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
-------------------------------------------------------------------------------
MFS SPECIAL VALUE TRUST
-------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
-------------------------------------------------------------------------------
(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
-------------------------------------------------------------------------------
Date of fiscal year end: October 31
-------------------------------------------------------------------------------
Date of reporting period: April 30, 2006
-------------------------------------------------------------------------------
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds 04/30/06
SEMIANNUAL REPORT
MFS(R) SPECIAL VALUE TRUST
A path for pursuing opportunity
M F S(SM)
INVESTMENT MANAGEMENT(R)
[graphic omitted]
--------------------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
--------------------------------------------------------------------------------------------------
MFS(R) SPECIAL VALUE TRUST 4/30/06
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
TABLE OF CONTENTS
----------------------------------------------------
LETTER FROM THE CEO 1
----------------------------------------------------
PORTFOLIO COMPOSITION 2
----------------------------------------------------
PORTFOLIO MANAGERS' PROFILES 3
----------------------------------------------------
PERFORMANCE SUMMARY 4
----------------------------------------------------
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 6
----------------------------------------------------
PORTFOLIO OF INVESTMENTS 7
----------------------------------------------------
FINANCIAL STATEMENTS 19
----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 23
----------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 31
----------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 32
----------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 32
----------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 32
----------------------------------------------------
CONTACT INFORMATION BACK COVER
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At
MFS(R), we believe our investment management team has the knowledge and
confidence to navigate through difficult cycles and at the same time see
through adversity to find investment opportunities for our clients and
shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires 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, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 67.3%
Stocks 26.7%
Preferred Stocks 3.3%
Cash & Other Net Assets 2.0%
Convertible Preferred Stocks 0.7%
TOP FIVE INDUSTRIES (i)
Automotive 8.4%
------------------------------------------------
Broadcasting 8.3%
------------------------------------------------
Network & Telecommunications 5.7%
------------------------------------------------
Medical & Health Technology &
Services 4.8%
------------------------------------------------
Cable Television 4.3%
------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 0.2%
------------------------------------------------
A 0.1%
------------------------------------------------
BBB 2.3%
------------------------------------------------
BB 18.2%
------------------------------------------------
B 44.2%
------------------------------------------------
CCC 30.2%
------------------------------------------------
CC 0.5%
------------------------------------------------
Not Rated 4.3%
------------------------------------------------
PORTFOLIO FACTS
Average Duration (d) 4.5
------------------------------------------------
Average Life (m) 8.5 yrs.
------------------------------------------------
Average Maturity (m) 9.2 yrs.
------------------------------------------------
Average Credit Quality of
Rated Securities (a) B
------------------------------------------------
Average Short Term Credit Quality A-1
------------------------------------------------
(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 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 4/30/06.
Percentages are based on net assets as of 4/30/06, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
John F. Addeo, CFA, is Vice President and Associate Director of Fixed Income
Research of MFS Investment Management(R) (MFS(R)) and a portfolio manager of
the high-yield bond portfolios for our mutual funds, variable annuities,
offshore accounts and closed-end funds. John joined MFS as a research analyst
in 1998 and became portfolio manager in 2001. He was named Associate Director
of Fixed Income Research in 2004. He 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 and Director of Value
Portfolio Management 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. 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.
Scott B. Richards, CFA, is Vice President of MFS Investment Management(R)
(MFS(R)) and a portfolio manager for high-yield portfolios of our mutual
funds, variable annuities, closed end funds and offshore accounts. Scott
joined MFS in May 2004 with more than 24 years experience as a high-yield bond
portfolio manager and research director at several leading investment
management firms. He earned an M.B.A. degree from the Amos Tuck School at
Dartmouth College in 1984 and a bachelor's degree in applied economics from
Cornell University in 1981. He holds the Chartered Financial Analyst (CFA)
designation and is a member of The Boston Security Analysts Society, Inc.
PERFORMANCE SUMMARY THROUGH 4/30/06
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
4/30/06
Date Price
Net asset value per share 4/30/06 $9.82
------------------------------------------------------------------------------
10/31/05 $9.66
------------------------------------------------------------------------------
New York Stock Exchange Price 4/30/06 $9.86
------------------------------------------------------------------------------
11/01/05 (high) (t) $10.93
------------------------------------------------------------------------------
12/29/05 (low) (t) $9.17
------------------------------------------------------------------------------
10/31/05 $10.85
TOTAL RETURNS VS BENCHMARKS
Six months ended
4/30/06
New York Stock Exchange Price (r) -4.50%
------------------------------------------------------------------------------
Net asset value (r) 6.82%
------------------------------------------------------------------------------
Lehman Brothers U.S. High-Yield Corporate Bond Index (f) 4.97%
------------------------------------------------------------------------------
Russell 1000 Value Index (f) 12.87%
(f) Source: FactSet Research Systems, Inc.
(r) Includes reinvestment of dividend and capital gain distributions.
(t) For the period November 1, 2005 through April 30, 2006.
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.
KEY RISK CONSIDERATIONS
Stock markets are volatile and can decline due to adverse issuer, political,
regulatory or economic conditions. The value of the portfolio's equity
investments will fluctuate in response to many factors including company
specific factors as well as general market conditions. Foreign investments can
be more volatile than U.S. investments. Changes in currency exchange rates may
affect the portfolio's net asset value, the value of dividends and interest
earned and gains and losses realized on the sale of securities. Investing in
emerging markets can involve risks in addition to those generally associated
with investing in more developed foreign markets. The portfolio's yield and
share prices change daily based on the credit quality of its investments and
changes in interest rates. In general, the value of debt securities will
decline when interest rates rise and will increase when interest rates fall.
Debt securities with longer maturity dates will be subject to greater price
fluctuations than those with shorter maturities. Derivatives involve risks
different from, and greater than, those of the underlying indicator's in whose
value the derivative is based. The value of the derivative can move in
unexpected ways and result in unanticipated losses and increased volatility if
the value of the underlying indicator(s) does not move in the direction or the
extent anticipated. Lower quality debt securities involve substantially
greater risk of default and their value can decline significantly over time.
When you sell shares, they may be worth more or less than the amount you paid
for them.
Please see the prospectus for further information regarding these and other
risk considerations.
These risks will increase share price volatility.
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 $100 in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/06
The Portfolio of Investments is a complete list of all securities owned by your trust.
It is categorized by broad-based asset classes.
Bonds - 66.4%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 4.6%
-------------------------------------------------------------------------------------------------------
Allbritton Communications Co., 7.75%, 2012 $ 350,000 $ 350,875
EchoStar DBS Corp., 6.375%, 2011 150,000 146,437
Granite Broadcasting Corp., 9.75%, 2010 340,000 307,700
Hughes Network Systems LLC, 9.5%, 2014 (a) 145,000 147,719
Inmarsat Finance II PLC, 0% to 2008, 10.375% to 2012 360,000 309,600
Intelsat Ltd., 0% to 2010, 9.25% to 2015 (a) 180,000 130,500
Intelsat Subsidiary Holding Co. Ltd., 8.625%, 2015 135,000 140,400
LBI Media Holdings, Inc., 0% to 2008, 11% to 2013 875,000 657,344
Panamsat Holding Corp., 0% to 2009, 10.375 to 2014 640,000 462,400
Sirius Satellite Radio, Inc., 9.625%, 2013 330,000 322,575
Young Broadcasting, Inc., 10%, 2011 110,000 100,375
------------
$ 3,075,925
-------------------------------------------------------------------------------------------------------
Aerospace - 0.4%
-------------------------------------------------------------------------------------------------------
DRS Technologies, Inc., 7.625%, 2018 $ 250,000 $ 256,562
-------------------------------------------------------------------------------------------------------
Airlines- 0.8%
-------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., 8.307%, 2018 $ 210,553 $ 201,537
Continental Airlines, Inc., 6.795%, 2018 313,448 297,049
Continental Airlines, Inc., 7.566%, 2020 55,017 51,908
------------
$ 550,494
-------------------------------------------------------------------------------------------------------
Apparel Manufacturers - 1.1%
-------------------------------------------------------------------------------------------------------
Levi Strauss & Co., 9.75%, 2015 $ 345,000 $ 363,975
Propex Fabrics, Inc., 10%, 2012 395,000 371,300
------------
$ 735,275
-------------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 3.1%
-------------------------------------------------------------------------------------------------------
Anthracite CDO Ltd., 6%, 2037 (a) $ 450,000 $ 388,266
Asset Securitization Corp., FRN, 8.7832%, 2029 (a) 700,000 665,212
Falcon Franchise Loan LLC, FRN, 3.3789%, 2025 (a)(i) 596,204 97,956
GMAC Commercial Mortgage Securities, Inc., 6.02%, 2033 250,000 249,937
Morgan Stanley Capital I, Inc., FRN, 1.4958%, 2039 (a)(i) 697,506 48,008
Preferred Term Securities XII Ltd., 9.8%, 2033 (a)(e) 225,000 202,781
Preferred Term Securities XVI Ltd., 14%, 2035 (a)(e) 300,000 281,625
Preferred Term Securities XVII Ltd., 9.3%, 2035 (a)(e) 187,000 167,833
------------
$ 2,101,618
-------------------------------------------------------------------------------------------------------
Automotive - 6.5%
-------------------------------------------------------------------------------------------------------
Advanced Accessory Systems LLC, 10.75%, 2011 $ 60,000 $ 47,400
Cooper Standard Automotive, Inc., 8.375%, 2014 265,000 215,975
Ford Motor Credit Co., 6.625%, 2008 612,000 575,001
Ford Motor Credit Co., 5.625%, 2008 120,000 109,229
Ford Motor Credit Co., 5.8%, 2009 243,000 219,951
Ford Motor Credit Co., 8.625%, 2010 125,000 118,235
Ford Motor Credit Co., 7%, 2013 92,000 80,949
General Motors Acceptance Corp., 6.125%, 2008 101,000 97,272
General Motors Acceptance Corp., 5.85%, 2009 40,000 37,609
General Motors Acceptance Corp., 6.75%, 2014 1,125,000 1,025,353
General Motors Acceptance Corp., 8%, 2031 693,000 657,111
General Motors Corp., 8.375%, 2033 196,000 146,020
Goodyear Tire & Rubber Co., 9%, 2015 490,000 504,700
Lear Corp., 8.11%, 2009 389,000 380,247
Lear Corp., 5.75%, 2014 115,000 96,600
------------
$ 4,311,652
-------------------------------------------------------------------------------------------------------
Banks & Credit Companies - 0.5%
-------------------------------------------------------------------------------------------------------
ATF Bank JSC, 9.25%, 2012 (a) $ 219,000 $ 226,117
Russian Standard Finance S.A., 8.625%, 2011 (a) 101,000 101,000
------------
$ 327,117
-------------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 4.2%
-------------------------------------------------------------------------------------------------------
Cablevision Systems Corp., 8%, 2012 $ 180,000 $ 179,550
CCH I Holdings LLC, 9.92%, 2014 358,000 221,960
CCH I Holdings LLC, 11%, 2015 758,000 674,620
Corsair, FRN, 11.0747%, 2016 200,000 200,500
CSC Holdings, Inc., 6.75%, 2012 (a) 110,000 109,450
Kabel Deutschland, 10.625%, 2014 (a) 230,000 248,400
Mediacom LLC, 9.5%, 2013 440,000 449,900
Telenet Group Holdings N.V., 0% to 2008, 11.5% to 2014 (a) 510,000 422,025
Time Warner Entertainment Co. LP, 8.375%, 2033 278,000 317,979
------------
$ 2,824,384
-------------------------------------------------------------------------------------------------------
Building - 1.8%
-------------------------------------------------------------------------------------------------------
Goodman Global Holdings, Inc., 7.875%, 2012 $ 305,000 $ 305,000
Interface, Inc., 10.375%, 2010 180,000 197,100
Interface, Inc., 9.5%, 2014 170,000 176,800
Nortek Holdings, Inc., 8.5%, 2014 65,000 66,625
Nortek Holdings, Inc., 0% to 2009, 10.75% to 2014 632,000 481,110
------------
$ 1,226,635
-------------------------------------------------------------------------------------------------------
Business Services - 0.6%
-------------------------------------------------------------------------------------------------------
Northern Telecom Corp., 6.875%, 2023 $ 75,000 $ 69,938
Northern Telecom Corp., 7.875%, 2026 45,000 44,213
SunGard Data Systems, Inc., 10.25%, 2015 (a) 265,000 284,875
------------
$ 399,026
-------------------------------------------------------------------------------------------------------
Chemicals - 4.3%
-------------------------------------------------------------------------------------------------------
ARCO Chemical Co., 9.8%, 2020 $ 50,000 $ 56,000
Basell AF SCA, 8.375%, 2015 (a) 320,000 317,200
Crystal U.S. Holdings LLC, "A", 0% to 2009, 10% to 2014 36,000 28,800
Crystal U.S. Holdings LLC, "B", 0% to 2009, 10.5% to 2014 455,000 359,450
Equistar Chemicals, 10.625%, 2011 80,000 87,200
Huntsman International LLC, 10.125%, 2009 1,000 1,017
Huntsman International LLC, 7.375%, 2015 (a) 175,000 175,437
KI Holdings, Inc., 0% to 2009, 9.875% to 2014 547,000 404,780
Lyondell Chemical Co., 11.125%, 2012 340,000 375,700
Nalco Co., 8.875%, 2013 505,000 521,413
Polypore, Inc., 8.75%, 2012 195,000 184,763
Resolution Performance Products LLC, 13.5%, 2010 340,000 363,800
Rockwood Specialties Group, Inc., 10.625%, 2011 4,000 4,340
------------
$ 2,879,900
-------------------------------------------------------------------------------------------------------
Construction - 0.2%
-------------------------------------------------------------------------------------------------------
Technical Olympic USA, Inc., 7.5%, 2015 $ 145,000 $ 129,775
-------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 1.9%
-------------------------------------------------------------------------------------------------------
Affinion Group, Inc., 11.5%, 2015 (a) $ 195,000 $ 199,875
GEO Group, Inc., 8.25%, 2013 210,000 213,675
Jarden Corp., 9.75%, 2012 105,000 109,200
Playtex Products, Inc., 9.375%, 2011 65,000 67,763
Revlon Consumer Products Corp., 9.5%, 2011 375,000 367,500
Worldspan Financing Corp., FRN, 10.9988%, 2011 330,000 320,925
------------
$ 1,278,938
-------------------------------------------------------------------------------------------------------
Containers - 0.9%
-------------------------------------------------------------------------------------------------------
Crown Americas, 7.75%, 2015 (a) $ 215,000 $ 220,912
Graham Packaging Co. LP, 9.875%, 2014 215,000 220,912
Owens-Brockway Glass Container, Inc., 8.25%, 2013 160,000 164,400
------------
$ 606,224
-------------------------------------------------------------------------------------------------------
Defense Electronics - 0.2%
-------------------------------------------------------------------------------------------------------
L-3 Communications Holdings, Inc, 6.125%, 2014 $ 130,000 $ 124,800
-------------------------------------------------------------------------------------------------------
Electronics- 0.1%
-------------------------------------------------------------------------------------------------------
Magnachip Semiconductor S.A., 8%, 2014 $ 20,000 $ 18,650
Sensata Technologies B.V., 8%, 2014 (a) 50,000 50,250
------------
$ 68,900
-------------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.6%
-------------------------------------------------------------------------------------------------------
Gazprom OAO, 9.625%, 2013 (a) $ 150,000 $ 177,375
Gazprom OAO, 9.625%, 2013 60,000 70,950
Pemex Project Funding Master Trust, 8.625%, 2022 143,000 165,594
------------
$ 413,919
-------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.6%
-------------------------------------------------------------------------------------------------------
Federative Republic of Brazil, 8.875%, 2019 $ 242,000 $ 278,905
Republic of Panama, 9.375%, 2029 93,000 116,111
Republic of Panama, 6.7%, 2036 28,000 27,440
------------
$ 422,456
-------------------------------------------------------------------------------------------------------
Energy - Independent - 0.8%
-------------------------------------------------------------------------------------------------------
Belden & Blake Corp., 8.75%, 2012 $ 280,000 $ 287,700
Chesapeake Energy Corp., 6.875%, 2016 130,000 128,050
Whiting Petroleum Corp., 7%, 2014 135,000 133,650
------------
$ 549,400
-------------------------------------------------------------------------------------------------------
Entertainment - 1.9%
-------------------------------------------------------------------------------------------------------
AMC Entertainment, Inc., 11%, 2016 (a) $ 180,000 $ 195,300
HRP Myrtle Beach Operations, FRN, 9.8181%, 2012 (a) 155,000 155,775
Marquee Holdings, Inc., 0% to 2009, 12% to 2014 415,000 299,837
Six Flags, Inc., 9.75%, 2013 390,000 396,825
Universal City, Florida Holding Co., 8.375%, 2010 240,000 247,200
------------
$ 1,294,937
-------------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.8%
-------------------------------------------------------------------------------------------------------
Chaoda Modern Agriculture Holdings, 7.75%, 2010 (a) $ 359,000 $ 359,000
Doane Pet Care Co., 10.625%, 2015 135,000 164,700
------------
$ 523,700
-------------------------------------------------------------------------------------------------------
Forest & Paper Products - 3.5%
-------------------------------------------------------------------------------------------------------
Graphic Packaging International Corp., 9.5%, 2013 $ 870,000 $ 843,900
Jefferson Smurfit Corp., 8.25%, 2012 555,000 538,350
JSG Funding LLC, 11.5%, 2015 (a)(p) EUR 504,074 661,194
Millar Western Forest Products Ltd., 7.75%, 2013 $ 175,000 139,125
Norske Skog Canada Ltd., 7.375%, 2014 40,000 37,500
Sino-Forest Corp., 9.125%, 2011 (a) 12,000 12,915
Stone Container Corp., 7.375%, 2014 90,000 82,800
------------
$ 2,315,784
-------------------------------------------------------------------------------------------------------
Gaming & Lodging - 3.1%
-------------------------------------------------------------------------------------------------------
Greektown Holdings, 10.75%, 2013 (a) $ 345,000 $ 362,250
Majestic Star Casino LLC, 9.75%, 2011 (a) 125,000 128,125
NCL Corp. Ltd., 10.625%, 2014 360,000 363,600
Pinnacle Entertainment, Inc., 8.25%, 2012 195,000 203,775
Resorts International Hotel & Casino, Inc., 11.5%, 2009 400,000 437,000
Station Casinos, Inc., 6.875%, 2016 25,000 24,563
Trump Entertainment Resorts Holdings, Inc., 8.5%, 2015 320,000 315,200
Wynn Las Vegas LLC, 6.625%, 2014 215,000 209,088
------------
$ 2,043,601
-------------------------------------------------------------------------------------------------------
Industrial - 2.2%
-------------------------------------------------------------------------------------------------------
Amsted Industries, Inc., 10.25%, 2011 (a) $ 195,000 $ 212,550
Da-Lite Screen Co., Inc., 9.5%, 2011 120,000 127,500
JohnsonDiversey Holdings, Inc., "B", 9.625%, 2012 380,000 388,075
JohnsonDiversey Holdings, Inc., 0% to 2007, 10.67% to 2013 335,000 289,775
Knowledge Learning Corp., 7.75%, 2015 (a) 85,000 80,644
Milacron Escrow Corp., 11.5%, 2011 390,000 371,475
------------
$ 1,470,019
-------------------------------------------------------------------------------------------------------
Insurance - 0.5%
-------------------------------------------------------------------------------------------------------
MultiPlan, Inc., 10.375%, 2016 (a) $ 315,000 $ 320,119
-------------------------------------------------------------------------------------------------------
Machinery & Tools- 1.0%
-------------------------------------------------------------------------------------------------------
Case Corp., 7.25%, 2016 $ 220,000 $ 214,500
Case New Holland, Inc., 9.25%, 2011 205,000 217,813
Case New Holland, Inc., 7.125%, 2014 (a) 215,000 211,237
------------
$ 643,550
-------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.3%
-------------------------------------------------------------------------------------------------------
Accellent, Inc., 10.5%, 2013 $ 135,000 $ 145,125
CDRV Investors, Inc., 0% to 2010, 9.625% to 2015 370,000 261,775
DaVita, Inc., 6.625%, 2013 80,000 79,000
DaVita, Inc., 7.25%, 2015 150,000 150,000
Psychiatric Solutions, Inc., 7.75%, 2015 55,000 56,375
Select Medical Corp., 7.625%, 2015 270,000 243,675
Triad Hospitals, Inc., 7%, 2013 175,000 170,844
U.S. Oncology, Inc., 10.75%, 2014 275,000 307,656
Universal Hospital Services, Inc., 10.125%, 2011 105,000 108,413
------------
$ 1,522,863
-------------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.3%
-------------------------------------------------------------------------------------------------------
ANR Pipeline Co., 9.625%, 2021 $ 105,000 $ 126,165
Atlas Pipeline Partners LP, 8.125%, 2015 (a) 80,000 82,600
Colorado Interstate Gas Co., 5.95%, 2015 95,000 89,866
El Paso Energy Corp., 7%, 2011 300,000 299,250
El Paso Energy Corp., 7.75%, 2013 235,000 242,344
------------
$ 840,225
-------------------------------------------------------------------------------------------------------
Network & Telecom - 3.8%
-------------------------------------------------------------------------------------------------------
Axtel S.A. de C.V., 11%, 2013 $ 188,000 $ 212,440
Cincinnati Bell, Inc., 8.375%, 2014 205,000 209,612
Citizens Communications Co., 9.25%, 2011 170,000 186,787
Citizens Communications Co., 9%, 2031 240,000 257,400
Global Crossing UK Finance, 10.75%, 2014 80,000 83,800
Hawaiian Telecom Communications, Inc., 9.75%, 2013 (a) 130,000 134,550
Hawaiian Telecom Communications, Inc., 12.5%, 2015 (a) 190,000 200,450
Nordic Telephone Co. Holdings, 8.25%, 2016 (a) EUR 50,000 62,984
Nordic Telephone Co. Holdings, 8.875%, 2016 (a) $ 55,000 57,200
Nordic Telephone Co. Holdings, FRN, 8.352%, 2016 (a) EUR 50,000 62,984
Qwest Capital Funding, Inc., 7.25%, 2011 $ 175,000 175,656
Qwest Corp., 7.875%, 2011 180,000 188,775
Qwest Corp., 8.875%, 2012 175,000 191,625
Time Warner Telecom Holdings, Inc., 9.25%, 2014 235,000 250,275
Verizon New York, Inc., 7.375%, 2032 288,000 288,303
------------
$ 2,562,841
-------------------------------------------------------------------------------------------------------
Oil Services - 0.2%
-------------------------------------------------------------------------------------------------------
Hanover Compressor Co., 9%, 2014 $ 125,000 $ 134,375
-------------------------------------------------------------------------------------------------------
Pharmaceuticals- 0.6%
-------------------------------------------------------------------------------------------------------
Warner Chilcott Corp., 8.75%, 2015 (a) $ 375,000 $ 373,125
-------------------------------------------------------------------------------------------------------
Printing & Publishing - 3.2%
-------------------------------------------------------------------------------------------------------
American Media Operations, Inc., 8.875%, 2011 $ 260,000 $ 230,100
Dex Media, Inc., 0% to 2008, 9% to 2013 545,000 463,250
Dex Media, Inc., 0% to 2008, 9% to 2013 210,000 178,500
Houghton Mifflin Co., 0% to 2008, 11.5% to 2013 385,000 327,250
PRIMEDIA, Inc., 8.875%, 2011 295,000 283,938
PRIMEDIA, Inc., 8%, 2013 25,000 22,625
R.H. Donnelley Corp., 8.875%, 2016 (a) 240,000 246,900
WDAC Subsidiary Corp., 8.375%, 2014 (a) 365,000 362,263
------------
$ 2,114,826
-------------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.2%
-------------------------------------------------------------------------------------------------------
TFM S.A. de C.V., 9.375%, 2012 $ 121,000 $ 130,075
-------------------------------------------------------------------------------------------------------
Restaurants - 0.6%
-------------------------------------------------------------------------------------------------------
Denny's Corp. Holdings, Inc., 10%, 2012 $ 100,000 $ 104,250
El Pollo Loco, Inc., 11.75%, 2013 (a) 135,000 139,725
Uno Restaurant Corp., 10%, 2011 (a) 195,000 156,000
------------
$ 399,975
-------------------------------------------------------------------------------------------------------
Retailers - 3.3%
-------------------------------------------------------------------------------------------------------
Buhrmann U.S., Inc., 7.875%, 2015 $ 180,000 $ 182,250
Burlington Coat Factory Warehouse Corp., 11.125%, 2014 (a) 235,000 238,525
Burlington Coat Factory Warehouse Corp., 0% to 2008,
14.5% to 2014 (a) 385,000 298,375
Couche-Tard, Inc., 7.5%, 2013 170,000 172,975
Eye Care Centers of America, 10.75%, 2015 145,000 145,725
GSC Holdings Corp., 8%, 2012 (a) 265,000 265,331
Jean Coutu Group (PJC), Inc., 7.625%, 2012 115,000 112,987
Jean Coutu Group (PJC), Inc., 8.5%, 2014 125,000 117,187
Mothers Work, Inc., 11.25%, 2010 145,000 152,975
Neiman Marcus Group, Inc., 9%, 2015 (a) 165,000 175,313
Neiman Marcus Group, Inc., 10.375%, 2015 (a) 140,000 149,800
Rite Aid Corp., 8.125%, 2010 130,000 132,925
Rite Aid Corp., 7.7%, 2027 95,000 75,525
------------
$ 2,219,893
-------------------------------------------------------------------------------------------------------
Specialty Stores - 0.2%
-------------------------------------------------------------------------------------------------------
Payless ShoeSource, Inc., 8.25%, 2013 $ 125,000 $ 131,250
-------------------------------------------------------------------------------------------------------
Steel - 0.2%
-------------------------------------------------------------------------------------------------------
Chaparral Steel Co., 10%, 2013 $ 125,000 $ 140,000
-------------------------------------------------------------------------------------------------------
Supermarkets - 0.1%
-------------------------------------------------------------------------------------------------------
Pathmark Stores, Inc., 8.75%, 2012 $ 60,000 $ 59,100
-------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.3%
-------------------------------------------------------------------------------------------------------
Alamosa Holdings, Inc., 12%, 2009 $ 129,000 $ 138,191
Centennial Communications Corp., 10%, 2013 30,000 31,200
Centennial Communications Corp., 10.125%, 2013 140,000 153,125
Rogers Wireless, Inc., 7.5%, 2015 65,000 68,413
Rural Cellular Corp., 9.75%, 2010 213,000 219,656
Wind Acquisition Finance S.A., 10.75%, 2015 (a) 225,000 248,625
------------
$ 859,210
-------------------------------------------------------------------------------------------------------
Tobacco - 0.5%
-------------------------------------------------------------------------------------------------------
R.J. Reynolds Tobacco Holdings, Inc., 7.3%, 2015 $ 340,000 $ 345,100
-------------------------------------------------------------------------------------------------------
Transportation - 0.4%
-------------------------------------------------------------------------------------------------------
Arpeni Pratama Ocean Line PT, 8.75%, 2013 (a) $ 275,000 $ 273,625
-------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.0%
-------------------------------------------------------------------------------------------------------
Midwest Generation LLC, 8.75%, 2034 $ 145,000 $ 156,600
Mission Energy Holding Co., 13.5%, 2008 130,000 147,713
NGC Corp. Capital Trust, 8.316%, 2027 275,000 239,250
NRG Energy, Inc., 7.375%, 2016 430,000 433,763
Reliant Energy, Inc., 6.75%, 2014 60,000 54,600
Reliant Resources, Inc., 9.25%, 2010 200,000 202,750
TXU Corp., 5.55%, 2014 110,000 102,220
------------
$ 1,336,896
-------------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $43,321,906) $ 44,338,089
-------------------------------------------------------------------------------------------------------
Common Stocks - 26.7%
-------------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.3%
-------------------------------------------------------------------------------------------------------
Sinclair Broadcast Group, Inc., "A" (l) 30,000 $ 235,500
-------------------------------------------------------------------------------------------------------
Automotive - 1.3%
-------------------------------------------------------------------------------------------------------
Magna International, Inc., "A" 9,500 $ 745,275
TRW Automotive Holdings Corp. (l)(n) 5,800 128,644
------------
$ 873,919
-------------------------------------------------------------------------------------------------------
Business Services - 0.0%
-------------------------------------------------------------------------------------------------------
Anacomp, Inc., "B" (l)(n) 30 $ 308
-------------------------------------------------------------------------------------------------------
Chemicals - 0.4%
-------------------------------------------------------------------------------------------------------
Huntsman Corp. (n) 5,800 $ 113,970
Nalco Holding Co. (n) 6,600 124,410
------------
$ 238,380
-------------------------------------------------------------------------------------------------------
Computer Software - 1.5%
-------------------------------------------------------------------------------------------------------
Symantec Corp. (l)(n) 61,100 $ 1,000,818
-------------------------------------------------------------------------------------------------------
Construction - 1.6%
-------------------------------------------------------------------------------------------------------
Masco Corp. (l) 33,700 $ 1,075,030
-------------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.2%
-------------------------------------------------------------------------------------------------------
Brink's Co. (l) 2,200 $ 111,760
-------------------------------------------------------------------------------------------------------
Containers - 2.7%
-------------------------------------------------------------------------------------------------------
Crown Holdings, Inc. (n) 2,800 $ 44,884
Owens-Illinois, Inc. (l)(n) 97,000 1,773,160
------------
$ 1,818,044
-------------------------------------------------------------------------------------------------------
Electrical Equipment - 1.6%
-------------------------------------------------------------------------------------------------------
Tyco International Ltd. 41,200 $ 1,085,620
-------------------------------------------------------------------------------------------------------
Energy - Independent - 1.8%
-------------------------------------------------------------------------------------------------------
Apache Corp. 15,200 $ 1,079,808
Foundation Coal Holdings, Inc. (l) 3,000 152,100
------------
$ 1,231,908
-------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.4%
-------------------------------------------------------------------------------------------------------
Tenet Healthcare Corp. (l)(n) 189,400 $ 1,575,808
-------------------------------------------------------------------------------------------------------
Medical Equipment - 1.6%
-------------------------------------------------------------------------------------------------------
Pall Corp. (l) 35,400 $ 1,068,372
-------------------------------------------------------------------------------------------------------
Metals & Mining - 0.0%
-------------------------------------------------------------------------------------------------------
International Utility Structures, Inc. (n) 254,700 $ 0
-------------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.2%
-------------------------------------------------------------------------------------------------------
Ferrell Gas Partners LP 6,088 $ 129,979
-------------------------------------------------------------------------------------------------------
Network & Telecom - 1.7%
-------------------------------------------------------------------------------------------------------
Nortel Networks Corp. (n) 439,300 $ 1,168,538
-------------------------------------------------------------------------------------------------------
Oil Services - 3.4%
-------------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. (l) 36,830 $ 2,254,364
-------------------------------------------------------------------------------------------------------
Pharmaceuticals - 1.8%
-------------------------------------------------------------------------------------------------------
Wyeth 24,600 $ 1,197,282
-------------------------------------------------------------------------------------------------------
Printing & Publishing - 0.0%
-------------------------------------------------------------------------------------------------------
Golden Books Family Entertainment, Inc. (n) 53,266 $ 0
-------------------------------------------------------------------------------------------------------
Real Estate - 0.3%
-------------------------------------------------------------------------------------------------------
Mills Corp. (l) 5,500 $ 175,505
-------------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.3%
-------------------------------------------------------------------------------------------------------
Lyondell Chemical Co. (l) 8,500 $ 204,850
Sterling Chemicals, Inc. (n) 8 95
------------
$ 204,945
-------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.2%
-------------------------------------------------------------------------------------------------------
Vodafone Group PLC, ADR (l) 4,432 $ 105,038
-------------------------------------------------------------------------------------------------------
Telephone Services - 3.0%
-------------------------------------------------------------------------------------------------------
Adelphia Business Solutions, Inc. (n) 40,000 $ 0
NTL, Inc. 17,030 467,984
Sprint Nextel Corp. 62,300 1,545,040
------------
$ 2,013,024
-------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.4%
-------------------------------------------------------------------------------------------------------
NRG Energy, Inc. (l)(n) 6,227 $ 296,343
-------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $17,705,551) $ 17,860,485
-------------------------------------------------------------------------------------------------------
Floating Rate Loans - 0.3% (g)(r)
-------------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.2%
-------------------------------------------------------------------------------------------------------
Georgia Pacific, Second Lien Term Loan, 7.94%, 2013 $ 46,667 $ 47,653
Georgia Pacific, Term Loan, 6.88%, 2013 93,100 93,565
------------
$ 141,218
-------------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.1%
-------------------------------------------------------------------------------------------------------
HealthSouth Corp., Bridge Loan, 9.58%, 2007 $ 70,000 $ 69,504
-------------------------------------------------------------------------------------------------------
TOTAL FLOATING RATE LOANS (IDENTIFIED COST, $209,170) $ 210,722
-------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 0.7%
-------------------------------------------------------------------------------------------------------
Automotive - 0.4%
-------------------------------------------------------------------------------------------------------
General Motors Corp., "B", 5.25% (l) 17,155 $ 284,945
-------------------------------------------------------------------------------------------------------
Real Estate - 0.3%
-------------------------------------------------------------------------------------------------------
Mills Corp., 6.75% (a) 100 $ 88,500
Mills Corp., "F", 6.75% 100 88,500
------------
$ 177,000
-------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $448,896) $ 461,945
-------------------------------------------------------------------------------------------------------
Preferred Stocks - 3.3%
-------------------------------------------------------------------------------------------------------
Advertising & Broadcasting- 3.3%
-------------------------------------------------------------------------------------------------------
Paxson Communications Corp., 14.25% (p) 148 $ 1,328,300
Spanish Broadcasting Systems, Inc., "B", 10.75% (p) 775 852,500
------------
$ 2,180,800
-------------------------------------------------------------------------------------------------------
Consumer Goods & Services- 0.0%
-------------------------------------------------------------------------------------------------------
Renaissance Cosmetics, Inc., 14% (n)(p) 1,266 $ 0
-------------------------------------------------------------------------------------------------------
Real Estate- 0.0%
-------------------------------------------------------------------------------------------------------
HRPT Properties Trust, REIT, "B", 8.75% (l) 200 $ 5,114
-------------------------------------------------------------------------------------------------------
Telephone Services- 0.0%
-------------------------------------------------------------------------------------------------------
PTV, Inc., "A", 10% (l) 8 $ 16
-------------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $1,977,332) $ 2,185,930
-------------------------------------------------------------------------------------------------------
Warrants - 0.4%
-------------------------------------------------------------------------------------------------------
STRIKE FIRST
ISSUER PRICE EXERCISE SHARES/PAR VALUE
-------------------------------------------------------------------------------------------------------
Business Services - 0.0%
-------------------------------------------------------------------------------------------------------
Anacomp, Inc. (n) $61.54 12/10/2001 5,841 $ 117
-------------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.4%
-------------------------------------------------------------------------------------------------------
Republic of Venezuela, Oil-Indexed
Payment Obligation, expires 2020 N/A N/A 6,315 $ 233,055
-------------------------------------------------------------------------------------------------------
Network & Telecom - 0.0%
-------------------------------------------------------------------------------------------------------
Metricom, Inc. (n) $87.00 8/15/2000 775 $ 0
-------------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.0%
-------------------------------------------------------------------------------------------------------
Sterling Chemicals, Inc. (n) $52.00 12/31/2002 14 $ 1
-------------------------------------------------------------------------------------------------------
TOTAL WARRANTS (IDENTIFIED COST, $235,421) $ 233,173
-------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 9.9%
-------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 6,612,876 $6,612,876
-------------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.2%
-------------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
-------------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 4.77%, dated 4/28/06, due 5/01/06, total to
be received $130,052 (secured by various U.S. Treasury and Federal
Agency obligations in a jointly traded account), at Cost $ 130,000 $ 130,000
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $70,641,152) (k) $ 72,033,220
-------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (7.9)% (5,255,408)
-------------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 66,777,812
-------------------------------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be sold in transactions exempt from registration, normally to qualified institutional buyers.
At period end, the aggregate value of these securities was $10,978,800, representing 16.4% of net
assets.
(e) The rate shown represents a current effective yield.
(g) The rate shown represents a weighted average coupon rate 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, 2006, the fund held securities fair valued in accordance with the policies adopted
by the Board of Trustees, aggregating $44,012,008 and 61.10% of market value, of which 61.10% of
market value was provided by an independent pricing service using an evaluated bid.
(l) All or a portion of this security is on loan.
(n) Non-income producing security.
(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.
The following abbreviations are used in the Portfolio of Investments and are
defined:
ADR American Depository Receipt
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
REIT Real Estate Investment Trust
Abbreviations have been used throughout this report to indicate amounts shown in currencies other than
the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of
abbreviations is shown below:
EUR Euro
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are netted by currency.
NET UNREALIZED
CONTRACTS TO SETTLEMENT CONTRACTS APPRECIATION
DELIVER/RECEIVE DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
------------------------------------------------------------------------------------------------------
SALES
------------------------------------------------------------------------------------------------------
EUR 1,100,706 5/17/06-6/13/06 $1,341,894 $1,392,394 $(50,500)
-------------------------------------------------------------------------------------------------------
PURCHASES
-------------------------------------------------------------------------------------------------------
EUR 204,810 5/17/06-6/13/06 $ 250,355 $ 258,720 $ 8,365
-------------------------------------------------------------------------------------------------------
At April 30, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $831 with Merrill Lynch International.
CREDIT DEFAULT SWAPS
UNREALIZED
NOTIONAL PRINCIPAL APPRECIATION
EXPIRATION AMOUNT OF CONTRACT DESCRIPTION (DEPRECIATION)
------------------------------------------------------------------------------------------------------
3/20/11 $500,000 Agreement between the trust and Merrill Lynch $(8,636)
International to exchange the credit risk of
Sherwin-Williams Co. As a buyer of protection,
the trust agrees to pay Merrill Lynch quarterly
at a fixed annual rate of 0.98% of the notional
amount of $500,000 until maturity on March 20,
2011. If Sherwin-Williams Co. experiences one of
the following credit events: bankruptcy, failure
to pay, or a restructuring, the trust would then
purchase $500,000 par of Sherwin-Williams bonds
at the post credit event market price, and then
deliver those bonds to Merrill Lynch, who in
turn would deliver $500,000 in cash to the
trust.
At April 30, 2006, the trust had sufficient cash and/or securities to cover any commitments under
these derivative contracts.
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Assets and Liabilities (unaudited)
This statement represents your trust's balance sheet, which details the assets and liabilities
comprising the total value of the trust.
AT 4/30/06
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value, including $6,452,225 of securities on
loan (identified cost, $70,641,152) $72,033,220
Cash 1,789
Receivable for forward foreign currency exchange contracts 8,365
Receivable for investments sold 1,715,509
Interest and dividends receivable 922,764
Other assets 10,087
------------------------------------------------------------------------------------------------------
Total assets $74,691,734
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Payable to custodian $1,170
Payable to dividend disbursing agent 50,209
Payable for forward foreign currency exchange contracts 50,500
Payable for forward foreign currency exchange contracts subject
to master netting agreements 831
Payable for investments purchased 1,020,574
Unrealized depreciation on credit default swaps 8,636
Collateral for securities loaned, at value 6,612,876
Payable to affiliates
Management fee 4,949
Transfer agent and dividend disbursing costs 4,374
Administrative services fee 167
Payable for independent trustees' compensation 132,643
Accrued expenses and other liabilities 26,993
------------------------------------------------------------------------------------------------------
Total liabilities $7,913,922
------------------------------------------------------------------------------------------------------
Net assets $66,777,812
------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------
Paid-in capital $72,010,651
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 1,340,524
Accumulated net realized gain (loss) on investments and foreign
currency transactions (4,748,295)
Accumulated distributions in excess of net investment income (1,825,068)
------------------------------------------------------------------------------------------------------
Net assets $66,777,812
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (7,057,194 issued,
less 256,600 treasury shares) 6,800,594
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $66,777,812 /
6,800,594 shares of beneficial interest outstanding) $9.82
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (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.
SIX MONTHS ENDED 4/30/06
NET INVESTMENT INCOME
-------------------------------------------------------------------------------------------------------
Income
Interest $1,986,932
Dividends 257,196
Foreign taxes withheld (1,302)
-------------------------------------------------------------------------------------------------------
Total investment income $2,242,826
-------------------------------------------------------------------------------------------------------
Expenses
Management fee $300,253
Transfer agent and dividend disbursing costs 13,615
Administrative services fee 8,256
Independent trustees' compensation 7,617
Stock exchange fee 12,465
Custodian fee 25,994
Shareholder communications 29,450
Auditing fees 34,423
Legal fees 2,485
Miscellaneous 7,723
-------------------------------------------------------------------------------------------------------
Total expenses $442,281
-------------------------------------------------------------------------------------------------------
Fees paid indirectly (24,528)
Reduction of expenses by investment adviser (227)
-------------------------------------------------------------------------------------------------------
Net expenses $417,526
-------------------------------------------------------------------------------------------------------
Net investment income $1,825,300
-------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(107,736)
Swap transactions (258)
Foreign currency transactions 5,795
-------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(102,199)
-------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $2,686,339
Swap transactions (8,636)
Translation of assets and liabilities in foreign currencies (51,762)
-------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $2,625,941
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $2,523,742
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $4,349,042
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
This statement describes the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/06 10/31/05
(UNAUDITED)
CHANGE IN NET ASSETS
------------------------------------------------------------------------------------------------------
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $1,825,300 $4,064,833
Net realized gain (loss) on investments and foreign
currency transactions (102,199) 700,237
Net unrealized gain (loss) on investments and foreign
currency translation 2,625,941 (1,004,754)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $4,349,042 $3,760,316
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(3,300,535) $(4,852,320)
------------------------------------------------------------------------------------------------------
From paid-in capital -- (2,004,062)
------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(3,300,535) $(6,856,382)
------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $251,739 $634,182
------------------------------------------------------------------------------------------------------
Total change in net assets $1,300,246 $(2,461,884)
------------------------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------
At beginning of period 65,477,566 67,939,450
At end of period (including accumulated distributions in
excess of net investment income of $1,825,068 and $349,833,
respectively) $66,777,812 $65,477,566
------------------------------------------------------------------------------------------------------
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 ------------------------------------------------------------------
4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning of period $9.66 $10.12 $9.80 $7.50 $8.63 $11.67
-------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
-------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.27 $0.60 $0.59 $0.59 $0.71 $0.77
Net realized and unrealized gain (loss)
on investments and foreign currency 0.38 (0.04) 0.74 2.56 (0.86) (2.16)
-------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.65 $0.56 $1.33 $3.15 $(0.15) $(1.39)
-------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.49) $(0.72) $(0.58) $(0.57) $(0.98) $(0.83)
From net realized gain on investments and
foreign currency transactions -- -- -- (0.28) -- --
From paid-in capital -- (0.30) (0.43) -- -- (0.82)
-------------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.49) $(1.02) $(1.01) $(0.85) $(0.98) $(1.65)
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.82 $9.66 $10.12 $9.80 $7.50 $8.63
-------------------------------------------------------------------------------------------------------------------------------
Per share market value, end of period $9.86 $10.85 $11.60 $10.40 $7.25 $14.30
-------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) (r)(s) (4.50)(n) 2.77 22.56(b) 58.07 (43.54) 16.99
-------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.34(a) 1.37 1.28 1.34 1.56 1.53
Expenses after expense reductions (f) 1.34(a) 1.37 1.28 1.34 1.56 1.53
Net investment income 5.57(a) 5.95 5.82 6.75 8.39 7.49
Portfolio turnover 39 47 72 94 137 49
Net assets at end of period (000 Omitted) $66,778 $65,478 $67,939 $65,195 $49,622 $56,598
-------------------------------------------------------------------------------------------------------------------------------
(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.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the trust may receive proceeds from litigation settlements, without which performance would be lower.
(x) Effective November 1, 2001, the trust adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to November 1, 2001 have not been restated to reflect this change.
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 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. 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. Values of debt instruments 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. Short-
term instruments with a maturity at issuance of 397 days or less are generally
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 a broker-
dealer bid quotation. 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 quotation. 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
fund'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 fund's valuation policies and procedures, market
quotations are not considered to be readily available for many types of debt
instruments. These investments are generally valued at fair value based on
information from independent pricing services. These valuations can be based
on 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 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 fund'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 fund's net asset value may differ from quoted or published
prices for the same investments. 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 fund'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 fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value.
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.
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. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary.
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 forward foreign currency
exchange contracts and swap agreements.
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 the contract. 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's 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.
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 is recorded as unrealized appreciation or
depreciation in the Statement of Operations. Risks may arise upon entering
into these agreements from the potential inability of counterparties to meet
the terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based.
CREDIT DEFAULT SWAPS - The trust may enter into credit default swaps to limit
or to reduce risk exposure of the trust to credit events such as bankruptcy,
failure to pay, or a restructuring of corporate and sovereign issuers. The
trust may also use credit default swaps to create direct or synthetic short or
long exposure to domestic or foreign corporate debt securities or certain
sovereign debt securities to which the trust is not otherwise exposed. In a
credit default swap, one party makes a stream of payments 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.
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. 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.
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. 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 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,
consent fees, and prepayment fees. These fees are recorded on an accrual basis
as income in the accompanying financial statements. The trust may receive
proceeds from litigation settlements involving its portfolio holdings. Any
proceeds received are reflected in realized gain/loss in the Statement of
Operations, or in unrealized gain/loss if the security is still held by the
trust. 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. During the six months ended April 30, 2006, the trust's custodian
fees were reduced by $24,528 under this arrangement. This amount is shown as a
reduction of total expenses on the Statement of Operations. The trust has
entered into a commission recapture agreement, under which certain brokers
will credit the trust a portion of the commissions generated, to offset
certain expenses of the trust. For the six months ended April 30, 2006, the
trust did not receive any credits under this agreement. Effective January 1,
2006, the commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to continue 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. Income and capital gain
distributions are determined in accordance with income tax regulations, which
may differ from generally accepted accounting principles. No such designation
had been made for the six months ended April 30, 2006. 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 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, passive foreign investment companies, wash sale
loss deferrals, foreign currency transactions, and derivative transactions.
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:
OCTOBER 31, 2005 OCTOBER 31, 2004
Ordinary income (including any
short-term capital gains) $4,852,320 $3,870,737
Tax return of capital(1) 2,004,062 2,877,470
-------------------------------------------------------------------
Total distributions $6,856,382 $6,748,207
-------------------------------------------------------------------
(1) 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 APRIL 30, 2006
Cost of investments $73,873,247
----------------------------------------------------------
Gross appreciation $4,659,197
Gross depreciation (6,499,224)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(1,840,027)
AS OF OCTOBER 31, 2005
Capital loss carryforwards $(1,466,084)
Other temporary differences (329,399)
Net unrealized appreciation (depreciation) (4,485,863)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2005, the trust had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
October 31, 2012 $(322,473)
October 31, 2013 (1,143,611)
--------------------------------------------------
$(1,466,084)
(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 gross investment
income. The management fee, from net assets and gross investment income,
incurred for the six months ended April 30, 2006 was equivalent to an annual
effective rate of 0.92% of the trust's average daily net assets.
TRANSFER AGENT - The trust pays a portion of transfer agent and dividend-
disbursing costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary
of MFS. MFSC receives a fee from the trust, for its services as registrar and
dividend-disbursing agent. 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. For the six months ended April 30, 2006, these fees
amounted to $7,089. 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, 2006, these costs amounted to $5,524.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. From July 1, 2005 through March 31, 2006, the trust's annual fixed
amount was $10,000. Effective April 1, 2006, the trust's annual fixed amount
is $17,500. The administrative services fee incurred for the six months ended
April 30, 2006 was equivalent to an annual effective rate of 0.0252% 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 retired Independent Trustees which resulted in a
pension expense of $2,674. The trust also has an unfunded retirement benefit
deferral plan for certain current Independent Trustees which resulted in an
expense of $91. Both amounts are included in Independent trustees'
compensation for the six months ended April 30, 2006. The deferred liability
for retirement benefits payable to retired Trustees and certain current
Trustees amounted to $60,830 and $60,406, respectively, at April 30, 2006, 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 $10,087 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, 2006, the fee paid to Tarantino
LLC was $250. MFS has agreed to reimburse the fund for a portion of the
payments made by the funds to Tarantino LLC in the amount of $227, 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
$24,990,407 and $25,427,289, 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, 2006, the trust
did not repurchase any shares. Transactions in trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
Shares issued to
shareholders in
reinvestment of
distributions 25,406 $251,739 58,705 $634,182
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
line of credit provided by a syndication of banks under a 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 Federal Reserve
funds rate plus 0.35%. 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 calendar quarter. The commitment fee
allocated to the trust for the six months ended April 30, 2006 was $223, and
is included in the miscellaneous expense on the Statement of Operations. The
trust had no significant borrowings during the six months ended April 30,
2006.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of 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, 2006, and the related statements of operations, changes in net
assets, and financial highlights for the six-month period ended April 30,
2006. 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, 2005, and financial highlights
for each of the five years in the period ended October 31, 2005, and in our
report dated December 13, 2005, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
June 12, 2006
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund'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 fund 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 8 a.m. to 8 p.m. Eastern
time
Write to: MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of April 30, 2006, our records indicate that there are 548 registered
shareholders and approximately 5,128 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:
MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
[logo] M F S(R)
INVESTMENT MANAGEMENT
(C) 2006 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MFV-SEM-06/06 10M
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.
General. Information regarding the portfolio managers of the MFS Special Value
Trust (the "Fund") provided as of April 30, 2006 is set forth below.
TITLE AND FIVE YEAR
PORTFOLIO MANAGER PRIMARY ROLE SINCE HISTORY
----------------- ------------ ----- --------------------
John F. Addeo Debt Securities 2002 Senior Vice President of
Portfolio Manager MFS; employed in the
investment management
area of MFS since 1998.
Kenneth J. Enright Equity Securities 2004 Senior Vice President of
Portfolio Manager MFS; employed in the
investment management
area of MFS since 1986.
Scott B. Richards Debt Securities 2004 Vice President of MFS;
Portfolio Manager employed in the
investment management
area of MFS since 2004;
Head of the High Yield
Group at Columbia
Management Group from
1999 to 2003.
COMPENSATION. Portfolio manager total cash compensation as of April 30, 2006 is
a combination of base salary and performance bonus:
o Base Salary - Base salary represents a relatively smaller percentage of
portfolio manager total cash compensation (generally below 33%) than
incentive compensation.
o Performance Bonus - Generally, incentive compensation represents a majority
of portfolio manager total cash compensation. The performance bonus is
based on a combination of quantitative and qualitative factors, with more
weight given to the former (generally over 60%) and less weight given to
the latter.
>> The quantitative portion is based on pre-tax performance of all of the
accounts managed by the portfolio manager (which includes the Fund and
any other accounts managed by the portfolio manager) over a one-,
three- and five-year period relative to the appropriate Lipper peer
group universe and/or one or more benchmark indices with respect to
each account. The primary weight is given to portfolio performance
over a three-year time period with lesser consideration given to
portfolio performance over one- and five-year periods (adjusted as
appropriate if the portfolio manager has served for shorter periods).
>> The qualitative portion is based on the results of an annual internal
peer review process (conducted by other portfolio managers, analysts
and traders) and management's assessment of overall portfolio manager
contributions to the investment process (distinct from portfolio
performance).
Portfolio managers also typically benefit from the opportunity to participate
in the MFS Equity Plan. Equity interests in MFS or its parent company are
awarded by management, on a discretionary basis, taking into account tenure at
MFS, contribution to the investment process and other factors.
Finally, portfolio managers are provided with a benefits package including a
defined contribution plan, health coverage and other insurance, which are
available to other employees of MFS on substantially similar terms. The
percentage of compensation provided by these benefits depends upon the length
of the individual's tenure at MFS and salary level as well as other factors.
OWNERSHIP OF FUND SHARES. The following table shows the dollar range of equity
securities of the Fund beneficially owned by the Fund's portfolio manager as of
the Fund's semi-annual period ended April 30, 2006. The following dollar ranges
apply:
N. None
A. $1 - $10,000
B. $10,001 - $50,000
C. $50,001 - $100,000
D. $100,001 - $500,000
E. $500,001 - $1,000,000
F. Over $1,000,000
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY SECURITIES IN FUND
------------------------- -----------------------------------------
John F. Addeo N
Kenneth J. Enright N
Scott B. Richards N
OTHER ACCOUNTS. In addition to the Fund, the Fund's portfolio manager is
responsible (either individually or jointly) for the day-to-day management of
certain other accounts, the number and total assets of which as of the Fund's
semi-annual period ended April 30, 2006 were as follows:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
--------------------- ----------------------- --------------
NUMBER OF NUMBER OF NUMBER OF
NAME ACCOUNTS* TOTAL ASSETS* ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
John F. Addeo 10 $4.3 billion 1 $187 million 2 $533.7 billion
Kenneth J. Enright 12 $23.8 billion 0 N/A 2 $1.4 billion
Scott B. Richards 13 $4.7 billion 2 $477.2 million 2 $533.7 million
--------------
* Includes the Fund.
Advisory fees are not based upon performance of any of the accounts identified
in the table above.
POTENTIAL CONFLICTS OF INTEREST. MFS seek to identify potential conflicts of
interest resulting from a portfolio manager's management of both the Fund and
other accounts and has adopted policies and procedures designed to address such
potential conflicts.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for accounts with similar investment objectives of the
Adviser or subsidiary of the Adviser. Securities transactions for the Fund and
other accounts with similar investment objectives are generally executed on the
same day, or the next day. Nevertheless, it may develop that a particular
security is bought or sold for only one client even though it might be held by,
or bought or sold for, other clients. Likewise, a particular security may be
bought for one or more clients when one or more other clients are selling that
same security.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by MFS to be fair and equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. In most cases, however, MFS believes
that the Fund's ability to participate in volume transactions will produce
better executions for the Fund.
MFS does not receive a performance fee for its management of the Fund. MFS
and/or a portfolio manager may have an incentive to allocate favorable or
limited opportunity investments or structure the timing of investments to favor
accounts other than the Fund--for instance, those that pay a higher advisory
fee and/or have a performance fee.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
-------------------------------------------------------------------------------
MFS SPECIAL VALUE TRUST
-------------------------------------------------------------------------------
(C) (D)
TOTAL NUMBER MAXIMUM NUMBER
OF SHARES (OR APPROXIMATE
PURCHASED AS DOLLAR VALUE) OF
(B) PART OF SHARES THAT MAY
(A) AVERAGE PUBLICLY YET BE PURCHASED
TOTAL NUMBER PRICE ANNOUNCED UNDER
OF SHARES PAID PER PLANS OR THE PLANS
PERIOD PURCHASED SHARE PROGRAMS OR PROGRAMS
-------------------------------------------------------------------------------
11/1/05 - 11/30/05 0 n/a 0 673,558
-------------------------------------------------------------------------------
12/1/05 - 12/31/05 0 n/a 0 673,558
-------------------------------------------------------------------------------
1/1/06 - 1/31/06 0 n/a 0 673,558
-------------------------------------------------------------------------------
2/1/06 - 2/28/06 0 n/a 0 673,558
-------------------------------------------------------------------------------
3/1/06 - 3/31/06 0 n/a 0 679,033
-------------------------------------------------------------------------------
4/1/06 - 4/30/06 0 n/a 0 679,033
-------------------------------------------------------------------------------
TOTAL 0 n/a 0
-------------------------------------------------------------------------------
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, 2006 plan year are 679,033.
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 7(d)(2)(ii)(G) 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 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 23, 2006
-------------
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 23, 2006
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 23, 2006
-------------
* Print name and title of each signing officer under his or her signature.