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)
Stephen E. Cavan
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, 2002
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Date of reporting period: April 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) SPECIAL
VALUE TRUST
SEMIANNUAL REPORT o APRIL 30, 2003
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review ......................................................... 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 21
Notes to Financial Statements ............................................. 25
Trustees and Officers ..................................................... 32
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Our firm was built on the philosophy that bottom- up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers -- no matter how
talented they may be -- can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS" culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo, and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
MANAGEMENT REVIEW
[Photo of John F. Addeo]
John F. Addeo
Dear Shareholders,
For the six months ended April 30, 2003, the trust provided a total return of
24.57% based on its beginning and ending stock market prices and assuming the
reinvestment of any dividend and capital gains distributions paid during the
period. The trust's total return based on its net asset value (NAV) was 21.56%.
During the same period, the trust's benchmark, the Lehman Brothers High Yield
Bond Index, an unmanaged index of below-investment-grade corporate debt,
returned 22.75%.
STRONG PERIOD FOR CORPORATE BONDS
In the fourth quarter of 2002, stock and corporate bond prices rebounded sharply
from a dramatic September decline, sparked by signs of improving economic
activity and a pickup in corporate earnings. The stock market rally stalled in
the first quarter of 2003, however, as the uncertainty of war with Iraq began to
be a factor with investors. Less-than-encouraging economic news in early 2003
also dampened investor enthusiasm for stocks.
However, corporate bonds continued to rally through the end of the reporting
period, as investor focus turned from U.S. Treasuries to higher-yielding bonds.
(The principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity.) Many companies were actively reducing the
amount of debt on their balance sheets and becoming stronger, more profitable
operations. An increase in the number of high-yield corporate bonds being issued
brought some well-needed liquidity back into the market. The number of companies
filing for bankruptcy and defaulting on their bonds declined, and there was an
increase in the recovery rate for those that did. These factors helped improve
credit quality and bond performance, particularly for high-yield corporate
issuers.
Mortgage-backed securities also posted strong returns for the reporting period,
benefiting from record low interest rates and a steady mortgage refinancing
market.
PORTFOLIO STRUCTURE
4/30/03
High Yield Corporates 49.1%
U.S. Equities 33.6%
Emerging Markets 6.8%
Commercial Mortgage Backed Securities 5.1%
Other 5.4%
The portfolio is actively managed, and current holdings may be different.
POSITIVE PERFORMANCE CONTRIBUTORS
For the period, the trust's overexposure to high-yield securities helped
performance, particularly when the stock market slipped in late 2002 and early
2003. Our allocation to high-yielding corporate bonds responded positively to
the rally in the U.S. credit markets (led by the media, telecommunications, and
utilities areas) that began last fall and carried over to the end of the
reporting period. We took advantage of the rally by selecting bonds that we felt
were attractive from fundamental and valuation standpoints, including Charter
Communications and Alamosa Holdings. These bond holdings made positive
contributions to relative returns as the market stabilized, investors regained
confidence in corporate securities, and bond prices bounced back from depressed
levels.
The trust was overweighted in longer maturities relative to its benchmark during
the period. This position also helped relative performance, as bonds with longer
maturities constituted one of the best-performing areas of the yield curve.
In addition, the trust's stock holdings in the utilities & communications and
leisure sectors made significant contributions to relative performance. In
particular, energy producer Calpine Corporation and U.S. cable operator Comcast
Corporation were two of the trust's best performing holdings.
WEAKNESS FROM SECTOR ALLOCATIONS
The trust's underexposure to stocks in the basic materials, energy, and
technology sectors detracted from relative performance, as these sectors
performed well during the reporting period. Specific stock holdings also held
back performance for the period. Examples included Owens-Illinois and
GlobalSantaFe Corporation.
Our underexposure to bonds in the industrial and electric sectors also hurt
relative returns, as these economically sensitive areas of the market rebounded
strongly from earlier weakness. However, strong performance from our corporate
bond holdings in the media sector helped offset some of these losses.
The trust had a substantial allocation to equities during the reporting period,
and as the equity market did not rally as much as the high-yield market, this
allocation detracted from performance relative to the trust's high-yield
benchmark.
Respectfully,
/s/ John F. Addeo
John F. Addeo
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
These views are subject to change at any time based on market and other
conditions, and no forecast can be guaranteed.
It is not possible to invest directly in an index.
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PORTFOLIO MANAGER'S PROFILE
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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 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. PREVIOUSLY, HE WAS A QUANTITATIVE ANALYST AND
A VICE PRESIDENT IN THE HIGH-YIELD GROUPS OF SEVERAL MAJOR INVESTMENT
COMPANIES.
HE RECEIVED A BACHELOR OF SCIENCE DEGREE FROM SIENA COLLEGE IN 1984. HE HOLDS
THE CHARTERED FINANCIAL ANALYST (CFA) DESIGNATION.
ALL PORTFOLIO MANAGERS AT MFS ARE SUPPORTED BY AN INVESTMENT STAFF OF OVER
160 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A GLOBAL,
ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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.
OBJECTIVE: To obtain an annual distribution rate of 10% based on its average
daily net asset value (NAV), while seeking opportunities for capital
appreciation.
NEW YORK STOCK EXCHANGE SYMBOL: MFV
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PERFORMANCE SUMMARY
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(For the six months ended April 30, 2003)
NET ASSET VALUE PER SHARE
October 31, 2002 $7.50
April 30, 2003 $8.67
NEW YORK STOCK EXCHANGE PRICE
October 31, 2002 $7.25
April 29 and 30, 2003 (high)* $8.60
November 14, 2002 (low)* $7.22
April 30, 2003 $8.60
*For the period November 1, 2002, through April 30, 2003
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NOTES TO PERFORMANCE SUMMARY
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 DIFFERENT FROM THOSE SHOWN. PAST PERFORMANCE IS
NO GUARANTEE OF FUTURE RESULTS.
KEY RISK CONSIDERATIONS
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. The trust's shares also may trade at a premium to their net asset value.
When trust shares trade at a premium, buyers pay more than the 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.
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 increasing 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 asset value.
The portfolio may invest in derivative securities, which may include futures and
options. These types of instruments can increase price fluctuation.
Investments in high yield or lower-rated securities may provide greater returns
but are subject to greater-than-average risk.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
NUMBER OF SHAREHOLDERS
As of April 30, 2003, our records indicate that there are 703 registered
shareholders and approximately 5,050 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:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS 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 in any amount over $100 can be made 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 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 8 a.m. to 8 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, 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.
PORTFOLIO OF INVESTMENTS (Unaudited) -- April 30, 2003
Bonds - 61.2%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 52.2%
Advertising & Broadcasting - 4.1%
Dex Media East LLC, 9.875s, 2009## $ 150 $ 171,750
Echostar DBS Corp., 9.375s, 2009 500 539,375
Emmis Communications Corp., 0s to 2006, 12.5s to 2011 568 499,840
Granite Broadcasting Corp., 10.375s, 2005 300 298,500
Panamsat Corp., 8.5s, 2012 150 162,375
Primedia, Inc., 8.875s, 2011 325 346,125
RH Donnelley Finance Corp., 10.875s, 2012## 150 173,625
XM Satellite Radio, Inc., 0s to 2005, 14s to 2009 225 158,625
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$ 2,350,215
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Aerospace - 0.6%
Hexcel Corp., 9.875s, 2008## $ 20 $ 21,400
Hexcel Corp., 9.75s, 2009 210 206,850
K & F Industries, Inc., "B", 9.625s, 2010 80 86,400
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$ 314,650
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Airlines - 0.3%
Continental Airlines Pass-Through Trust, Inc., 6.545s, 2019 $ 183 $ 158,998
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Apparel & Manufacturers - 0.1%
Westpoint Stevens, Inc., 7.875s, 2008** $ 325 $ 60,125
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Automotive - 4.1%
Accuride Corp., 9.25s, 2008 $ 200 $ 167,000
Collins & Aikman Products Co., 10.75s, 2011 350 358,750
Delco Remy International, Inc., 8.625s, 2007 40 36,000
Dura Operating Corp., 9s, 2009 550 525,250
Hayes Lemmerz International, Inc., 11.875s, 2006##** 780 390,000
Metaldyne Corp., 11s, 2012 115 100,050
Tenneco Automotive, Inc., "B", 11.625s, 2009 290 256,650
TRW Automotive, Inc., 9.375s, 2013## 90 98,325
TRW Automotive, Inc., 11s, 2013## 20 21,900
TRW Automotive, Inc., 11.75s, 2013 EUR 245 295,796
Venture Holdings Trust, 11s, 2007** $ 375 110,625
Venture Holdings Trust, 12s, 2009** 150 2,250
-----------
$ 2,362,596
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Basic Industry - 0.4%
Foamex L P/Foamex Capital Corp., 10.75s, 2009 $ 295 $ 206,500
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008** 985 40,631
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$ 247,131
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Broadcast & Cable TV - 3.9%
Adelphia Communications Corp., 10.25s, 2011** $ 750 $ 378,750
Charter Communications Holdings, 8.625s, 2009 365 239,988
Charter Communications Holdings, 0s to 2004, 9.92s to 2011 1,000 575,000
CSC Holdings, Inc., 8.125s, 2009 155 164,300
CSC Holdings, Inc., "B", 8.125s, 2009 50 53,000
FrontierVision Holding LP, 11.875s, 2007** 300 216,000
Insight Midwest, 9.75s, 2009 300 321,750
Mediacom Broadband LLC, 11s, 2013 275 312,812
-----------
$ 2,261,600
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Building - 1.1%
Formica Corp., 10.875s, 2009** $ 850 $ 212,500
Interface, Inc., 10.375s, 2010 105 95,550
Williams Scotsman, Inc., 9.875s, 2007 350 348,250
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$ 656,300
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Business Services - 1.7%
General Binding Corp., 9.375s, 2008 $ 1,000 $ 955,000
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Chemicals - 2.5%
Huntsman ICI Holdings, 10.125s, 2009 $ 750 $ 772,500
Lyondell Chemical Co., 11.125s, 2012 300 324,000
Pioneer Americas LLC, 4.9s, 2006 56 43,951
Sovereign Specialty Chemicals, 11.875s, 2010 320 313,600
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$ 1,454,051
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Consumer Goods & Services - 2.2%
American Safety Razor Co., 9.875s, 2005 $ 500 $ 465,000
Samsonite Corp., 10.75s, 2008 550 519,750
Sealy Mattress Co., 9.875s, 2007 275 283,250
-----------
$ 1,268,000
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Containers - 1.3%
Pliant Corp., 13s, 2010 $ 525 $ 485,625
Silgan Holdings, Inc., 9s, 2009 275 286,000
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$ 771,625
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Corporate Asset-Backed - 5.0%
Anthracite CDO I Ltd., 6s, 2037## $ 450 $ 328,166
DLJ Mortgage Acceptance Corp., 8s, 2003+ 803 763,101
Falcon Auto Dealership LLC, 4.198s, 2023 (Interest only) 718 137,303
GMAC Commercial Mortgage Security, Inc., 6.02s, 2033 250 219,375
Morgan Stanley Capital I, Inc., Class D, 7.642s, 2039 1,070 1,032,178
Morgan Stanley Capital I, Inc., Class F, 7.642s, 2039 600 414,866
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$ 2,894,989
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Electronics - 0.8%
On Semiconductor Corp., 13s, 2008 $ 500 $ 475,000
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Energy - Independent - 1.7%
Belden & Blake Corp., 9.875s, 2007 $ 240 $ 223,200
Continental Resources, Inc., 10.25s, 2008 750 742,500
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$ 965,700
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Entertainment - 0.2%
Six Flags, Inc., 9.75s, 2013 $ 135 $ 140,737
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Food & Non Alcoholic Beverage Products - 0.7%
Burns Philip Capital Property Ltd., 9.75s, 2012## $ 425 $ 425,000
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Forest & Paper Products - 1.3%
Buckeye Technologies, Inc., 8s, 2010 $ 465 $ 427,800
Fibermark, Inc., 10.75s, 2011 255 257,550
Georgia Pacific Corp., 9.375s, 2013## 55 60,500
-----------
$ 745,850
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Gaming & Lodging - 1.5%
Hollywood Park, Inc., 9.5s, 2007 $ 275 $ 269,500
Host Marriott LP, 9.5s, 2007 275 289,094
Resorts International Hotel, 11.5s, 2009 350 325,500
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$ 884,094
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Home Construction - 0.7%
MMI Products, Inc., 11.25s, 2007 $ 500 $ 375,000
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Machinery & Tools - 2.2%
Columbus McKinnon Corp., 8.5s, 2008 $ 225 $ 159,750
Motors & Gears, Inc., 10.75s, 2006 270 236,250
Terex Corp., 9.25s, 2011 500 535,000
Terex Corp., 10.375s, 2011 60 66,600
United Rentals North America, Inc., 10.75s, 2008 250 270,000
-----------
$ 1,267,600
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Medical & Health Products - 0.0%
HMP Equity Holdings Corp., 0s, 2008 $ 55 $ 26,089
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Medical & Health Technology Services - 0.9%
Alliance Imaging, Inc., 10.375s, 2011 $ 200 $ 188,000
Beverly Enterprises, Inc., 9.625s, 2009 165 145,612
HealthSouth Corp., 8.5s, 2008** 260 165,750
-----------
$ 499,362
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Metals & Mining - 0.6%
Doe Run Resources Corp., 11.75s, 2008 $ 435 $ 174,000
Kaiser Aluminum & Chemical Corp., 9.875s, 2049** 200 126,000
Kaiser Aluminum & Chemical Corp., 12.75s, 2049** 465 18,600
-----------
$ 318,600
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Natural Gas - Pipeline - 1.5%
ANR Pipeline Co., 9.625s, 2021 $ 125 $ 140,625
Dynegy Holdings, Inc., 6.875s, 2011 500 425,000
Williams Cos, Inc., 7.125s, 2011 320 302,400
-----------
$ 868,025
------------------------------------------------------------------------------------------------------
Oil Services - 0.6%
Dresser, Inc., 9.375s, 2011 $ 285 $ 293,550
Grant Prideco, Inc., 9s, 2009## 20 21,900
-----------
$ 315,450
------------------------------------------------------------------------------------------------------
Oils - 0.7%
Citgo Petroleum Corp., 11.375s, 2011## $ 150 $ 167,250
Tesoro Petroleum Corp., 9.625s, 2012 220 211,200
-----------
$ 378,450
------------------------------------------------------------------------------------------------------
Pollution Control - 0.6%
Allied Waste North America, Inc., 10s, 2009 $ 325 $ 347,344
------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.2%
Hollinger, Inc., 11.875s, 2011 $ 85 $ 90,525
------------------------------------------------------------------------------------------------------
Steel - 0.1%
AK Steel Corp., 7.875s, 2009 $ 75 $ 66,563
------------------------------------------------------------------------------------------------------
Stores - 1.9%
Finlay Enterprises, Inc., 9s, 2008 $ 495 $ 490,050
J. Crew Group, Inc., 13.125s, 2008 160 113,600
J. Crew Operating Corp., 10.375s, 2007 100 90,000
PCA LLC, 11.875s, 2009 180 189,900
Rite Aid Corp, 12.5s, 2006 40 45,200
Rite Aid Corp., 9.5s, 2011## 125 133,125
-----------
$ 1,061,875
------------------------------------------------------------------------------------------------------
Supermarkets - 0.0%
Fleming Cos., Inc., 9.25s, 2010** $ 125 $ 17,813
------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 2.8%
Qwest Services Corp., 13.5s, 2010## $ 600 $ 666,000
Qwest Services Corp., 8.875s, 2012## 110 120,450
Sprint Capital Corp., 6.125s, 2008 265 270,300
Time Warner Telecommunications LLC, 9.75s, 2008 275 231,000
Worldcom, Inc., 7.5s, 2011** 1,080 305,100
-----------
$ 1,592,850
------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.0%
AES Corp., 8.5s, 2007 $ 750 $ 686,250
Calpine Corp., 8.5s, 2011 215 156,950
PSEG Energy Holdings LLC, 7.75s, 2007 200 209,500
TXU Corp., 6.375s, 2006 100 106,500
-----------
$ 1,159,200
------------------------------------------------------------------------------------------------------
Wireless Communication - 3.9%
Alamosa Holdings, Inc., 0s to 2005, 12.875s to 2010 $ 750 $ 337,500
AT&T Wireless Services, Inc., 7.875s, 2011 125 144,013
Crown Castle International Corp., 0s to 2004, 10.375s to 2011 929 826,810
Nextel Communications, Inc., 9.95s, 2008 450 472,500
Rural Cellular Corp., 9.75s, 2010 500 435,000
-----------
$ 2,215,823
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Total U.S. Bonds $29,992,230
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Foreign Bonds - 9.0%
Brazil - 1.1%
Federal Republic of Brazil, 2.125s, 2006 $ 31 $ 29,256
Federal Republic of Brazil, 2.188s, 2009 54 45,113
Federal Republic of Brazil, 2.625s, 2012 100 73,750
Federal Republic of Brazil, 8s, 2014 188 164,855
Federal Republic of Brazil, 8.875s, 2024 254 190,500
Federal Republic of Brazil, 10.125s, 2027 90 73,386
Federal Republic of Brazil, 12.25s, 2030 60 57,600
-----------
$ 634,460
------------------------------------------------------------------------------------------------------
Canada - 0.2%
PCI Chemicals Canada Co., 10s, 2008 (Chemicals) $ 167 $ 138,528
------------------------------------------------------------------------------------------------------
Colombia - 0.5%
Republic of Colombia, 10s, 2012 $ 259 $ 285,159
------------------------------------------------------------------------------------------------------
Dominican Republic - 0.5%
Dominican Republic, 9.04s, 2013## $ 260 $ 261,625
------------------------------------------------------------------------------------------------------
Ecuador - 0.2%
Republic of Ecuador, 12s, 2012 $ 160 $ 132,800
------------------------------------------------------------------------------------------------------
France - 0.7%
Crown European Holdings S.A., 10.875s, 2013 (Containers)## $ 350 $ 377,125
------------------------------------------------------------------------------------------------------
Greece - 0.7%
Fage Dairy Industries S.A., 9s, 2007 (Food & Non-
Alcoholic Beverage) $ 400 $ 388,500
------------------------------------------------------------------------------------------------------
Kazakhstan - 0.1%
Kaztransoil Co., 8.5s, 2006 (Oil Services)## $ 70 $ 73,500
------------------------------------------------------------------------------------------------------
Mexico - 0.5%
Corp. Durango SA de C.V., 13.75s, 2009 (Forest &
Paper Products)##** $ 258 $ 118,680
Pemex Project Funding Master Trust, 8.625s, 2022 (Oils) 155 172,050
-----------
$ 290,730
------------------------------------------------------------------------------------------------------
Norway - 0.7%
Ocean Rig Norway AS, 10.25s, 2008 (Oil Services) $ 440 $ 396,000
------------------------------------------------------------------------------------------------------
Peru - 0.2%
Republic of Peru, 9.875s, 2015 $ 130 $ 145,925
------------------------------------------------------------------------------------------------------
Poland - 1.0%
PTC International Finance II S.A., 11.25s, 2009
(Wireless Communications) $ 500 $ 557,500
------------------------------------------------------------------------------------------------------
Russia - 2.5%
AO Siberian Oil Co, 10.75s, 2009 (Energy - Integrated) $ 136 $ 157,338
Gazprom OAO, 9.625s, 2013 (Utilities - Gas)## 150 159,750
Ministry of Finance, 12.75s, 2028 389 601,005
Russian Federation, 3s, 2008 149 131,120
Russian Federation, 5s, 2030 187 168,300
Tyumen Oil Co., 11s, 2007 (Oil Services) 200 231,500
-----------
$ 1,449,013
------------------------------------------------------------------------------------------------------
Singapore - 0.1%
Flextronics International Ltd., 9.875s, 2010 (Electronics) $ 50 $ 56,000
------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 5,186,865
------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $36,708,001) $35,179,095
------------------------------------------------------------------------------------------------------
Stocks - 28.7%
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
U.S. Stocks - 27.2%
Banks & Credit Cos. - 1.7%
FleetBoston Financial Corp. 37,000 $ 981,240
------------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 4.0%
Comcast Corp.* 30,400 $ 913,824
Cumulus Media, Inc.* 21,000 362,040
NTL, Inc.* 6,317 107,389
Sinclair Broadcast Group, Inc., "A"* 30,000 318,000
Sirius Satellite Radio, Inc.* 786,320 581,877
-----------
$ 2,283,130
------------------------------------------------------------------------------------------------------
Business Services
Anacomp, Inc.* 30 $ 210
------------------------------------------------------------------------------------------------------
Chemicals
Sterling Chemicals, Inc.* 1,570 $ 29,233
------------------------------------------------------------------------------------------------------
Computer Software - 2.1%
Oracle Corp.* 100,620 $ 1,195,366
------------------------------------------------------------------------------------------------------
Containers - 0.9%
Owens-Illinois, Inc.* 60,800 $ 540,512
------------------------------------------------------------------------------------------------------
Electrical Equipment - 2.4%
Tyco International Ltd. 87,740 $ 1,368,744
------------------------------------------------------------------------------------------------------
Energy - Independent - 1.4%
Chesapeake Energy Corp. 100,500 $ 810,030
------------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.4%
Argosy Gaming Corp.* 5,425 $ 110,507
Pinnacle Entertainment, Inc.* 23,675 126,425
-----------
$ 236,932
------------------------------------------------------------------------------------------------------
General Merchandise - 1.5%
Sears, Roebuck & Co. 31,240 $ 885,342
------------------------------------------------------------------------------------------------------
Machinery & Tools
Thermadyne Holdings Corp.** 7,554 $ 151
------------------------------------------------------------------------------------------------------
Metals & Mining - 2.2%
Alcoa, Inc. 27,140 $ 622,320
Commonwealth Industries, Inc. 39,700 192,545
Metal Management, Inc.* 50,093 430,800
-----------
$ 1,245,665
------------------------------------------------------------------------------------------------------
Oil Services - 3.3%
BJ Services Co.* 13,700 $ 500,187
Cooper Cameron Corp.* 10,730 513,538
GlobalSantaFe Corp.* 29,530 624,855
Noble Corp.* 8,190 253,480
-----------
$ 1,892,060
------------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.9%
Atlantis Plastics, Inc.* 86,550 $ 493,335
------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.0%
Motorola, Inc. 69,890 $ 552,830
------------------------------------------------------------------------------------------------------
Telephone Services
Adelphia Business Solutions** 40,000 $ 1,000
------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.5%
Calpine Corp.* 255,060 $ 1,369,672
El Paso Electric Co.* 800 9,072
NiSource, Inc. 33,800 638,820
-----------
$ 2,017,564
------------------------------------------------------------------------------------------------------
Wireless Communication - 1.9%
AT&T Wireless Services, Inc.* 168,270 $ 1,087,024
------------------------------------------------------------------------------------------------------
Total U.S. Stocks $15,620,368
------------------------------------------------------------------------------------------------------
Foreign Stocks - 1.5%
Canada - 0.2%
International Utility Structures, Inc. (Metals & Mining)* 254,700 $ 83,508
------------------------------------------------------------------------------------------------------
Netherlands - 0.4%
Completel Europe N.V. (Telecom - Wireline)* 11,741 $ 119,440
Completel Europe N.V., Preferred (Telecom - Wireline)* 117 122,293
-----------
$ 241,733
------------------------------------------------------------------------------------------------------
Sweden - 0.5%
Song Networks Holding AB (Telephone Services) 66,675 $ 293,769
Song Networks Holding AB (Telephone Services)* 7,200 7,490
Song Networks Holding AB (Telephone Services)* 12 1
-----------
$ 301,260
------------------------------------------------------------------------------------------------------
United Kingdom - 0.4%
Jazztel PLC (Telecom - Wireline)** 481,606 $ 231,506
------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 858,007
------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $25,472,164) $16,478,375
------------------------------------------------------------------------------------------------------
Preferred Stocks - 6.1%
------------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 3.8%
CSC Holdings, Inc., 11.125s 6,500 $ 679,250
NTL Europe, Inc., "A", 10s 10 31
Paxon Communications Corp., 13.25s 165 1,518,000
-----------
$ 2,197,281
------------------------------------------------------------------------------------------------------
Telecommunications - Wireline
Global Crossings Holdings Ltd., 10.5s** 10,525 $ 5,263
------------------------------------------------------------------------------------------------------
Wireless Communication - 2.3%
Nextel Communications, Inc., 11.125s 1,207 $ 1,285,455
------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $3,627,667) $ 3,487,999
------------------------------------------------------------------------------------------------------
Convertible Bonds - 1.5%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------------------------------
United Kingdom - 1.5%
Business Services - 1.4%
Colt Telecom Group, 2s, 2006 EUR 1,000 $ 782,531
------------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.1%
Jazztel, PLC 12s, 2012** EUR 93 49,860
------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $872,156) $ 832,391
------------------------------------------------------------------------------------------------------
Convertible Preferred Stock - 0.2%
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
United States - 0.2%
Energy - Independent - 0.2%
NRG Energy, Inc. (Identified Cost, $439,848) 14,307 $ 129,621
------------------------------------------------------------------------------------------------------
Municipal Bond - 0.2%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------------------------------
Industrial Revenue - Airlines - 0.2%
------------------------------------------------------------------------------------------------------
Dallas Fort Worth, TX, 5.95s, 2029 (Identified Cost $190,125) $ 225 $ 134,438
------------------------------------------------------------------------------------------------------
Warrants
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
Anacomp, Inc. (Business Services)* 5,841 $ 117
Doe Run Resources Corp. (Metals & Mining)* 2 0
Ono Finance PLC (Broadcast & Cable TV)* 1,000 10
Sterling Chemicals, Inc. (Chemicals)* 1,945 19
------------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $47,170) $ 146
------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 12.1%
------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at
identified cost $6,991,541 $ 6,991,541
------------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.4%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 4/30/03, due 5/01/03, total to be
received $238,009 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $ 238 $ 238,000
------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $74,586,672) $63,471,606
Other Assets, Less Liabilities - (10.4)% (6,003,117)
------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $57,468,489
------------------------------------------------------------------------------------------------------
*Non-income producing security.
**Non-income producing security - in default.
##SEC Rule 144A restriction.
+Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
EUR = EURO
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
--------------------------------------------------------------------------------
APRIL 30, 2003
--------------------------------------------------------------------------------
Assets:
Investments, at value, including $6,579,862 of securities
on loan (identified cost, $74,586,672) $ 63,471,606
Receivable for investments sold 550,542
Interest and dividends receivable 901,624
Other assets 10,566
------------
Total assets $ 64,934,338
------------
Liabilities:
Payable to custodian $ 1,518
Payable to dividend disbursing agent 39,404
Payable for forward currency exchange contracts 32,867
Payable for investments purchased 126,099
Collateral for securities loaned, at value 6,991,541
Payable to affiliates -
Management fee 915
Transfer and dividend disbursing agent fee 1,312
Administrative fee 27
Accrued expenses and other liabilities 272,166
------------
Total liabilities $ 7,465,849
------------
Net assets $ 57,468,489
------------
Net assets consist of:
Paid-in capital $ 74,927,004
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (11,147,459)
Accumulated net realized loss on investments and foreign
currency transactions (4,839,400)
Accumulated distributions in excess of net investment income (1,471,656)
------------
Total $ 57,468,489
------------
Shares of beneficial interest outstanding (6,881,649, less
256,600 treasury shares) 6,625,049
---------
Net asset value per share (net assets / shares of
beneficial interest outstanding) $8.67
-----
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
--------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
--------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 2,074,465
Dividends 224,462
-----------
Total investment income $ 2,298,927
-----------
Expenses -
Management fee $ 256,285
Trustees" compensation 28,610
Administrative fee 3,071
Investor communication expense 21,943
Transfer and dividend disbursing agent fee 7,751
Custodian fee 11,977
Printing 7,971
Postage 2,024
Auditing fees 18,800
Legal 750
Miscellaneous 4,228
-----------
Total expenses $ 363,410
Fees paid indirectly (4,614)
-----------
Net expenses $ 358,796
-----------
Net investment income $ 1,940,131
-----------
Realized and unrealized gain (loss) on investments:
Realized loss (identified cost basis) -
Investment transactions $(3,142,830)
Foreign currency transactions (175,293)
-----------
Net realized loss on investments and foreign
currency transactions $(3,318,123)
-----------
Change in unrealized appreciation (depreciation) -
Investments $11,792,334
Translation of assets and liabilities in foreign currencies (13,515)
-----------
Net unrealized gain on investments and foreign
currency translation $11,778,819
-----------
Net realized and unrealized gain on investments
and foreign currency $ 8,460,696
-----------
Increase in net assets from operations $10,400,827
-----------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2002
--------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 1,940,131 $ 4,852,838
Net realized loss on investments and foreign currency
transactions (3,318,123) (97,694)
Net unrealized gain (loss) on investments and foreign
currency translation 11,778,819 (5,901,862)
----------- -----------
Increase (decrease) in net assets from operations $10,400,827 $ (1,146,718)
----------- ------------
Distributions declared to shareholders -
From net investment income $(2,594,010) $ (4,852,712)
In excess of net investment income -- (1,609,046)
---------- ------------
Total distributions declared to shareholders $(2,594,010) $ (6,461,758)
----------- ------------
Net increase in net assets from trust share transactions $ 39,321 $ 632,359
----------- ------------
Total increase (decrease) in net assets $ 7,846,138 $(6,976,117)
Net assets:
At beginning of period 49,622,351 56,598,468
----------- ------------
At end of period (including accumulated distributions in
excess of net investment income of $1,471,656 and
$817,777, respectively) $57,468,489 $49,622,351
----------- -----------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------------------------------
APRIL 30, 2003 2002 2001 2000 1999 1998
(UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $ 7.50 $ 8.63 $ 11.67 $ 14.34 $ 13.76 $ 15.03
------- ------- -------- -------- -------- --------
Income from investment operations# -
Net investment income(S) $ 0.29 $ 0.74 $ 0.77 $ 1.01 $ 0.57 $ 0.04
Net realized and unrealized
gain (loss) on investments
and foreign currency 1.27 (0.89) (2.16) (1.53) 1.66 1.01
------- ------- -------- -------- -------- --------
Total from investment
operations $ 1.56 $ (0.15) $ (1.39) $ (0.52) $ 2.23 $ 1.05
------- ------- -------- -------- -------- --------
Less distributions declared to
shareholders -
From net investment income $ (0.39) $ (0.74) $ (0.77) $ (1.01) $ (0.57) $ (0.04)
From net realized gain on
investments and foreign
currency transactions -- -- -- (0.95) (1.00) (2.28)
In excess of net investment
income -- (0.24) (0.06) (0.01) (0.08) --
From paid-in capital -- -- (0.82) (0.18) -- --
------- ------- -------- -------- -------- --------
Total distributions
declared to
shareholders $ (0.39) $ (0.98) $ (1.65) $ (2.15) $ (1.65) $ (2.32)
------- ------- -------- -------- -------- --------
Net asset value - end of period $ 8.67 $ 7.50 $ 8.63 $ 11.67 $ 14.34 $ 13.76
------- ------- -------- -------- -------- --------
Per share market value - end of
period $ 8.600 $ 7.250 $14.300 $ 13.750 $ 16.750 $ 16.750
------- ------- -------- -------- -------- --------
Total return at market value 24.57%++ (43.54)% 16.99% (4.33)% 11.08% 0.26%
Ratios (to average net assets)/
Supplemental data:
Expenses## 1.39%+ 1.56% 1.53% 1.35% 1.23% 1.10%
Net investment income(S) 7.40%+ 8.76% 7.49% 7.46% 3.79% 0.26%
Portfolio turnover 47% 137% 49% 32% 137% 85%
Net assets at end of period
(000 Omitted) $57,468 $49,622 $56,598 $ 75,545 $ 91,603 $ 86,937
(S) As required, effective November 1, 2001, the trust has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium and accreting discount on all debt securities. The effect of this change
for the year ended October 31, 2002 was to increase net investment income per share by $0.02, decrease net realized and
unrealized gains and losses per share by $0.02, and increase the ratio of net investment income to average net assets by
0.49%. Per share, ratios, and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this
change in presentation.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
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 non-diversified closed-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of 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. 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.
Investment Valuations - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the trust's portfolio are valued at
an evaluated bid price on the basis of quotes from brokers and dealers or on
the basis of valuations furnished by a pricing service. Prices obtained from
pricing services utilize both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate 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 without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Equity securities in the trust's portfolio
for which market quotations are available are valued at the last sale or
official closing price on the primary market or exchange on which they are
primarily traded or at the last quoted bid price for securities in which there
were no sales during the day. If no sales are reported, as is the case for
most securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Short-term obligations in the trust's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer supplied valuations.
Portfolio investments for which market quotations are not readily available,
or whose values have been materially affected by events occurring after the
close of their primary markets, are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees.
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, along with
other affiliated entities of 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 - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. 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.
Deferred Trustee Compensation - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the trust or other MFS trusts 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 accrued expenses and other liabilities, is $9,456 of Deferred Trustees"
compensation.
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 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.
Cash collateral is invested in 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. 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.
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The trust may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The trust may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the trust may enter into contracts with the intent of changing the
relative exposure of the trust" portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
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 generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on 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. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of
the security; other legal fees are expensed. Capital infusions made directly
to the security issuer, which are generally non-recurring, incurred to protect
or enhance the value of high-yield debt securities, are reported as additions
to the cost basis of the security. Costs that are incurred to negotiate the
terms or conditions of capital infusions or that are expected to result in a
plan of reorganization are reported as realized losses. Ongoing costs incurred
to protect or enhance an investment, or costs incurred to pursue other claims
or legal actions, are expensed.
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 is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, derivatives, defaulted bonds, and
amortization and accretion on debt securities.
The tax character of distributions declared for the years ended October 31,
2002 and October 31, 2001 was as follows:
OCTOBER 31, 2002 OCTOBER 31, 2001
---------------------------------------------------------------------------
Distributions paid from:
Ordinary income $6,461,758 $ 5,427,231
Tax return of capital -- 5,328,929
---------- -----------
Total distributions declared $6,461,758 $10,756,160
---------- -----------
As of October 31, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Capital loss carryforward $ (151,293)
Unrealized depreciation (22,729,932)
Other temporary differences (2,384,107)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on October 31, 2009.
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
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 investment income.
The trust pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the trust, 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 MFS Service Center, Inc. (MFSC). The fund has an unfunded, defined
benefit plan for inactive Trustees and an unfunded retirement benefit deferral
plan for active Trustees. Included in Trustees" compensation is a net increase
of $20,250 as a result of the change in the trust's pension liability for
active Trustees and a pension expense of $4,257 for inactive trustees for the
six months ended April 30, 2003.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust pays MFS an administrative fee
at the following annual percentages of the trust's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$24,266,072 and $23,894,412, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $ 74,375,437
------------
Gross unrealized depreciation $(16,957,848)
Gross unrealized appreciation 6,054,017
------------
Net unrealized depreciation $(10,903,831)
------------
(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 6,625,048.907 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2003 OCTOBER 31, 2002
------------------------ --------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------
Shares issued to shareholders in reinvestment of
distributions 4,903 $39,321 63,689 $632,359
----- ------- ------ --------
(6) Line of Credit
The trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the trust for the six
months ended April 30, 2003 was $279. The trust had no borrowings during the
period.
(7) Financial Instruments
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the trust has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions
are considered.
Forward Foreign Currency Exchange Contracts
NET
CONTRACTS TO CONTRACTS UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE DEPRECIATION
-----------------------------------------------------------------------------------------------------------
Sales
6/16/03 EUR 1,562,224 $1,710,635 $1,743,502 $(32,867)
At April 30, the trust had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Restricted Securities
The trust may invest not more than 20% of its total assets in securities which
are subject to legal or contractual restrictions on resale. At April 30, 2003
the trust owned the following restricted securities, excluding securities
issued under Rule 144A, constituting 1.33% of net assets which may not be
publicly sold without registration under the Securities Act of 1933. The trust
does not have the right to demand that such securities be registered. The
value of these securities is determined by valuations furnished by dealers or
by a pricing service, or if not available, in good faith at the direction of
the Trustees.
DATE OF PRINCIPAL
DESCRIPTION ACQUISITION AMOUNT COST VALUE
------------------------------------------------------------------------------------------------------------------
DLJ Mortgage Acceptance Corp. 8s, 2003 4/6/01 803,000 $484,738 $763,101
(9) Change in Accounting Principle
As required, effective November 1, 2001 the fund adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting discount on debt securities. The cumulative effect of
this accounting change had no impact on total net assets of the fund, but
resulted in a $99,487 increase in cost of securities and a corresponding
$99,487 increase in net unrealized depreciation, based on securities held by
the fund on November 1, 2001.
The effect of this change for the year ended October 31, 2002 was to increase
net investment income by $142,315, increase net unrealized depreciation by
$143,850, and decrease net realized losses by $1,535. The Statement of Changes
in Net Assets and Financial Highlights for prior periods has not been restated
to reflect this change in presentation.
MFS(R) SPECIAL VALUE TRUST
The following tables present certain information regarding the Trustees and
officers of the Trust, including their principal occupations, which, unless
specific dates are shown, are of more than five years" duration, although the
titles may not have been the same throughout.
NAME, AGE, POSITION WITH THE TRUST,
PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Financial Services, Inc.
Chairman (investment advisers), Chairman
and Chief Executive Officer
JOHN W. BALLEN* (born 09/12/59)
Trustee and President LAWRENCE T. PERERA (born 06/23/
Massachusetts Financial Services 35) Trustee
Company, Chief Executive Officer and Hemenway & Barnes (attorneys),
Director Partner
KEVIN R. PARKE* (born 12/14/59) WILLIAM J. POORVU (born 04/10/
Trustee 35) Trustee
Massachusetts Financial Services Private investor; Harvard
Company, President, Chief Investment University Graduate School of
Officer, and Director Business Administration, Class
of 1961 Adjunct Professor in
INDEPENDENT TRUSTEES Entrepreneurship Emeritus; CBL
& Associates Properties, Inc.
LAWRENCE H. COHN, M.D. (born 03/11/37) (real estate investment trust),
Trustee Director;
Brigham and Women's Hospital, Chief of
Cardiac Surgery; Harvard Medical J. DALE SHERRATT (born 09/23/
School, Professor of Surgery 38)
Trustee
J. ATWOOD IVES (born 05/01/36) Insight Resources, Inc.
Trustee (acquisition planning
Private investor; KeySpan Corporation specialists), President;
(energy related services), Director; Wellfleet Investments (investor
Eastern Enterprises (diversified in health care companies),
services company), Chairman, Trustee Managing General Partner (since
and Chief Executive Officer (until 1993); Cambridge Nutraceuticals
November 2000) (professional nutritional
products), Chief Executive
Officer (until May 2001)
ELAINE R. SMITH (born 04/25/46)
Trustee
Independent health care
industry consultant
WARD SMITH (born 09/13/30)
Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55)
Chairman ROBERT R. FLAHERTY (born 09/18/
Massachusetts Financial Services 63) Assistant Treasurer
Company, Chairman Massachusetts Financial
Services Company, Vice
JOHN W. BALLEN (born 09/12/59) President (since
Trustee and President August 2000); UAM Fund
Massachusetts Financial Services Services, Senior Vice President
Company, Chief Executive Officer and (prior to
Director August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/ RICHARD M. HISEY (born 08/29/
59) Assistant Secretary and Assistant 58)
Clerk Treasurer
Massachusetts Financial Services Massachusetts Financial
Company, Senior Vice President and Services Company, Senior Vice
Associate General Counsel President (since July 2002);
The Bank of New York, Senior
STEPHEN E. CAVAN (born 11/06/53) Vice President (September 2000
Secretary and Clerk to July 2002); Lexington Global
Massachusetts Financial Services Asset Managers, Inc., Executive
Company, Senior Vice President, Vice President and Chief
General Counsel Financial Officer, General
and Secretary Manager, Mutual Funds (prior to
September 2000)
STEPHANIE A. DESISTO (born 10/01/53)
Assistant Treasurer ELLEN MOYNIHAN (born 11/13/57)
Massachusetts Financial Services Assistant Treasurer
Company, Vice President (since April Massachusetts Financial
2003); Brown Brothers Harriman & Co., Services Company, Vice
Senior Vice President (November 2002 President
to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice JAMES O. YOST (born 06/12/60)
President (prior to November 2002) Assistant Treasurer
Massachusetts Financial
Services Company, Senior Vice
President
The Trust holds annual shareholder meetings for the purpose of electing
Trustees, and Trustees are elected for fixed terms. The Board of Trustees
currently is divided into three classes, each having a term of three years.
Each year the term of one class expires. Each Trustee's term of office expires
on the date of the third annual meeting following the election to office of
the Trustee's class. Each Trustee will serve until next elected or his or her
earlier death, resignation, retirement or removal.
Messrs. Shames, Cohn, Sherratt and Smith, and Ms. O'Neill, have served in
their capacity as Trustee of the trust continuously since originally elected
or appointed. Messrs. Ballen, Gutow, Ives, Perera and Poorvu, and Ms. Smith,
were elected by shareholders and have served as Trustees of the Trust since
January 1, 2002.
Mr. Parke has served as a Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
INVESTMENT ADVISER TRANSFER AGENT, REGISTRAR AND
DIVIDEND DISBURSING AGENT
Massachusetts Financial Services Company
500 Boylston Street State Street Bank and Trust
Boston, MA 02116-3741 Company
c/o MFS Service Center, Inc.
P.O. Box 55024
PORTFOLIO MANAGER Boston, MA 02205-5024
John F. Addeo+ 1-800-637-2304
CUSTODIAN
State Street Bank and Trust Company
+ MFS Investment Management
MFS(R) SPECIAL VALUE TRUST
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116. MFVCE-SEM-6/03 15.4M
ITEM 2. CODE OF ETHICS.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
If applicable, not applicable at this time. Applicable for annual reports filed
on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this 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
requir ed 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 significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) 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: Not applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.
[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)) 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.][The submission of Section 906 certifications has been
proposed by the SEC, but has not yet been finalized. The SEC has
encouraged issuers to submit Section 906 certifications as an exhibit
to Form N-CSR until the final rule has been adopted. Please see
Proposed Rule: Certification of Disclosure in Certain Exchange Act
Reports, Release No. 33-8212 (March 21, 2003)].
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)* /s/ JOHN W. BALLEN
-------------------------------------------------
John W. Ballen, President
Date: June 23, 2003
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)* /s/ JOHN W. BALLEN
-------------------------------------------------
John W. Ballen, President (Principal Executive
Officer)
Date: June 23, 2003
By (Signature and Title)* /s/ RICHARD M. HISEY
-------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: June 23, 2003
* Print name and title of each signing officer under his or her signature.