded (such as foreign exchange or market) and
prior to the determination of the trust's net asset value, or after the halting
of trading of a specific security where trading does not resume prior to the
close of the exchange or market on which the security is principally traded.
Events that occur on a frequent basis after foreign markets close (such as
developments in foreign markets and significant movements in the U.S. markets)
and prior to the determination of the trust's net asset value may be deemed to
have a material affect on the value of securities traded in foreign markets.
Accordingly, the trust's foreign equity securities may often be valued at fair
value. The adviser may rely on independent pricing services or other
information (such as the correlation with price movements of similar securities
in the same or other markets; the type, cost and investment characteristics of
the security; the business and financial condition of the issuer; and trading
and other market data) to assist in determining whether to fair value and at
what value to fair value an investment. The value of an investment for purposes
of calculating the trust's net asset value can differ depending on the source
and method used to determine value. When fair valuation is used, the value of
investments used to determine the trust's net asset value may differ from
quoted or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the trust, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the trust's financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 (FAS 159) "The Fair Value Option for Financial Assets and Financial
Liabilities - including an amendment of FASB Statement No. 115." FAS 159
permits entities to elect to measure certain financial assets and liabilities
at fair value. Unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings at each subsequent
reporting date. FAS 159 is effective for fiscal years beginning after November
15, 2007. Management is evaluating the application of the Statement to the
trust and its impact on the trust's financial statements, if any, has not been
determined.
REPURCHASE AGREEMENTS - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the trust to obtain those
securities in the event of a default under the repurchase agreement. The trust
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the trust
under each such repurchase agreement. The trust and other funds managed by
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of both
realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
DERIVATIVE RISK - The trust may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the trust uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative's original cost.
Derivative instruments include swap agreements.
SWAP AGREEMENTS - The trust may enter into swap agreements. A swap is an
exchange of cash payments between the trust and another party. Net cash
payments are exchanged at specified intervals and are recorded as a realized
gain or loss in the Statement of Operations. The value of the swap is adjusted
daily and the change in value, including accruals of periodic amounts of
interest to be paid or received, is recorded as unrealized appreciation or
depreciation in the Statement of Operations. A liquidation payment received or
made upon early termination is recorded as a realized gain or loss in the
Statement of Operations. Collateral, in the form of cash or securities, may be
required to be held in segregated accounts with the trust's custodian in
connection with these agreements. Risk of loss may exceed amounts recognized on
the Statement of Assets and Liabilities. These risks include the possible lack
of a liquid market, failure of the counterparty to perform under the terms of
the agreements, and unfavorable market movement of the underlying instrument.
All swap agreements entered into by the trust with the same counterparty are
generally governed by a single master agreement, which provides for the netting
of all amounts owed by the parties under the agreement upon the occurrence of
an event of default, thereby reducing the credit risk to which such party is
exposed.
The trust holds a credit default swap in which one party makes a stream of
payments based on a fixed percentage applied to the notional amount to another
party in exchange for the right to receive a specified return in the event of a
default by a third party, such as a corporate issuer or foreign issuer, on its
obligation. The trust may enter into credit default swaps to limit or to reduce
its risk exposure to defaults of corporate and sovereign issuers or to create
direct or synthetic short or long exposure to corporate debt securities or
certain sovereign debt securities to which it is not otherwise exposed.
SECURITY LOANS - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the trust to certain qualified
institutions (the "Borrowers") approved by the trust. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the trust with indemnification against Borrower default. The
trust bears the risk of loss with respect to the investment of cash collateral.
On loans collateralized by cash, the cash collateral is invested in a money
market fund or short-term securities. A portion of the income generated upon
investment of the collateral is remitted to the Borrowers, and the remainder is
allocated between the trust and the lending agent. On loans collateralized by
U.S. Treasury securities, a fee is received from the Borrower, and is allocated
between the trust and the lending agent. Net income from securities lending is
included in interest income on the Statement of Operations. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS - The trust may invest in loans and
loan participations or other receivables. These investments may include standby
financing commitments, including revolving credit facilities, which obligate
the trust to supply additional cash to the borrower on demand. At 4/30/07, the
portfolio had unfunded loan commitments of $8,814, which could be extended at
the option of the borrower and which are covered by sufficient cash and/or
liquid securities held by the trust. Loan participations involve a risk of
insolvency of the lending bank or other financial intermediary.
INDEMNIFICATIONS - Under the trust's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the trust. Additionally, in the
normal course of business, the trust enters into agreements with service
providers that may contain indemnification clauses. The trust's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the trust that have not yet occurred.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. The trust earns certain fees in connection with its floating rate
loan purchasing activities. These fees are in addition to interest payments
earned and may include amendment fees, commitment fees, facility fees, consent
fees, and prepayment fees. These fees are recorded on an accrual basis as
income in the accompanying financial statements. Dividends received in cash are
recorded on the ex-dividend date. Certain dividends from foreign securities
will be recorded when the trust is informed of the dividend if such information
is obtained subsequent to the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex- dividend or
ex-interest date in an amount equal to the value of the security on such date.
The trust may receive proceeds from litigation settlements. Any proceeds
received from litigation involving portfolio holdings are reflected in the
Statement of Operations in realized gain/loss if the security has been disposed
of by the fund or in unrealized gain/loss if the security is still held by the
trust. Any other proceeds from litigation not related to portfolio holdings are
reflected as other income in the Statement of Operations.
FEES PAID INDIRECTLY - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount, for the six months ended April 30, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the trust in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. The trust
pays monthly distributions based on an annual rate of 10% of the trust's
average daily net asset value. As a result, distributions may exceed actual
earnings which may result in a tax return of capital. No such designation had
been made for the six months ended April 30, 2007. Income and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from U.S. generally accepted accounting principles. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These adjustments have no
impact on net assets or net asset value per share. Temporary differences which
arise from recognizing certain items of income, expense, gain or loss in
different periods for financial statement and tax purposes will reverse at some
time in the future. Distributions from other sources, in excess of net
investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, defaulted bonds, wash sale loss deferrals, foreign currency
transactions and deferred trustee compensation.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
10/31/06
Ordinary income (including any
short-term capital gains) $4,028,876
Tax return of capital (b) 2,511,845
----------------------------------------------------------
Total distributions $6,540,721
----------------------------------------------------------
(b) Distributions in excess of tax basis earnings and profits are reported
in the financial statements as a tax return of capital.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 4/30/07
Cost of investments $74,247,777
----------------------------------------------------------
Gross appreciation $5,351,534
Gross depreciation (1,766,332)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $3,585,202
AS OF 10/31/06
Capital loss carryforwards $(5,183,412)
Other temporary differences (169,812)
Net unrealized appreciation (depreciation) 728,207
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2006, the trust had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/12 $(322,473)
10/31/13 (1,143,611)
10/31/14 (3,717,328)
----------------------------------------------------------
$(5,183,412)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management
has evaluated the application of the Interpretation to the trust, and has
determined that there is no impact resulting from the adoption of this
Interpretation on the trust's financial statements.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the trust.
The management fee is computed daily and paid monthly at an annual rate of
0.68% of the trust's average daily net assets and 3.40% of gross income. Gross
income is calculated based on tax elections that generally include the
accretion of discount and exclude the amortization of premium, which may differ
from investment income reported in the Statement of Operations. The management
fee, from net assets and gross income, incurred for the six months ended April
30, 2007 was equivalent to an annual effective rate of 0.92% of the trust's
average daily net assets.
TRANSFER AGENT - Prior to December 18, 2006, MFS Service Center, Inc. (MFSC),
a wholly-owned subsidiary of MFS, received a fee from the trust for its
services as registrar and dividend-disbursing agent. Pursuant to a written
agreement, the trust paid MFSC an account maintenance fee of no more than
$9.00 and a dividend services fee of $0.75 per reinvestment. Effective
December 18, 2006, the trust has engaged Computershare Trust Company, N.A.
("Computershare") as the sole transfer agent for the trust. MFSC will continue
to monitor and supervise the activities of Computershare for an agreed upon
fee approved by the Board of Trustees. For the six months ended April 30,
2007, these fees paid to MFSC amounted to $3,038. MFSC also receives payment
from the trust for out-of-pocket expenses paid by MFSC on behalf of the trust.
For the six months ended April 30, 2007, these costs amounted to $4,229.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the trust.
Under an administrative services agreement, the trust partially reimburses MFS
the costs incurred to provide these services. The trust is charged a fixed
amount plus a fee based on calendar year average net assets. The trust's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended April 30,
2007 was equivalent to an annual effective rate of 0.0306% of the trust's
average daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The trust pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The trust does not pay
compensation directly to trustees or to officers of the trust who are also
officers of the investment adviser, all of whom receive remuneration for their
services to the trust from MFS. Certain officers and trustees of the trust are
officers or directors of MFS and MFSC. The trust has an unfunded, defined
benefit plan for certain retired independent trustees which resulted in a
pension expense of $2,024. The trust also has an unfunded retirement benefit
deferral plan for certain independent trustees which resulted in an expense of
$5,270. Both amounts are included in independent trustees' compensation for the
six months ended April 30, 2007. The liability for deferred retirement benefits
payable to certain independent trustees under both plans amounted to $122,946
at April 30, 2007, and is included in payable for independent trustees'
compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent trustees previously were allowed to elect to defer receipt of all
or a portion of their annual compensation. Trustees are no longer allowed to
defer compensation under the Plan. Amounts previously deferred are treated as
though equivalent dollar amounts had been invested in shares of the trust or
other MFS funds selected by the trustee. Deferred amounts represent an
unsecured obligation of the trust until distributed in accordance with the
Plan. Included in other assets and payable for independent trustees'
compensation is $10,562 of deferred trustees' compensation.
OTHER - This trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended April 30, 2007, the fee paid to Tarantino
LLC was $257. MFS has agreed to reimburse the trust for a portion of the
payments made by the funds to Tarantino LLC in the amount of $167, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$23,606,886 and $26,970,651, respectively.
(5) SHARES OF BENEFICIAL INTEREST
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. During the six months ended April 30, 2007, the trust
did not repurchase any shares. Transactions in trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
4/30/07 10/31/06
SHARES AMOUNT SHARES AMOUNT
Shares issued to shareholders in
reinvestment of distributions 27,164 $278,711 55,000 $540,115
(6) LINE OF CREDIT
The trust and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the trust and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve funds
rate plus 0.30% for the committed line of credit and 0.35% for the uncommitted
line of credit. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended April 30, 2007, the trust's commitment fee and interest expense were $190
and $248, respectively, and are included in miscellaneous expense on the
Statement of Operations.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of the MFS Special Value Trust
We have reviewed the accompanying statement of assets and liabilities of the
MFS Special Value Trust (the Trust), including the portfolio of investments, as
of April 30, 2007, and the related statements of operations, changes in net
assets, and financial highlights for the six-month period ended April 30, 2007.
These interim financial statements are the responsibility of the Trust's
management.
We conducted our review in accordance with the standards of the Public
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements for them to be in
conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of changes in
net assets for the year ended October 31, 2006, and financial highlights for
each of the five years in the period ended October 31, 2006, and in our report
dated December 21, 2006, we expressed an unqualified opinion on such statement
of changes in net assets and financial highlights.
ERNST & YOUNG LLP
Boston, Massachusetts
June 13, 2007
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
trust's investment advisory agreement is available by clicking on the trust's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the trust voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time
Write to: Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Effective December 18, 2006, Computershare Trust Company, N.A. became the
Transfer Agent and Registrar and Computershare Shareholder Services, Inc.
became the Dividend Disbursing Agent, succeeding MFS Service Center, Inc.
NUMBER OF SHAREHOLDERS
As of April 30, 2007, our records indicate that there are 508 registered
shareholders and approximately 4,840 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
1-800-637-2304
M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street, Boston, MA 02116
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph
(b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=====================================================================================================================
MFS SPECIAL VALUE TRUST
---------------------------------------------------------------------------------------------------------------------
(D) MAXIMUM NUMBER
(C) TOTAL NUMBER OF (OR APPROXIMATE
SHARES PURCHASED AS DOLLAR VALUE) OF
(B) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
(A) TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE OR PROGRAMS THE PLANS OR PROGRAMS
=====================================================================================================================
11/1/06 - 11/30/06 0 N/A N/A 679,033
---------------------------------------------------------------------------------------------------------------------
12/1/06 - 12/31/06 0 N/A N/A 679,033
---------------------------------------------------------------------------------------------------------------------
1/1/07 - 1/31/07 0 N/A N/A 679,033
---------------------------------------------------------------------------------------------------------------------
2/1/07 - 2/28/07 0 N/A N/A 679,033
---------------------------------------------------------------------------------------------------------------------
3/1/07 - 3/31/07 0 N/A N/A 685,222
---------------------------------------------------------------------------------------------------------------------
4/1/07 - 4/30/07 0 N/A N/A 685,222
---------------------------------------------------------------------------------------------------------------------
TOTAL 0 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Note: The Board of Trustees approves procedures to repurchase Fund shares
annually. The notification to shareholders of the program is included in the
semi-annual and annual reports sent to shareholders. These annual programs
begin on March 1st of each year. The programs conform to the conditions of Rule
10b-18 of the Securities Exchange Act of 1934 and limit the aggregate number of
Fund shares that may be repurchased in each annual period (March 1 through the
following February 28) to 10% of the Registrant's outstanding shares as of the
first day of the plan year (March 1). The aggregate number of Fund shares
available for repurchase for the March 1, 2007 plan year is 685,222.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) of Schedule 14A), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this report on Form N-CSR, the registrant's principal
financial officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SPECIAL VALUE TRUST
------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: June 13, 2007
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: June 13, 2007
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 13, 2007
-------------
* Print name and title of each signing officer under his or her signature.