MFS SPECIAL VALUE TRUST N-CSRS
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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 811-05912

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, 2012


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ITEM 1. REPORTS TO STOCKHOLDERS.


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LOGO

 

MFS® Special Value Trust

 

LOGO

 

 

SEMIANNUAL REPORT

April 30, 2012

 

MFV-SEM


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Managed Distribution Policy Disclosure

The MFS Special Value Trust’s (the fund) Board of Trustees has adopted a managed distribution policy. The fund seeks to pay monthly distributions based on an annual rate of 10% of the fund’s average monthly net asset value. The fund’s total return in relation to changes in net asset value is presented in the Financial Highlights. You should not draw any conclusions about the fund’s investment performance from the amount of the current distribution or from the terms of the fund’s managed distribution policy. The Board may amend or terminate the managed distribution policy at any time without prior notice to fund shareholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of the managed distribution policy.

With each distribution, the fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other related information. In accordance with the amounts and sources of distributions reported in the Notice to Shareholders – the Sources of Distributions are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.

Under a managed distribution policy the fund may at times distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the fund is paid back to you. A return of capital does not necessarily reflect the fund’s investment performance and should not be confused with ‘yield’ or ‘income’.


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MFS® SPECIAL VALUE TRUST

New York Stock Exchange Symbol: MFV

 

Letter from the Chairman and CEO     1   
Portfolio composition     2   
Portfolio managers’ profiles     4   
Other notes     4   
Portfolio of investments     6   
Statement of assets and liabilities     24   
Statement of operations     25   
Statements of changes in net assets     26   
Financial highlights     27   
Notes to financial statements     29   
Report of independent registered public accounting firm     41   
Board review of investment advisory agreement     42   
Proxy voting policies and information     42   
Quarterly portfolio disclosure     42   
Further information     42   
Contact information    back cover   

 

 

 

NOT FDIC INSURED Ÿ MAY LOSE VALUE Ÿ NO BANK GUARANTEE


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LOGO

 

LETTER FROM THE CHAIRMAN AND CEO

 

Dear Shareholders:

World financial markets remain a venue of uncertainty. The focus has shifted most recently to the eurozone, where elections in the 17-country region reflected a level of voter unwillingness to accept the austerity measures enacted in the midst of an economic slowdown. Volatility is likely to continue as investors watch how this voter backlash plays out in Europe and in other countries attempting to

resolve budget issues.

The U.S. economy is experiencing a period of growth. However, markets have been jittery in reaction to events in Europe and ahead of the U.S. presidential election. As in Europe, voters in the United States are watching the economy closely and waiting to see if Congress agrees to cut the budget and extend the Bush tax cuts. Failure to do so could ultimately send the U.S. economy back into recession.

Amid this global uncertainty, managing risk becomes a top priority for investors and their advisors. At MFS®, our global research platform is designed to ensure the smooth

functioning of our investment process in all business climates. Risk management is always foremost in our minds. Our research platform enables our analysts to uncover attractive global opportunities across asset classes. Additionally, we have a team of quantitative analysts that measures and assesses the risk profiles of our portfolios and securities on an ongoing basis. The chief investment risk officer, who oversees the team, reports directly to the firm’s president and chief investment officer so that the risk associated with each portfolio can be assessed objectively and independently of the portfolio management team.

We, like our investors, are mindful of the many economic challenges faced at the local, national, and international levels. It is in times such as these that we want to emphasize the merits of maintaining a long-term view, adhering to basic investing principles such as asset allocation and diversification, and working closely with investment advisors to research and identify appropriate investment opportunities.

Respectfully,

 

LOGO

Robert J. Manning

Chairman and Chief Executive Officer

MFS Investment Management®

June 18, 2012

The opinions expressed in this letter are subject to change, may not be relied upon for investment advice, and no forecasts can be guaranteed.

 

1


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PORTFOLIO COMPOSITION

 

Portfolio structure (i)

 

LOGO

 

Top ten holdings (i)  
JPMorgan Chase & Co.     1.3%   
Ford Motor Credit Company, 12.0% 2015     1.2%   
Philip Morris International, Inc.     1.2%   
International Business Machines Corp.     1.0%   
Tyco International Ltd.     1.0%   
General Mills, Inc.     0.9%   
3M Co.     0.9%   
United Technologies Corp.     0.9%   
Pfizer, Inc.     0.9%   
Viacom, Inc., “B”     0.9%   
Equity sectors  
Financial Services     5.7%   
Industrial Goods & Services     3.5%   
Consumer Staples     2.7%   
Health Care     2.7%   
Utilities & Communications     1.9%   
Technology     1.9%   
Basic Materials     1.6%   
Energy     1.5%   
Leisure     1.2%   
Special Products & Services     0.9%   
Retailing     0.8%   
Autos & Housing     0.1%   
Fixed income sectors (i)  
High Yield Corporates     65.5%   
Emerging Markets Bonds     4.6%   
High Grade Corporates     2.7%   
Commercial Mortgage-Backed Securities     0.8%   
Non-U.S. Government Bonds     0.2%   
Floating Rate Loans     0.2%   
Collateralized Debt Obligations (o)     0.0%   
Composition including fixed income credit quality (a)(i)  
A     0.1%   
BBB     2.7%   
BB     17.4%   
B     36.1%   
CCC     16.1%   
CC     0.7%   
C     0.4%   
Not Rated     0.5%   
Non-Fixed Income     24.5%   
Cash & Other     1.5%   
 

 

2


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Portfolio Composition – continued

 

 

(a) For all securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. Ratings are shown in the S&P and Fitch scale (e.g., AAA). All ratings are subject to change. Not Rated includes fixed income securities, including fixed income futures, which have not been rated by any rating agency. Non-Fixed Income includes equity securities (including convertible bonds and equity derivatives) and commodities. Cash & Other includes cash, other assets less liabilities, offsets to derivative positions, and short-term securities. The fund may not hold all of these instruments. The fund is not rated by these agencies.

 

(i) For purposes of this presentation, the components include the market value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. The bond component will include any accrued interest amounts. Equivalent exposure is a calculated amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than market value. Where the fund holds convertible bonds, these are treated as part of the equity portion of the portfolio.

 

(o) Less than 0.1%.

Percentages are based on net assets as of 4/30/12.

The portfolio is actively managed and current holdings may be different.

 

3


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PORTFOLIO MANAGERS’ PROFILES

 

William Adams     Investment Officer of MFS; employed in the investment management area of MFS since 2009. Portfolio Manager of the Fund since May 2011.
Nevin Chitkara    

Investment Officer of MFS; employed in the investment management area of MFS since 1997. Portfolio manager of the Fund since January 2012.

David Cole    

Investment Officer of MFS; employed in the investment management area of MFS since 2004. Portfolio manager of the Fund since 2006.

Note to Shareholders: Effective January 12, 2012, Nevin Chitkara replaced Brooks Taylor as a co-manager of the fund.

OTHER NOTES

The fund’s shares may trade at a discount or premium to net asset value. Shareholders do not have the right to cause the fund to repurchase their shares at net asset value. When fund shares trade at a premium, buyers pay more than the net asset value underlying fund shares, and shares purchased at a premium would receive less than the amount paid for them in the event of the fund’s liquidation. As a result, the total return that is calculated based on the net asset value and New York Stock Exchange price can be different.

The fund’s monthly distributions may include a return of capital to shareholders to the extent that the fund’s net investment income and net capital gains are insufficient to meet the fund’s target annual distribution rate. 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. It may also result in a recharacterization of what economically represents a return of capital to ordinary income in those situations where a fund has long term capital gain and a capital loss carryforward. Returns of shareholder capital have the effect of reducing the fund’s assets and increasing the fund’s expense ratio.

 

4


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Other Notes – continued

 

The fund’s target annual distribution rate is calculated based on an annual rate of 10% of the fund’s average monthly net asset value, not a fixed share price, and the fund’s dividend amount will fluctuate with changes in the fund’s average daily net assets.

 

 

In accordance with Section 23(c) of the Investment Company Act of 1940, the fund hereby gives notice that it may from time to time repurchase shares of the fund in the open market at the option of the Board of Trustees and on such terms as the Trustees shall determine.

 

5


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PORTFOLIO OF INVESTMENTS

4/30/12 (unaudited)

The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized by broad-based asset classes.

 

Bonds - 72.2%                 
Issuer    Shares/Par     Value ($)  
    
Aerospace - 1.1%                 
Bombardier, Inc., 7.5%, 2018 (n)    $ 105,000      $ 116,288   
Bombardier, Inc., 7.75%, 2020 (n)      55,000        61,463   
CPI International, Inc., 8%, 2018      115,000        101,344   
Heckler & Koch GmbH, 9.5%, 2018 (z)    EUR  100,000        86,041   
Huntington Ingalls Industries, Inc., 7.125%, 2021    $ 110,000        116,462   
Kratos Defense & Security Solutions, Inc., 10%, 2017      35,000        37,625   
    

 

 

 
             $ 519,223   
Apparel Manufacturers - 0.4%                 
Hanesbrands, Inc., 8%, 2016    $ 50,000      $ 55,063   
Hanesbrands, Inc., 6.375%, 2020      60,000        61,950   
Jones Group, Inc., 6.875%, 2019      65,000        63,294   
Levi Strauss & Co., 6.875%, 2022 (z)      15,000        15,337   
    

 

 

 
             $ 195,644   
Asset-Backed & Securitized - 0.8%                 
Banc of America Commercial Mortgage, Inc., FRN, 6.437%, 2051 (z)    $ 328,951      $ 69,080   
Citigroup Commercial Mortgage Trust, FRN, 5.885%, 2049      220,000        62,963   
Falcon Franchise Loan LLC, FRN, 5.241%, 2025 (i)(z)      151,351        19,645   
JPMorgan Chase Commercial Mortgage Securities Corp., “B”, FRN, 5.925%, 2049      142,189        42,742   
JPMorgan Chase Commercial Mortgage Securities Corp., “C”, FRN, 5.925%, 2049      217,049        51,158   
JPMorgan Chase Commercial Mortgage Securities Corp., “C”, FRN, 6.253%, 2051      95,000        38,745   
JPMorgan Chase Commercial Mortgage Securities Corp., “D”, FRN, 5.925%, 2049      595,809        37,596   
Morgan Stanley Capital I, Inc., FRN, 1.34%, 2039 (i)(z)      305,603        6,876   
Preferred Term Securities XII Ltd., CDO, 0%, 2033 (a)(c)(z)      225,000        68   
Preferred Term Securities XVI Ltd., CDO, 0%, 2035 (a)(c)(z)      300,000        30   
Preferred Term Securities XVII Ltd., CDO, 0%, 2035 (a)(c)(z)      187,000        19   
Wachovia Bank Commercial Mortgage Trust, FRN, 5.874%, 2047      142,497        33,017   
Wachovia Bank Commercial Mortgage Trust, FRN, 5.933%, 2047      89,972        18,147   
    

 

 

 
             $ 380,086   
Automotive - 3.3%                 
Accuride Corp., 9.5%, 2018    $ 180,000      $ 191,250   
Allison Transmission, Inc., 7.125%, 2019 (n)      100,000        104,750   

 

6


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Automotive - continued                 
Chrysler Group LLC/CG Co-Issuer, Inc., 8.25%, 2021    $ 200,000      $ 207,000   
Ford Motor Co., 7.45%, 2031      60,000        76,425   
Ford Motor Credit Co. LLC, 12%, 2015      445,000        560,700   
General Motors Financial Co., Inc., 6.75%, 2018      20,000        21,301   
Goodyear Tire & Rubber Co., 7%, 2022      40,000        39,700   
IDQ Holdings, Inc., 11.5%, 2017 (z)      35,000        36,750   
Jaguar Land Rover PLC, 8.125%, 2021 (n)      300,000        313,500   
Lear Corp., 8.125%, 2020      40,000        44,600   
    

 

 

 
             $ 1,595,976   
Basic Industry - 0.2%                 
Trimas Corp., 9.75%, 2017    $ 100,000      $ 111,000   
Broadcasting - 4.7%                 
Allbritton Communications Co., 8%, 2018    $ 90,000      $ 95,850   
AMC Networks, Inc., 7.75%, 2021 (n)      71,000        79,342   
Clear Channel Communications, Inc., 9%, 2021      187,000        169,235   
Clear Channel Worldwide Holdings, Inc., 7.625%, 2020 (n)      55,000        54,450   
Clear Channel Worldwide Holdings, Inc., “A”, 7.625%, 2020 (n)      5,000        4,862   
Hughes Network Systems LLC, 7.625%, 2021      70,000        75,862   
Intelsat Bermuda Ltd., 11.25%, 2017      205,000        212,688   
Intelsat Bermuda Ltd., 11.5%, 2017 (p)      125,000        130,313   
Intelsat Jackson Holdings Ltd., 11.25%, 2016      90,000        94,613   
LBI Media Holdings, Inc., 11%, 2013      140,000        98,700   
LBI Media, Inc., 8.5%, 2017 (z)      90,000        22,725   
Liberty Media Corp., 8.5%, 2029      95,000        97,731   
Liberty Media Corp., 8.25%, 2030      50,000        50,875   
LIN Television Corp., 8.375%, 2018      30,000        31,125   
Local TV Finance LLC, 9.25%, 2015 (p)(z)      187,527        193,153   
Newport Television LLC, 13%, 2017 (n)(p)      114,372        119,376   
Nexstar Broadcasting Group, Inc., 8.875%, 2017      50,000        53,375   
Sinclair Broadcast Group, Inc., 9.25%, 2017 (n)      55,000        61,325   
Sinclair Broadcast Group, Inc., 8.375%, 2018      15,000        16,387   
SIRIUS XM Radio, Inc., 13%, 2013 (n)      65,000        73,531   
SIRIUS XM Radio, Inc., 8.75%, 2015 (n)      105,000        119,175   
SIRIUS XM Radio, Inc., 7.625%, 2018 (n)      75,000        81,750   
Townsquare Radio LLC, 9%, 2019 (z)      40,000        41,200   
Univision Communications, Inc., 6.875%, 2019 (n)      25,000        25,281   
Univision Communications, Inc., 7.875%, 2020 (n)      80,000        83,400   
Univision Communications, Inc., 8.5%, 2021 (n)      130,000        128,375   
    

 

 

 
             $ 2,214,699   

 

7


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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Brokerage & Asset Managers - 0.8%                 
E*TRADE Financial Corp., 7.875%, 2015    $ 155,000      $ 158,294   
E*TRADE Financial Corp., 12.5%, 2017      190,000        221,350   
    

 

 

 
             $ 379,644   
Building - 1.5%                 
Building Materials Holding Corp., 7%, 2020 (n)    $ 45,000      $ 48,038   
CEMEX S.A., 9.25%, 2020      295,000        264,173   
HD Supply, Inc., 8.125%, 2019 (z)      30,000        32,212   
Masonite International Corp., 8.25%, 2021 (n)      105,000        109,200   
Nortek, Inc., 10%, 2018      55,000        58,025   
Nortek, Inc., 8.5%, 2021      150,000        148,125   
USG Corp., 7.875%, 2020 (z)      45,000        46,237   
    

 

 

 
             $ 706,010   
Business Services - 0.9%                 
Ceridian Corp., 12.25%, 2015 (p)    $ 95,000      $ 90,963   
iGATE Corp., 9%, 2016      145,000        157,325   
Iron Mountain, Inc., 8.375%, 2021      20,000        21,800   
SunGard Data Systems, Inc., 10.25%, 2015      125,000        129,531   
SunGard Data Systems, Inc., 7.375%, 2018      45,000        48,038   
    

 

 

 
             $ 447,657   
Cable TV - 2.1%                 
Bresnan Broadband Holdings LLC, 8%, 2018 (n)    $ 25,000      $ 25,500   
CCH II LLC, 13.5%, 2016      205,000        231,650   
CCO Holdings LLC, 7.875%, 2018      25,000        27,063   
CCO Holdings LLC, 8.125%, 2020      95,000        106,400   
Cequel Communications Holdings, 8.625%, 2017 (n)      60,000        64,800   
DISH DBS Corp., 6.75%, 2021      60,000        65,700   
Nara Cable Funding Ltd., 8.875%, 2018 (z)      200,000        183,000   
UPC Holding B.V., 9.875%, 2018 (n)      100,000        110,500   
Virgin Media Finance PLC, 9.5%, 2016      42,000        47,040   
Ziggo Bond Co. B.V., 8%, 2018 (n)    EUR  100,000        142,629   
    

 

 

 
             $ 1,004,282   
Chemicals - 1.9%                 
Celanese U.S. Holdings LLC, 6.625%, 2018    $ 65,000      $ 69,875   
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 8.875%, 2018      120,000        125,700   
Hexion U.S. Finance Corp./Hexion Nova Scotia Finance, 9%, 2020      25,000        23,812   
Huntsman International LLC, 8.625%, 2021      80,000        91,300   
INEOS Group Holdings PLC, 8.5%, 2016 (n)      150,000        146,625   
Momentive Performance Materials, Inc., 12.5%, 2014      193,000        204,580   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Chemicals - continued                 
Momentive Performance Materials, Inc., 11.5%, 2016    $ 167,000      $ 138,193   
Polypore International, Inc., 7.5%, 2017      100,000        105,000   
    

 

 

 
             $ 905,085   
Computer Software - 0.9%                 
Lawson Software, Inc., 11.5%, 2018 (n)    $ 220,000      $ 246,400   
Syniverse Holdings, Inc., 9.125%, 2019      125,000        138,594   
TransUnion Holding Co., Inc., 9.625%, 2018 (n)(p)      35,000        37,537   
TransUnion LLC/TransUnion Financing Corp., 11.375%, 2018      15,000        17,812   
    

 

 

 
             $ 440,343   
Computer Software - Systems - 0.8%                 
Audatex North America, Inc., 6.75%, 2018 (z)    $ 40,000      $ 41,900   
CDW LLC/CDW Finance Corp., 12.535%, 2017      55,000        59,950   
CDW LLC/CDW Finance Corp., 8.5%, 2019 (n)      25,000        26,750   
CDW LLC/CDW Finance Corp., 8.5%, 2019      125,000        133,750   
DuPont Fabros Technology, Inc., REIT, 8.5%, 2017      95,000        104,738   
    

 

 

 
             $ 367,088   
Conglomerates - 1.3%                 
Amsted Industries, Inc., 8.125%, 2018 (n)    $ 175,000      $ 188,125   
Dynacast International LLC, 9.25%, 2019 (z)      75,000        78,750   
Griffon Corp., 7.125%, 2018      150,000        156,562   
Tomkins LLC/Tomkins, Inc., 9%, 2018      162,000        180,225   
    

 

 

 
             $ 603,662   
Construction - 0.0%                 
Empresas ICA Sociedad Controladora S.A. de C.V., 8.9%, 2021 (n)    $ 3,000      $ 2,970   
Consumer Products - 0.6%                 
Easton-Bell Sports, Inc., 9.75%, 2016    $ 85,000      $ 94,031   
Elizabeth Arden, Inc., 7.375%, 2021      90,000        98,775   
FGI Operating Co./FGI Finance, Inc., 7.875%, 2020 (z)      5,000        5,150   
Libbey Glass, Inc., 10%, 2015      77,000        82,101   
Prestige Brands, Inc., 8.125%, 2020 (z)      10,000        10,925   
    

 

 

 
             $ 290,982   
Consumer Services - 0.6%                 
Realogy Corp., 11.5%, 2017    $ 100,000      $ 93,500   
Service Corp. International, 7%, 2019      200,000        213,750   
    

 

 

 
             $ 307,250   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Containers - 1.3%                 
Ardagh Packaging Finance PLC, 9.125%, 2020 (z)    $ 200,000      $ 212,500   
Exopack Holding Corp., 10%, 2018      70,000        72,800   
Reynolds Group, 7.125%, 2019 (n)      175,000        182,875   
Reynolds Group, 8.5%, 2021 (n)      115,000        110,975   
Sealed Air Corp., 8.125%, 2019 (n)      15,000        16,762   
Sealed Air Corp., 8.375%, 2021 (n)      15,000        17,025   
    

 

 

 
             $ 612,937   
Defense Electronics - 0.3%                 
Ducommun, Inc., 9.75%, 2018    $ 98,000      $ 103,635   
ManTech International Corp., 7.25%, 2018      20,000        21,350   
    

 

 

 
             $ 124,985   
Electrical Equipment - 0.2%                 
Avaya, Inc., 9.75%, 2015    $ 85,000      $ 84,256   
Electronics - 0.6%                 
Freescale Semiconductor, Inc., 9.25%, 2018 (n)    $ 110,000      $ 120,588   
Freescale Semiconductor, Inc., 8.05%, 2020      55,000        55,412   
Sensata Technologies B.V., 6.5%, 2019 (n)      105,000        109,462   
    

 

 

 
             $ 285,462   
Emerging Market Quasi-Sovereign - 0.8%                 
Banco de la Provincia de Buenos Aires, 11.75%, 2015 (n)    $ 124,000      $ 108,190   
OAO Gazprom, 9.625%, 2013      60,000        63,755   
Petroleos de Venezuela S.A., 5.25%, 2017      250,000        194,063   
    

 

 

 
             $ 366,008   
Emerging Market Sovereign - 0.2%                 
Republic of Venezuela, 7%, 2038    $ 160,000      $ 114,400   
Energy - Independent - 5.1%                 
ATP Oil & Gas Corp., 11.875%, 2015    $ 165,000      $ 127,050   
Bill Barrett Corp., 9.875%, 2016      95,000        105,450   
BreitBurn Energy Partners LP, 8.625%, 2020      50,000        53,250   
BreitBurn Energy Partners LP, 7.875%, 2022 (n)      55,000        55,550   
Carrizo Oil & Gas, Inc., 8.625%, 2018      65,000        68,900   
Chaparral Energy, Inc., 8.875%, 2017      170,000        178,182   
Chaparral Energy, Inc., 7.625%, 2022 (z)      85,000        85,319   
Chesapeake Energy Corp., 6.875%, 2020      60,000        58,500   
Concho Resources, Inc., 8.625%, 2017      25,000        27,375   
Connacher Oil & Gas Ltd., 8.5%, 2019 (n)      45,000        44,775   
Denbury Resources, Inc., 8.25%, 2020      110,000        122,650   

 

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Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Energy - Independent - continued                 
Energy XXI Gulf Coast, Inc., 9.25%, 2017    $ 165,000      $ 181,087   
Everest Acquisition LLC/Everest Acqusition Finance, Inc., 9.375%, 2020 (z)      170,000        181,050   
EXCO Resources, Inc., 7.5%, 2018      150,000        127,875   
Harvest Operations Corp., 6.875%, 2017 (n)      30,000        31,650   
Hilcorp Energy I/Hilcorp Finance Co., 8%, 2020 (n)      40,000        43,700   
Laredo Petroleum, Inc., 9.5%, 2019      65,000        72,637   
Laredo Petroleum, Inc., 7.375%, 2022 (z)      15,000        15,525   
LINN Energy LLC, 8.625%, 2020      20,000        21,850   
LINN Energy LLC, 7.75%, 2021      20,000        21,100   
Newfield Exploration Co., 6.625%, 2016      50,000        51,125   
OGX Petroleo e Gas Participacoes S.A., 8.5%, 2018 (n)      220,000        228,250   
Pioneer Natural Resources Co., 7.5%, 2020      70,000        86,276   
Plains Exploration & Production Co., 8.625%, 2019      70,000        78,750   
QEP Resources, Inc., 6.875%, 2021      80,000        87,800   
SandRidge Energy, Inc., 8%, 2018 (n)      235,000        243,813   
Whiting Petroleum Corp., 6.5%, 2018      20,000        21,300   
    

 

 

 
             $ 2,420,789   
Energy - Integrated - 0.2%                 
Pacific Rubiales Energy Corp., 7.25%, 2021 (n)    $ 100,000      $ 109,000   
Engineering - Construction - 0.2%                 
B-Corp. Merger Sub, Inc., 8.25%, 2019 (n)    $ 85,000      $ 86,700   
Entertainment - 0.9%                 
AMC Entertainment, Inc., 8.75%, 2019    $ 180,000      $ 191,925   
AMC Entertainment, Inc., 9.75%, 2020      105,000        102,375   
Cinemark USA, Inc., 8.625%, 2019      75,000        83,344   
NAI Entertainment Holdings LLC, 8.25%, 2017 (n)      45,000        49,613   
    

 

 

 
             $ 427,257   
Financial Institutions - 3.0%                 
Ally Financial, Inc., 5.5%, 2017    $ 95,000      $ 97,093   
CIT Group, Inc., 6.625%, 2018 (n)      119,000        129,412   
CIT Group, Inc., 5.5%, 2019 (n)      118,000        121,245   
Credit Acceptance Corp., 9.125%, 2017      105,000        114,188   
GMAC, Inc., 8%, 2031      20,000        22,900   
Icahn Enterprises LP, 8%, 2018      96,000        102,600   
International Lease Finance Corp., 8.75%, 2017      85,000        95,412   
International Lease Finance Corp., 7.125%, 2018 (n)      137,000        150,700   
Nationstar Mortgage LLC/Capital Corp., 10.875%, 2015      320,000        342,400   

 

11


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Financial Institutions - continued                 
PHH Corp., 9.25%, 2016    $ 115,000      $ 117,300   
SLM Corp., 8%, 2020      130,000        138,125   
SLM Corp., 7.25%, 2022      15,000        15,150   
    

 

 

 
             $ 1,446,525   
Food & Beverages - 1.3%                 
ARAMARK Corp., 8.5%, 2015    $ 105,000      $ 107,626   
B&G Foods, Inc., 7.625%, 2018      130,000        139,750   
Constellation Brands, Inc., 7.25%, 2016      55,000        62,150   
JBS USA LLC/JBS USA Finance, 8.25%, 2020 (n)      50,000        50,625   
Pinnacle Foods Finance LLC, 9.25%, 2015      130,000        133,250   
Pinnacle Foods Finance LLC, 8.25%, 2017      30,000        32,475   
TreeHouse Foods, Inc., 7.75%, 2018      80,000        86,600   
    

 

 

 
             $ 612,476   
Forest & Paper Products - 1.3%                 
Boise, Inc., 8%, 2020    $ 105,000      $ 115,763   
Cascades, Inc., 7.75%, 2017      70,000        69,300   
Georgia-Pacific Corp., 8%, 2024      50,000        65,217   
Graphic Packaging Holding Co., 7.875%, 2018      65,000        72,150   
Millar Western Forest Products Ltd., 8.5%, 2021      25,000        20,500   
Monaco SpinCo, Inc., 6.75%, 2020 (z)      15,000        15,525   
Smurfit Kappa Group PLC, 7.75%, 2019 (n)    EUR  50,000        70,818   
Tembec Industries, Inc., 11.25%, 2018    $ 75,000        80,250   
Tembec Industries, Inc., 11.25%, 2018 (n)      5,000        5,350   
Xerium Technologies, Inc., 8.875%, 2018      100,000        83,500   
    

 

 

 
             $ 598,373   
Gaming & Lodging - 3.5%                 
Boyd Gaming Corp., 7.125%, 2016    $ 165,000      $ 160,875   
Caesars Operating Escrow LLC, 8.5%, 2020 (n)      25,000        25,750   
Fontainebleau Las Vegas Holdings LLC, 10.25%, 2015 (a)(d)(n)      290,000        181   
GWR Operating Partnership LLP, 10.875%, 2017      85,000        95,625   
Harrah’s Operating Co., Inc., 11.25%, 2017      210,000        232,050   
Harrah’s Operating Co., Inc., 10%, 2018      66,000        48,510   
Harrah’s Operating Co., Inc., 10%, 2018      120,000        90,450   
MGM Mirage, 6.625%, 2015      40,000        41,600   
MGM Mirage, 7.5%, 2016      20,000        20,800   
MGM Resorts International, 11.375%, 2018      235,000        279,944   
MGM Resorts International, 9%, 2020      45,000        50,175   
Penn National Gaming, Inc., 8.75%, 2019      160,000        178,400   
Pinnacle Entertainment, Inc., 8.75%, 2020      75,000        82,687   
Pinnacle Entertainment, Inc., 7.75%, 2022      30,000        31,800   

 

12


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Gaming & Lodging - continued                 
Seven Seas Cruises S. de R.L., 9.125%, 2019 (n)    $ 130,000      $ 132,925   
Wyndham Worldwide Corp., 7.375%, 2020      50,000        59,774   
Wynn Las Vegas LLC, 7.75%, 2020      120,000        132,600   
    

 

 

 
             $ 1,664,146   
Industrial - 0.9%                 
Altra Holdings, Inc., 8.125%, 2016    $ 70,000      $ 75,425   
Hillman Group, Inc., 10.875%, 2018      85,000        89,675   
Hyva Global B.V., 8.625%, 2016 (n)      200,000        168,500   
Mueller Water Products, Inc., 8.75%, 2020      74,000        83,065   
    

 

 

 
             $ 416,665   
Insurance - 0.6%                 
American International Group, Inc., 8.25%, 2018    $ 100,000      $ 121,163   
American International Group, Inc., 8.175% to 2038, FRN to 2068      170,000        181,688   
    

 

 

 
             $ 302,851   
Insurance - Property & Casualty - 1.3%                 
Liberty Mutual Group, Inc., 10.75% to 2038, FRN to 2088 (n)    $ 235,000      $ 319,600   
USI Holdings Corp., 9.75%, 2015 (z)      185,000        187,081   
XL Group PLC, 6.5% to 2017, FRN to 2049      130,000        108,225   
    

 

 

 
             $ 614,906   
International Market Quasi-Sovereign - 0.2%                 
Irish Life & Permanent PLC, 3.6%, 2013 (e)(n)    $ 100,000      $ 95,882   
Machinery & Tools - 1.0%                 
Case Corp., 7.25%, 2016    $ 50,000      $ 55,063   
Case New Holland, Inc., 7.875%, 2017      95,000        110,675   
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017 (z)      50,000        50,750   
RSC Equipment Rental, Inc., 8.25%, 2021      140,000        151,200   
UR Financing Escrow Corp., 5.75%, 2018 (n)      45,000        46,462   
UR Financing Escrow Corp., 7.625%, 2022 (n)      48,000        50,760   
    

 

 

 
             $ 464,910   
Major Banks - 0.8%                 
Bank of America Corp., 5.65%, 2018    $ 50,000      $ 52,881   
RBS Capital Trust II, 6.425% to 2034, FRN to 2049 (a)(d)      95,000        62,700   
Royal Bank of Scotland Group PLC, 6.99% to 2017, FRN to 2049 (a)(d)(n)      100,000        79,000   
Royal Bank of Scotland Group PLC, 7.648% to 2031, FRN to 2049      210,000        172,463   
    

 

 

 
             $ 367,044   

 

13


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Medical & Health Technology & Services - 4.2%                 
Biomet, Inc., 10.375%, 2017 (p)    $ 50,000      $ 54,063   
Biomet, Inc., 11.625%, 2017      135,000        146,475   
Emdeon, Inc., 11%, 2019 (n)      45,000        50,850   
Fresenius Medical Care AG & Co. KGaA, 9%, 2015 (n)      120,000        137,550   
HCA, Inc., 9%, 2014      320,000        352,000   
HCA, Inc., 8.5%, 2019      175,000        196,328   
HCA, Inc., 7.5%, 2022      90,000        96,862   
HealthSouth Corp., 8.125%, 2020      155,000        168,950   
IASIS Healthcare LLC/IASIS Capital Corp., 8.375%, 2019      50,000        49,187   
Physio-Control International, Inc., 9.875%, 2019 (z)      65,000        69,062   
Surgical Care Affiliates, Inc., 10%, 2017 (n)      185,000        186,850   
Teleflex, Inc., 6.875%, 2019      50,000        53,500   
Tenet Healthcare Corp., 9.25%, 2015      65,000        72,638   
Universal Health Services, Inc., 7%, 2018      30,000        32,287   
Universal Hospital Services, Inc., 8.5%, 2015 (p)      105,000        107,559   
Universal Hospital Services, Inc., FRN, 4.12%, 2015      35,000        33,163   
USPI Finance Corp., 9%, 2020 (n)      30,000        31,425   
Vanguard Health Systems, Inc., 0%, 2016      2,000        1,325   
Vanguard Health Systems, Inc., 8%, 2018      65,000        66,219   
WP Rocket Merger Sub, Inc., 10.125%, 2019 (n)      100,000        95,000   
    

 

 

 
             $ 2,001,293   
Metals & Mining - 1.2%                 
Arch Coal, Inc., 7.25%, 2020    $ 45,000      $ 40,275   
Cloud Peak Energy, Inc., 8.25%, 2017      140,000        141,400   
Cloud Peak Energy, Inc., 8.5%, 2019      85,000        86,487   
Consol Energy, Inc., 8%, 2017      75,000        79,125   
Consol Energy, Inc., 8.25%, 2020      50,000        52,500   
Fortescue Metals Group Ltd., 6.875%, 2018 (n)      30,000        30,825   
Fortescue Metals Group Ltd., 8.25%, 2019 (n)      110,000        119,075   
    

 

 

 
             $ 549,687   
Natural Gas - Distribution - 0.2%                 
AmeriGas Finance LLC, 6.75%, 2020    $ 45,000      $ 46,012   
Ferrellgas LP/Ferrellgas Finance Corp., 6.5%, 2021      60,000        54,750   
    

 

 

 
             $ 100,762   
Natural Gas - Pipeline - 1.6%                 
Atlas Pipeline Partners LP, 8.75%, 2018    $ 160,000      $ 172,400   
Crosstex Energy, Inc., 8.875%, 2018      110,000        117,975   
El Paso Corp., 7%, 2017      105,000        118,090   
El Paso Corp., 7.75%, 2032      105,000        119,972   
Energy Transfer Equity LP, 7.5%, 2020      135,000        149,512   

 

14


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Natural Gas - Pipeline - continued                 
Enterprise Products Partners LP, 7.034% to 2018, FRN to 2068    $ 40,000      $ 42,900   
Rockies Express Pipeline LLC, 5.625%, 2020 (n)      51,000        45,900   
    

 

 

 
             $ 766,749   
Network & Telecom - 1.6%                 
Cincinnati Bell, Inc., 8.25%, 2017    $ 30,000      $ 31,050   
Cincinnati Bell, Inc., 8.75%, 2018      100,000        93,750   
Citizens Communications Co., 9%, 2031      65,000        61,913   
Eileme 2 AB, 11.625%, 2020 (n)      200,000        206,000   
Frontier Communications Corp., 8.125%, 2018      70,000        73,500   
Qwest Communications International, Inc., 7.125%, 2018 (n)      105,000        112,088   
Windstream Corp., 8.125%, 2018      20,000        21,500   
Windstream Corp., 7.75%, 2020      105,000        112,350   
Windstream Corp., 7.75%, 2021      40,000        42,900   
    

 

 

 
             $ 755,051   
Oil Services - 1.3%                 
Afren PLC, 11.5%, 2016 (n)    $ 200,000      $ 216,776   
Chesapeake Energy Corp., 6.625%, 2019 (n)      35,000        32,900   
Dresser-Rand Group, Inc., 6.5%, 2021      45,000        47,025   
Edgen Murray Corp., 12.25%, 2015      150,000        159,750   
Pioneer Drilling Co., 9.875%, 2018      135,000        142,425   
Pioneer Drilling Co., 9.875%, 2018 (n)      10,000        10,550   
    

 

 

 
             $ 609,426   
Other Banks & Diversified Financials - 1.7%                 
Capital One Financial Corp., 10.25%, 2039    $ 130,000      $ 135,525   
CenterCredit International B.V., 8.625%, 2014      100,000        102,000   
Groupe BPCE S.A., 12.5% to 2019, FRN to 2049 (n)      100,000        104,973   
LBG Capital No. 1 PLC, 7.875%, 2020 (n)      200,000        174,533   
Santander UK PLC, 8.963% to 2030, FRN to 2049      299,000        299,000   
    

 

 

 
             $ 816,031   
Pharmaceuticals - 0.5%                 
Capsugel FinanceCo. SCA, 9.875%, 2019 (n)    EUR  100,000      $ 145,607   
Valeant Pharmaceuticals International, Inc., 6.5%, 2016 (n)    $ 35,000        36,269   
Valeant Pharmaceuticals International, Inc., 7%, 2020 (n)      75,000        76,031   
    

 

 

 
             $ 257,907   
Pollution Control - 0.1%                 
Heckmann Corp., 9.875%, 2018 (z)    $ 60,000      $ 59,400   

 

15


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Printing & Publishing - 0.4%                 
American Media, Inc., 13.5%, 2018 (z)    $ 23,764      $ 19,962   
Morris Publishing Group LLC, 10%, 2014      49,551        46,454   
Nielsen Finance LLC, 11.5%, 2016      62,000        71,610   
Nielsen Finance LLC, 7.75%, 2018      45,000        49,725   
    

 

 

 
             $ 187,751   
Real Estate - 0.5%                 
CB Richard Ellis Group, Inc., 11.625%, 2017    $ 120,000      $ 136,500   
CNL Lifestyle Properties, Inc., REIT, 7.25%, 2019      50,000        45,625   
Kennedy Wilson, Inc., 8.75%, 2019      45,000        46,912   
    

 

 

 
             $ 229,037   
Retailers - 2.0%                 
Academy Ltd., 9.25%, 2019 (n)    $ 70,000      $ 74,725   
Burlington Coat Factory Warehouse Corp., 10%, 2019      100,000        107,000   
J. Crew Group, Inc., 8.125%, 2019      85,000        87,975   
Limited Brands, Inc., 6.9%, 2017      75,000        83,906   
Limited Brands, Inc., 6.95%, 2033      40,000        38,800   
Neiman Marcus Group, Inc., 10.375%, 2015      160,000        167,602   
QVC, Inc., 7.375%, 2020 (n)      50,000        54,750   
Sally Beauty Holdings, Inc., 6.875%, 2019 (n)      45,000        47,925   
Toys “R” Us Property Co. II LLC, 8.5%, 2017      60,000        62,400   
Toys “R” Us, Inc., 10.75%, 2017      140,000        154,000   
Yankee Acquisition Corp., 8.5%, 2015      2,000        2,050   
YCC Holdings LLC/Yankee Finance, Inc., 10.25%, 2016 (p)      50,000        51,125   
    

 

 

 
             $ 932,258   
Specialty Chemicals - 0.1%                 
Koppers, Inc., 7.875%, 2019    $ 40,000      $ 43,000   
Specialty Stores - 0.4%                 
Michaels Stores, Inc., 11.375%, 2016    $ 125,000      $ 132,814   
Michaels Stores, Inc., 7.75%, 2018      75,000        78,937   
    

 

 

 
             $ 211,751   
Telecommunications - Wireless - 3.3%                 
Clearwire Corp., 12%, 2015 (n)    $ 200,000      $ 184,500   
Cricket Communications, Inc., 7.75%, 2016      95,000        99,988   
Cricket Communications, Inc., 7.75%, 2020      125,000        117,188   
Crown Castle International Corp., 9%, 2015      80,000        88,400   
Crown Castle International Corp., 7.125%, 2019      50,000        54,750   
Digicel Group Ltd., 10.5%, 2018 (n)      265,000        290,493   
MetroPCS Wireless, Inc., 7.875%, 2018      60,000        61,500   
Sprint Capital Corp., 6.875%, 2028      80,000        59,800   

 

16


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Telecommunications - Wireless - continued                 
Sprint Nextel Corp., 6%, 2016    $ 115,000      $ 104,363   
Sprint Nextel Corp., 8.375%, 2017      140,000        134,750   
Sprint Nextel Corp., 9%, 2018 (n)      25,000        27,531   
Wind Acquisition Finance S.A., 11.75%, 2017 (n)      350,000        343,875   
    

 

 

 
             $ 1,567,138   
Telephone Services - 0.4%                 
Cogent Communications Group, Inc., 8.375%, 2018 (n)    $ 45,000      $ 48,375   
Level 3 Financing, Inc., 9.375%, 2019      90,000        98,100   
Level 3 Financing, Inc., 8.625%, 2020 (n)      45,000        47,137   
    

 

 

 
             $ 193,612   
Transportation - 0.2%                 
Navios South American Logistics, Inc., 9.25%, 2019    $ 112,000      $ 102,480   
Transportation - Services - 2.4%                 
ACL I Corp., 10.625%, 2016 (n)(p)    $ 145,207      $ 140,902   
Atlas Airlines, Inc. Pass-Through Certificates, “B”, 7.68%, 2014      50,879        48,335   
Avis Budget Car Rental LLC, 8.25%, 2019 (n)      20,000        20,950   
Avis Budget Car Rental LLC , 9.75%, 2020      40,000        44,000   
CEVA Group PLC, 8.375%, 2017 (n)      160,000        159,200   
Commercial Barge Line Co., 12.5%, 2017      205,000        230,369   
Hertz Corp., 7.5%, 2018      70,000        75,075   
Navios Maritime Acquisition Corp., 8.625%, 2017      165,000        153,450   
Navios Maritime Holdings, Inc., 8.875%, 2017      70,000        71,925   
Swift Services Holdings, Inc., 10%, 2018      180,000        196,650   
    

 

 

 
             $ 1,140,856   
Utilities - Electric Power - 4.5%                 
AES Corp., 8%, 2017    $ 175,000      $ 199,500   
Atlantic Power Corp., 9%, 2018 (z)      60,000        61,050   
Calpine Corp., 8%, 2016 (n)      125,000        135,625   
Calpine Corp., 7.875%, 2020 (n)      120,000        130,800   
Covanta Holding Corp., 7.25%, 2020      75,000        81,150   
Covanta Holding Corp., 6.375%, 2022      25,000        25,715   
Dolphin Subsidiary ll, Inc., 7.25%, 2021 (n)      80,000        88,800   
Edison Mission Energy, 7%, 2017      155,000        96,875   
EDP Finance B.V., 6%, 2018 (n)      300,000        265,363   
Energy Future Holdings Corp., 10%, 2020      180,000        195,975   
Energy Future Holdings Corp., 10%, 2020      250,000        275,937   
Energy Future Holdings Corp., 11.75%, 2022 (n)      45,000        46,688   
GenOn Energy, Inc., 9.875%, 2020      210,000        197,400   
NGC Corp. Capital Trust, 8.316%, 2027 (a)      275,000        68,750   

 

17


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Bonds - continued                 
Utilities - Electric Power - continued                 
NRG Energy, Inc., 8.25%, 2020    $ 195,000      $ 195,487   
Texas Competitive Electric Holdings Co. LLC, 11.5%, 2020 (n)      125,000        77,500   
    

 

 

 
             $ 2,142,615   
Total Bonds (Identified Cost, $34,950,400)            $ 34,353,977   
Convertible Bonds - 0.2%                 
Network & Telecom - 0.2%                 
Nortel Networks Corp., 2.125%, 2014 (Identified Cost, $103,631) (a)(d)    $ 105,000      $ 104,738   
Floating Rate Loans (g)(r) - 0.2%                 
Aerospace - 0.1%                 
Hawker Beechcraft Acquisition Co. LLC, Term Loan, 10.5%, 2014 (a)(d)    $ 64,362      $ 41,513   
Utilities - Electric Power - 0.1%                 
Dynegy Midwest Generation LLC, Term Loan, 9.25%, 2017    $ 13,338      $ 13,638   
Dynegy Power LLC, Term Loan, 9.25%, 2017      20,006        20,915   
    

 

 

 
             $ 34,553   
Total Floating Rate Loans (Identified Cost, $95,076)            $ 76,066   
Common Stocks - 23.5%                 
Aerospace - 1.7%                 
Lockheed Martin Corp.      4,540      $ 411,052   
United Technologies Corp.      5,200        424,528   
    

 

 

 
             $ 835,580   
Alcoholic Beverages - 0.6%                 
Diageo PLC, ADR      2,940      $ 297,293   
Automotive - 0.0%                 
Accuride Corp. (a)      2,414      $ 17,501   
Broadcasting - 1.0%                 
New Young Broadcasting Holding Co., Inc. (a)      18      $ 52,200   
Viacom, Inc., “B”      8,900        412,871   
    

 

 

 
             $ 465,071   
Brokerage & Asset Managers - 0.7%                 
Blackrock, Inc.      1,723      $ 330,092   

 

18


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Common Stocks - continued                 
Business Services - 0.8%                 
Accenture PLC, “A”      5,710      $ 370,865   
Chemicals - 1.6%                 
3M Co.      4,890      $ 436,970   
PPG Industries, Inc.      3,120        328,349   
    

 

 

 
             $ 765,319   
Computer Software - 0.7%                 
Oracle Corp.      11,590      $ 340,630   
Computer Software - Systems - 1.0%                 
International Business Machines Corp.      2,250      $ 465,930   
Electrical Equipment - 1.8%                 
Danaher Corp.      7,130      $ 386,589   
Tyco International Ltd.      8,060        452,408   
    

 

 

 
             $ 838,997   
Energy - Independent - 0.8%                 
Occidental Petroleum Corp.      4,280      $ 390,422   
Energy - Integrated - 0.7%                 
Exxon Mobil Corp.      3,890      $ 335,863   
Food & Beverages - 0.9%                 
General Mills, Inc.      11,300      $ 439,457   
General Merchandise - 0.8%                 
Target Corp.      6,760      $ 391,674   
Insurance - 1.4%                 
MetLife, Inc.      8,130      $ 292,924   
Travelers Cos., Inc.      5,900        379,488   
    

 

 

 
             $ 672,412   
Major Banks - 2.5%                 
Bank of New York Mellon Corp.      12,760      $ 301,774   
Goldman Sachs Group, Inc.      2,600        299,390   
JPMorgan Chase & Co.      13,880        596,562   
    

 

 

 
             $ 1,197,726   
Medical Equipment - 0.5%                 
St. Jude Medical, Inc.      5,630      $ 217,994   

 

19


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Issuer    Shares/Par     Value ($)  
    
Common Stocks - continued                 
Other Banks & Diversified Financials - 0.5%                 
Western Union Co.      14,330      $ 263,385   
Pharmaceuticals - 2.2%                 
Abbott Laboratories      5,400      $ 335,124   
Johnson & Johnson      4,590        298,763   
Pfizer, Inc.      18,160        416,409   
    

 

 

 
             $ 1,050,296   
Printing & Publishing - 0.1%                 
American Media Operations, Inc. (a)      6,090      $ 33,800   
Special Products & Services - 0.1%                 
Mark IV Industries LLC, Common Units, “A” (a)      687      $ 24,045   
Telecommunications - Wireless - 0.6%                 
Vodafone Group PLC, ADR      9,660      $ 268,838   
Telephone Services - 0.7%                 
AT&T, Inc.      10,620      $ 349,504   
Tobacco - 1.2%                 
Philip Morris International, Inc.      6,220      $ 556,752   
Utilities - Electric Power - 0.6%                 
PG&E Corp.      5,990      $ 264,638   
Total Common Stocks (Identified Cost, $10,488,196)            $ 11,184,084   
Convertible Preferred Stocks - 0.1%                 
Automotive - 0.1%                 
General Motors Co., 4.75% (Identified Cost, $84,500)      1,690      $ 65,978   
Preferred Stocks - 0.6%                 
Other Banks & Diversified Financials - 0.6%                 
Ally Financial, Inc., 7% (z)      60      $ 50,925   
Ally Financial, Inc., “A”, 8.5%      6,928        155,187   
GMAC Capital Trust I, 8.125%      3,325        79,634   
Total Preferred Stocks (Identified Cost, $316,113)            $ 285,746   

 

20


Table of Contents

Portfolio of Investments (unaudited) – continued

 

 

Warrants - 0.1%                                
Issuer   Strike Price     First Exercise     Shares/Par     Value ($)  
Broadcasting - 0.1%                                
New Young Broadcasting Holding Co., Inc. (1 share for 1 warrant) (a)
(Identified Cost, $30,741)
  $ 0.01        12/24/24        15      $ 43,500   
Money Market Funds - 1.4%                                
MFS Institutional Money Market Portfolio, 0.12%, at Cost and Net Asset Value (v)                     641,097      $ 641,097   
Total Investments (Identified Cost, $46,709,754)                      $ 46,755,186   
Other Assets, Less Liabilities - 1.7%                        830,750   
Net Assets - 100.0%                           $ 47,585,936   

 

(a) Non-income producing security.
(c) The rate shown represents a current effective yield, not a coupon rate.
(d) In default. Interest and/or scheduled principal payment(s) have been missed.
(e) Guaranteed by Minister for Finance of Ireland.
(g) The rate shown represents a weighted average coupon rate on settled positions at period end, unless otherwise indicated.
(i) Interest only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate value of these securities was $9,580,421, representing 20.1% of net assets.
(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.
(v) Underlying affiliated fund that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities:

 

Restricted Securities   

Acquisition

Date

   Cost      Value  
Ally Financial, Inc., 7%    4/13/11-4/14/11      $56,250         $50,925   
American Media, Inc., 13.5%, 2018    12/22/10      24,100         19,962   
Ardagh Packaging Finance PLC, 9.125%, 2020    1/20/12      196,325         212,500   
Atlantic Power Corp., 9%, 2018    10/26/11-3/02/12      59,601         61,050   
Audatex North America, Inc., 6.75%, 2018    4/10/12      41,081         41,900   

 

21


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Restricted Securities - continued   

Acquisition

Date

   Cost      Value  
Banc of America Commercial Mortgage, Inc., FRN, 6.437%, 2051    6/19/08      $240,701         $69,080   
Chaparral Energy, Inc., 7.625%, 2022    4/18/12-4/19/12      85,338         85,319   
Dynacast International LLC, 9.25%, 2019    7/12/11-7/15/11      75,836         78,750   
Everest Acquisition LLC/Everest Acqusition Finance, Inc., 9.375%, 2020    4/10/12      170,000         181,050   
FGI Operating Co./FGI Finance, Inc.,
7.875%, 2020
   4/12/12      5,000         5,150   
Falcon Franchise Loan LLC, FRN, 5.241%, 2025    1/29/03      11,303         19,645   
HD Supply, Inc., 8.125%, 2019    4/05/12      30,000         32,212   
Heckler & Koch GmbH, 9.5%, 2018    5/06/11      141,925         86,041   
Heckmann Corp., 9.875%, 2018    4/04/12      59,668         59,400   
IDQ Holdings, Inc., 11.5%, 2017    3/20/12      34,310         36,750   
LBI Media, Inc., 8.5%, 2017    7/18/07      89,067         22,725   
Laredo Petroleum, Inc., 7.375%, 2022    4/24/12      15,000         15,525   
Levi Strauss & Co., 6.875%, 2022    4/24/12      15,000         15,337   
Local TV Finance LLC, 9.25%, 2015    11/14/07-2/16/11      184,902         193,153   
Monaco SpinCo, Inc., 6.75%, 2020    4/20/12      15,000         15,525   
Morgan Stanley Capital I, Inc., FRN, 1.34%, 2039    7/20/04      6,545         6,876   
NESCO LLC/NESCO Holdings Corp., 11.75%, 2017    4/05/12      49,090         50,750   
Nara Cable Funding Ltd., 8.875%, 2018    1/26/12      194,028         183,000   
Physio-Control International, Inc., 9.875%, 2019    1/13/12-1/30/12      66,098         69,062   
Preferred Term Securities XII Ltd., CDO, 0%, 2033    1/07/05      127,734         68   
Preferred Term Securities XVI Ltd., CDO, 0%, 2035    12/08/04      187,576         30   
Preferred Term Securities XVII Ltd., CDO, 0%, 2035    3/09/05      114,513         19   
Prestige Brands, Inc., 8.125%, 2020    1/24/12      10,000         10,925   
Townsquare Radio LLC, 9%, 2019    3/30/12      39,603         41,200   
USG Corp., 7.875%, 2020    3/29/12-4/02/12      44,934         46,237   
USI Holdings Corp., 9.75%, 2015    4/26/07-6/8/07      186,116         187,081   
Total Restricted Securities            $1,897,247   
% of Net assets            4.0%   

The following abbreviations are used in this report and are defined:

 

ADR   American Depositary Receipt
CDO   Collateralized Debt Obligation
FRN   Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
PLC   Public Limited Company
REIT   Real Estate Investment Trust

Abbreviations 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

 

22


Table of Contents

Portfolio of Investments (unaudited) – continued

 

Derivative Contracts at 4/30/12

Forward Foreign Currency Exchange Contracts at 4/30/12

 

Type   Currency   Counterparty   Contracts
to
Deliver/
Receive
    Settlement
Date Range
  In
Exchange
for
    Contracts
at Value
    Net
Unrealized
Appreciation
(Depreciation)
 
Liability Derivatives  
SELL   EUR   JPMorgan Chase Bank N.A.     348,481      7/13/12   $ 455,632      $ 461,455      $ (5,823
             

 

 

 

At April 30, 2012, the trust had sufficient cash and/or securities to cover any commitments under these derivative contracts.

See Notes to Financial Statements

 

23


Table of Contents

Financial Statements

 

STATEMENT OF ASSETS AND LIABILITIES

At 4/30/12 (unaudited)

This statement represents your fund’s balance sheet, which details the assets and liabilities comprising the total value of the fund.

 

Assets         

Investments-

  

Non-affiliated issuers, at value (identified cost, $46,068,657)

     $46,114,089   

Underlying affiliated funds, at cost and value

     641,097   

Total investments, at value (identified cost, $46,709,754)

     $46,755,186   

Cash

     266   

Receivables for

  

Investments sold

     270,919   

Interest and dividends

     812,706   

Other assets

     16,382   

Total assets

     $47,855,459   
Liabilities         

Payables for

  

Forward foreign currency exchange contracts

     $5,823   

Investments purchased

     140,911   

Payable to affiliates

  

Investment adviser

     4,871   

Transfer agent and dividend disbursing costs

     1,561   

Payable for independent Trustees’ compensation

     69,100   

Accrued expenses and other liabilities

     47,257   

Total liabilities

     $269,523   

Net assets

     $47,585,936   
Net assets consist of         

Paid-in capital

     $63,698,824   

Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies

     39,714   

Accumulated net realized gain (loss) on investments and foreign
currency transactions

     (15,071,048

Accumulated distributions in excess of net investment income

     (1,081,554

Net assets

     $47,585,936   

Shares of beneficial interest outstanding

     6,925,328   

Net asset value per share (net assets of
$47,585,936 / 6,925,328 shares of beneficial interest outstanding)

     $6.87   

See Notes to Financial Statements

 

24


Table of Contents

Financial Statements

 

STATEMENT OF OPERATIONS

Six months ended 4/30/12 (unaudited)

This statement describes how much your fund earned in investment income and accrued in expenses.

It also describes any gains and/or losses generated by fund operations.

 

Net investment income         

Income

        

Interest

     $1,545,084   

Dividends

     168,860   

Dividends from underlying affiliated funds

     470   

Foreign taxes withheld

     (302

Total investment income

     $1,714,112   

Expenses

  

Management fee

     $218,446   

Transfer agent and dividend disbursing costs

     9,690   

Administrative services fee

     8,710   

Independent Trustees’ compensation

     10,750   

Stock exchange fee

     11,831   

Custodian fee

     9,764   

Shareholder communications

     32,545   

Audit and tax fees

     31,604   

Legal fees

     959   

Miscellaneous

     9,526   

Total expenses

     $343,825   

Fees paid indirectly

     (15

Reduction of expenses by investment adviser

     (10,310

Net expenses

     $333,500   

Net investment income

     $1,380,612   
Realized and unrealized gain (loss) on investments
and foreign currency transactions
        

Realized gain (loss) (identified cost basis)

  

Investment transactions

     $344,674   

Foreign currency transactions

     11,334   

Net realized gain (loss) on investments and foreign currency transactions

     $356,008   

Change in unrealized appreciation (depreciation)

  

Investments

     $1,552,275   

Translation of assets and liabilities in foreign currencies

     4,829   

Net unrealized gain (loss) on investments and foreign currency translation

     $1,557,104   

Net realized and unrealized gain (loss) on investments and foreign currency

     $1,913,112   

Change in net assets from operations

     $3,293,724   

See Notes to Financial Statements

 

25


Table of Contents

Financial Statements

 

STATEMENTS OF CHANGES IN NET ASSETS

These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any shareholder transactions.

 

Change in net assets   Six months ended
4/30/12
(unaudited)
    

Year ended
10/31/11

 
From operations                 

Net investment income

    $1,380,612         $2,776,798   

Net realized gain (loss) on investments and foreign currency transactions

    356,008         236,255   

Net unrealized gain (loss) on investments and foreign currency translation

    1,557,104         (1,516,778

Change in net assets from operations

    $3,293,724         $1,496,275   
Distributions declared to shareholders                 

From net investment income

    $(1,380,612      $(2,856,130

From tax return of capital

            (2,097,352

From other sources

    (929,136        

Total distributions declared to shareholders

    $(2,309,748      $(4,953,482

Change in net assets from fund share transactions

    $164,413         $433,705   

Total change in net assets

    $1,148,389         $(3,023,502
Net assets                 

At beginning of period

    46,437,547         49,461,049   

At end of period (including accumulated distributions in
excess of net investment income of $1,081,554 and
$152,418, respectively)

    $47,585,936         $46,437,547   

See Notes to Financial Statements

 

26


Table of Contents

Financial Statements

 

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the fund’s financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.

 

    Six months
ended
4/30/12
    Years ended 10/31  
      2011     2010     2009     2008     2007  
    (unaudited)                                

Net asset value, beginning of period

    $6.73        $7.23        $6.71        $5.36        $9.08        $9.52   
Income (loss) from investment operations                   

Net investment income (d)

    $0.20        $0.40        $0.44        $0.56        $0.61        $0.55   

Net realized and unrealized gain (loss) on investments and foreign currency

    0.27        (0.18     0.77        1.32        (3.52     (0.02

Total from investment operations

    $0.47        $0.22        $1.21        $1.88        $(2.91     $0.53   
Less distributions declared to shareholders                                   

From net investment income

    $(0.20     $(0.42     $(0.51     $(0.54     $(0.60     $(0.89

From net realized gain on investments

                                       (0.08

From tax return of capital

           (0.30     (0.18            (0.21       

From other sources

    (0.13                                   

Total distributions declared to shareholders

    $(0.33     $(0.72     $(0.69     $(0.54     $(0.81     $(0.97

Net increase from repurchase of capital shares

    $—        $—        $—        $0.01        $—        $—   

Net asset value, end of period (x)

    $6.87        $6.73        $7.23        $6.71        $5.36        $9.08   

Market value, end of period

    $7.08        $6.86        $7.95        $6.23        $4.75        $8.44   

Total return at market value (%)

    8.43 (n)      (4.67     40.46        46.76        (36.80     (14.74

Total return at net asset
value (%) (j)(r)(s)(x)

    7.24 (n)      2.81        18.63        40.08        (33.71     5.11   
Ratios (%) (to average net assets)
and Supplemental data:
                                               

Expenses before expense reductions (f)

    1.48 (a)      1.42        1.53        1.64        1.47        1.27   

Expenses after expense reductions (f)

    1.44 (a)      1.39        1.47        1.64        1.47        1.27   

Net investment income

    5.96 (a)      5.65        6.36        10.17        7.85        5.70   

Portfolio turnover

    33        53        55        78        91        76   

Net assets at end of period (000 omitted)

    $47,586        $46,438        $49,461        $45,646        $36,948        $62,558   

 

27


Table of Contents

Financial Highlights – continued

 

 

(a) Annualized.
(d) Per share data is based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly, if applicable.
(j) Total return at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than the total return at market value.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(x) The net asset values per share and total returns have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.

See Notes to Financial Statements

 

28


Table of Contents

NOTES TO FINANCIAL STATEMENTS

(unaudited)

 

(1)   Business and Organization

MFS Special Value Trust (the fund) 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. In the preparation of these financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued. The fund invests 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 fund invests in foreign securities. Investments in foreign securities are vulnerable to the effects of changes in the relative values of the local currency and the U.S. dollar and to the effects of changes in each country’s legal, political, and economic environment.

In December 2011, the Financial Accounting Standards Board issued Accounting Standards Update 2011-11, Balance Sheet (Topic 210) – Disclosures about Offsetting Assets and Liabilities (“ASU 2011-11”). Effective for annual reporting periods beginning on or after January 1, 2013 and interim periods within those annual periods, ASU 2011-11 is intended to enhance disclosure requirements on the offsetting of financial assets and liabilities. Although still evaluating the potential impacts of ASU 2011-11 to the fund, management expects that the impact of the fund’s adoption will be limited to additional financial statement disclosures.

Investment Valuations – Equity securities, including restricted equity securities, are generally valued at the last sale or official closing price as provided by a third-party pricing service on the market or exchange on which they are primarily traded. Equity securities, for which there were no sales reported that day, are generally valued at the last quoted daily bid quotation as provided by a third-party pricing service on the market or exchange on which such securities are primarily traded. Debt instruments and floating rate loans (other than short-term instruments), including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party

 

29


Table of Contents

Notes to Financial Statements (unaudited) – continued

 

pricing service. Short-term instruments with a maturity at issuance of 60 days or less generally are valued at amortized cost, which approximates market value. Forward foreign currency exchange contracts are generally valued at the mean of bid and asked prices for the time period interpolated from rates provided by a third-party pricing service for proximate time periods. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. Values obtained from third-party pricing services can utilize both transaction data and market information such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, and other market data. The values of foreign securities and other assets and liabilities expressed in foreign currencies are converted to U.S. dollars using the mean of bid and asked prices for rates provided by a third-party 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 most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from third-party pricing services. In addition, investments may be valued at fair value if the adviser determines that an investment’s value has been materially affected by events occurring after the close of the exchange or market on which the investment is principally traded (such as foreign exchange or market) and prior to the determination of the 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 effect on the value of securities traded in foreign markets. Accordingly, the fund’s foreign equity securities may often be valued at fair value. The adviser generally relies on third-party 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

 

30


Table of Contents

Notes to Financial Statements (unaudited) – continued

 

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 an investment used to determine the fund’s net asset value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines its net asset value per share.

Various inputs are used in determining the value of the fund’s assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser’s own assumptions in determining the fair value of investments. Other financial instruments are derivative instruments not reflected in total investments, such as forward foreign currency exchange contracts. The following is a summary of the levels used as of April 30, 2012 in valuing the fund’s assets or liabilities:

 

Investments at Value    Level 1      Level 2      Level 3      Total  
Equity Securities            

United States

     $10,808,707         $170,670         $33,800         $11,013,177   

United Kingdom

     566,131                         566,131   
Non-U.S. Sovereign Debt              576,290                 576,290   
Corporate Bonds              27,328,500                 27,328,500   
Commercial Mortgage-Backed Securities              379,969                 379,969   
Asset-Backed Securities
(including CDOs)
             117                 117   
Foreign Bonds              6,173,839                 6,173,839   
Floating Rate Loans              76,066                 76,066   
Mutual Funds      641,097                         641,097   
Total Investments      $12,015,935         $34,705,451         $33,800         $46,755,186   
Other Financial Instruments                            
Forward Foreign Currency Exchange Contracts      $—         $(5,823      $—         $(5,823

For further information regarding security characteristics, see the Portfolio of Investments.

 

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Notes to Financial Statements (unaudited) – continued

 

The following is a reconciliation of level 3 assets for which significant unobservable inputs were used to determine fair value. The fund’s policy is to recognize transfers between the levels as of the end of the period. The table presents the activity of level 3 securities held at the beginning and the end of the period.

 

     Equity
Securities
 
Balance as of 10/31/11      $79,962   

Change in unrealized appreciation (depreciation)

     (46,162

Realized gain (loss)

     0   

Disposition of worthless securities

     0   
Balance as of 4/30/12      $33,800   

The net change in unrealized appreciation (depreciation) from investments still held as level 3 at April 30, 2012 is $(46,162).

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 or on the reporting date for foreign denominated receivables and payables. 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 receivables, payables, 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.

Derivatives – The fund uses derivatives for different purposes, primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from derivative instruments may be substantially greater than the derivative’s original cost.

The derivative instruments used by the fund were forward foreign currency exchange contracts. The fund’s period end derivatives, as presented in the Portfolio of Investments and the associated Derivative Contract Tables, generally are indicative of the volume of its derivative activity during the period.

 

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Notes to Financial Statements (unaudited) – continued

 

The following table presents, by major type of derivative contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at April 30, 2012 as reported in the Statement of Assets and Liabilities:

 

        Fair Value  
Risk   Derivative Contracts   Liability Derivatives  

Foreign Exchange

  Forward Foreign Currency Exchange     $(5,823)   

The following table presents, by major type of derivative contract, the realized gain (loss) on derivatives held by the fund for the six months ended April 30, 2012 as reported in the Statement of Operations:

 

Risk    Foreign
Currency
Transactions
 
Foreign Exchange      $12,162   

The following table presents, by major type of derivative contract, the change in unrealized appreciation (depreciation) on derivatives held by the fund for the six months ended April 30, 2012 as reported in the Statement of Operations:

 

Risk    Translation
of Assets
and
Liabilities in
Foreign
Currencies
 
Foreign Exchange      $4,453   

Derivative counterparty credit risk is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain over-the-counter derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an International Swaps and Derivatives Association (ISDA) Master Agreement on a bilateral basis with each of the counterparties with whom it undertakes a significant volume of transactions. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a certain deterioration in the credit quality of the other party. The ISDA Master Agreement gives the fund the right, upon an event of default by the applicable counterparty or a termination of the agreement, to close out all transactions traded under such agreement and to net amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund’s credit risk to such counterparty equal to any amounts payable by the fund under the applicable transactions, if any. However, absent an event of default by the counterparty or a termination of the agreement, the ISDA Master Agreement does not result in an offset of reported amounts of assets and liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty.

 

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Notes to Financial Statements (unaudited) – continued

 

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearing house for exchange traded derivatives (i.e., futures and exchange-traded options) while collateral terms are contract specific for over-the-counter traded derivatives (i.e., forward foreign currency exchange contracts, swaps and over-the-counter options). For derivatives traded under an ISDA Master Agreement, the collateral requirements are netted across all transactions traded under such agreement and one amount is posted from one party to the other to collateralize such obligations. Cash collateral that has been pledged to cover obligations of the fund under derivative contracts, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities collateral pledged for the same purpose, if any, is noted in the Portfolio of Investments.

Forward Foreign Currency Exchange Contracts – The fund entered into forward foreign currency exchange contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. These contracts may be used to hedge the fund’s currency risk or for non-hedging purposes. For hedging purposes, the fund may enter into contracts to deliver or receive foreign currency that the fund will receive from or use in its normal investment activities. The fund may also use contracts to hedge against declines in the value of foreign currency denominated securities due to unfavorable exchange rate movements. For non-hedging purposes, the fund may enter into contracts with the intent of changing the relative exposure of the fund’s portfolio of securities to different currencies to take advantage of anticipated exchange rate changes.

Forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any unrealized gains or losses are recorded as a receivable or payable for forward foreign currency exchange contracts until the contract settlement date. On contract settlement date, any gain or loss on the contract is recorded as realized gains or losses on foreign currency transactions.

Risks may arise upon entering into these contracts from unanticipated movements in the value of the contract and from the potential inability of counterparties to meet the terms of their contracts. Generally, the fund’s maximum risk due to counterparty credit risk is the unrealized gain on the contract due to the use of Continuous Linked Settlement, an industry accepted settlement system. This risk is mitigated in cases where there is an ISDA Master Agreement between the fund and the counterparty providing for netting as described above and for posting of collateral by the counterparty to the fund to cover the fund’s exposure to the counterparty under such ISDA Master Agreement.

 

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Notes to Financial Statements (unaudited) – continued

 

Loans and Other Direct Debt Instruments – The fund invests in loans and loan participations or other receivables. These investments may include standby financing commitments, including revolving credit facilities, which obligate the fund to supply additional cash to the borrower on demand. Loan participations involve a risk of insolvency of the lending bank or other financial intermediary.

Indemnifications – Under the fund’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the fund. Additionally, in the normal course of business, the fund enters into agreements with service providers that may contain indemnification clauses. The fund’s maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund that have not yet occurred.

Investment Transactions and Income – Investment transactions are recorded on the trade date. Interest income is recorded on the accrual basis. All premium and discount is amortized or accreted for financial statement purposes in accordance with U.S. generally accepted accounting principles. The fund earns certain fees in connection with its floating rate loan purchasing activities. These fees are in addition to interest payments earned and may include amendment fees, commitment fees, facility fees, consent fees, and prepayment fees. Commitment fees are recorded on an accrual basis as income in the accompanying financial statements. Dividends received in cash are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded when the fund 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. Debt obligations may be placed on non-accrual status or set to accrue at a rate of interest less than the contractual coupon when the collection of all or a portion of interest has become doubtful. Interest income for those debt obligations may be further reduced by the write-off of the related interest receivables when deemed uncollectible.

The fund may receive proceeds from litigation settlements. Any proceeds received from litigation involving portfolio holdings are reflected in the Statement of Operations in realized gain/loss if the security has been disposed of by the fund or in unrealized gain/loss if the security is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.

Fees Paid Indirectly – The fund’s custody fee may be reduced according to an arrangement that measures the value of cash deposited with the custodian by the fund. This amount, for the six months ended April 30, 2012, is shown as a reduction of total expenses on the Statement of Operations.

 

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Notes to Financial Statements (unaudited) – continued

 

Tax Matters and Distributions – The fund intends to qualify as a regulated investment company, as defined under Subchapter M of the Internal Revenue Code, and to distribute all of its taxable income, including realized capital gains. As a result, no provision for federal income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Foreign taxes have been accrued by the fund in the accompanying financial statements.

Distributions to shareholders are recorded on the ex-dividend date. The fund seeks to pay monthly distributions based on an annual rate of 10% of the fund’s average monthly net asset value. As a result, distributions may exceed actual earnings which may result in a tax return of capital or, to the extent the fund has long-term gains, distributions of current year long-term gains may be recharacterized as ordinary income. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. generally accepted accounting principles. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset value per share. Temporary differences which arise from recognizing certain items of income, expense, gain or loss in different periods for financial statement and tax purposes will reverse at some time in the future. Distributions from other sources, in excess of net investment income or net realized gains are temporary overdistributions for financial statement purposes resulting from differences in the recognition or classification of income or distributions for financial statement and tax purposes.

Book/tax differences primarily relate to amortization and accretion of debt securities, defaulted bonds, and deferred trustee compensation.

The tax character of distributions made during the current period will be determined at fiscal year end. The tax character of distributions declared to shareholders for the last fiscal year is as follows:

 

     10/31/11  
Ordinary income (including any short-term
capital gains) (a)
     $2,856,130   
Tax return of capital (b)      2,097,352   
Total distributions      $4,953,482   

(a)  Included in the fund’s distributions from ordinary income is $51,250 in excess of investment company taxable income which, in accordance with applicable U.S. tax law, is taxable to shareholders as ordinary income distributions.

        

(b)  Distributions in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital.

      

 

36


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Notes to Financial Statements (unaudited) – continued

 

The federal tax cost and the tax basis components of distributable earnings were as follows:

 

As of 4/30/12       
Cost of investments      $47,630,652   
Gross appreciation      3,008,189   
Gross depreciation      (3,883,655
Net unrealized appreciation (depreciation)      $(875,466
As of 10/31/11       
Capital loss carryforwards      (14,526,958
Other temporary differences      (162,965
Net unrealized appreciation (depreciation)      (2,406,941

The aggregate cost above includes prior fiscal year end tax adjustments, if applicable.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses recognized after October 31, 2011 may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses.

As of October 31, 2011 the fund had capital loss carryforwards available to offset future realized gains. Such losses expire as follows:

 

Pre-enactment losses:   
10/31/16      $(9,725,720
10/31/17      (4,711,246
10/31/18      (89,992
Total      $(14,526,958

 

(3)   Transactions with Affiliates

Investment Adviser – The fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund.

The management fee is computed daily and paid monthly at an annual rate of 0.68% of the fund’s average daily net assets and 3.40% of gross income. Gross income is calculated based on tax elections that generally include the accretion of discount and exclude the amortization of premium, which may differ from investment income reported in the Statement of Operations. MFS has agreed to reduce its management fee to the lesser of the contractual management fee as set forth above or 0.90% of the average daily net assets. This written agreement will continue until modified by the fund’s Board of Trustees, but

 

37


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Notes to Financial Statements (unaudited) – continued

 

such an agreement will continue at least until October 31, 2012. This management fee reduction amounted to $10,229, which is shown as a reduction of total expenses in the Statement of Operations. The management fee, from net assets and gross income, incurred for the six months ended April 30, 2012 was equivalent to an annual effective rate of 0.90% of the fund’s average daily net assets.

Transfer Agent – The fund engages Computershare Trust Company, N.A. (“Computershare”) as the sole transfer agent for the fund. MFS Service Center, Inc. (MFSC) monitors and supervises the activities of Computershare for an agreed upon fee approved by the Board of Trustees. For the six months ended April 30, 2012, these fees paid to MFSC amounted to $2,335.

Administrator – MFS provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund partially reimburses MFS the costs incurred to provide these services. The fund is charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended April 30, 2012 was equivalent to an annual effective rate of 0.0376% of the fund’s average daily net assets.

Trustees’ and Officers’ Compensation – The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration for their services to the fund from MFS. Certain officers and Trustees of the fund are officers or directors of MFS and MFSC.

Prior to December 31, 2001, the fund had an unfunded defined benefit plan (“DB plan”) for independent Trustees. As of December 31, 2001, the Board took action to terminate the DB plan with respect to then-current and any future independent Trustees, such that the DB plan covers only certain of those former independent Trustees who retired on or before December 31, 2001. Effective January 1, 2002, accrued benefits under the DB plan for then-current independent Trustees who continued were credited to an unfunded retirement deferral plan (the “Retirement Deferral plan”), which was established for and exists solely with respect to these credited amounts, and is not available for other deferrals by these or other independent Trustees. Although the Retirement Deferral plan is unfunded, amounts deferred under the plan are periodically adjusted for investment experience as if they had been invested in shares of the fund. The DB plan resulted in a pension expense of $996 and the Retirement Deferral plan resulted in an expense of $4,664. Both amounts are included in independent Trustees’ compensation for the six months ended

 

38


Table of Contents

Notes to Financial Statements (unaudited) – continued

 

April 30, 2012. The liability for deferred retirement benefits payable to certain independent Trustees under both plans amounted to $67,824 at April 30, 2012, and is included in “Payable for independent Trustees’ compensation” on the Statement of Assets and Liabilities.

Other – This fund and certain other funds managed by MFS (the funds) have entered into services agreements (the Agreements) which provide for payment of fees by the funds to Tarantino LLC and Griffin Compliance LLC in return for the provision of services of an Independent Chief Compliance Officer (ICCO) and Assistant ICCO, respectively, for the funds. The ICCO and Assistant ICCO are officers of the funds and the sole members of Tarantino LLC and Griffin Compliance LLC, respectively. The funds can terminate the Agreements with Tarantino LLC and Griffin Compliance LLC at any time under the terms of the Agreements. For the six months ended April 30, 2012, the aggregate fees paid by the fund to Tarantino LLC and Griffin Compliance LLC were $264 and are included in miscellaneous expense on the Statement of Operations. MFS has agreed to reimburse the fund for a portion of the payments made by the fund in the amount of $81, 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 and Assistant ICCO.

The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks a high level of current income consistent with preservation of capital and liquidity. Income earned on this investment is included in dividends from underlying affiliated funds on the Statement of Operations. This money market fund does not pay a management fee to MFS.

 

(4)   Portfolio Securities

Purchases and sales of investments, other than U.S. Government securities, purchased option transactions, and short-term obligations, aggregated $14,866,953 and $16,113,033, respectively.

 

(5)   Shares of Beneficial Interest

The fund’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 fund of up to 10% annually of its own shares of beneficial interest. During the six months ended April 30, 2012 and the year ended October 31, 2011, the fund did not repurchase any shares. Transactions in fund shares were as follows:

 

     Six months ended
4/30/12
     Year ended
10/31/11
 
     Shares      Amount      Shares      Amount  
Shares issued to shareholders in
reinvestment of distributions
     24,198         $164,413         60,068         $433,705   

 

39


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Notes to Financial Statements (unaudited) – continued

 

 

(6)   Line of Credit

The fund and certain other funds managed by MFS participate in a $1.1 billion unsecured committed line of credit, subject to a $1 billion sublimit, 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, generally at a rate equal to the higher of the Federal Reserve funds rate or one month LIBOR plus an agreed upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated among the participating funds at the end of each calendar quarter. In addition, the fund and other funds managed by MFS have established unsecured uncommitted borrowing arrangements with certain banks 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 an agreed upon spread. For the six months ended April 30, 2012, the fund’s commitment fee and interest expense were $146 and $0, respectively, and are included in miscellaneous expense on the Statement of Operations.

 

(7)   Transactions in Underlying Affiliated Funds-Affiliated Issuers

An affiliated issuer may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the fund assumes the following to be an affiliated issuer:

 

Underlying Affiliated Fund    Beginning
Shares/Par
Amount
     Acquisitions
Shares/Par
Amount
     Dispositions
Shares/Par
Amount
     Ending
Shares/Par
Amount
 
MFS Institutional Money
Market Portfolio
     547,157         6,009,607         (5,915,667      641,097   
Underlying Affiliated Fund    Realized
Gain (Loss)
     Capital Gain
Distributions
     Dividend
Income
    

Ending

Value

 
MFS Institutional Money
Market Portfolio
     $—         $—         $470         $641,097   

 

40


Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of MFS Special Value Trust:

We have reviewed the accompanying statement of assets and liabilities of MFS Special Value Trust (the Fund), including the portfolio of investments, as of April 30, 2012, and the related statements of operations, changes in net assets, and financial highlights for the six-month period ended April 30, 2012. These interim financial statements and financial highlights are the responsibility of the Fund’s management.

We conducted our review in accordance with the standards of the Public Company 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 and financial highlights 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, 2011, and financial highlights for each of the five years in the period ended October 31, 2011, and in our report dated December 16, 2011, we expressed an unqualified opinion on such statement of changes in net assets and financial highlights.

 

LOGO

Boston, Massachusetts

June 18, 2012

 

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Table of Contents

BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT

A discussion regarding the Board’s most recent review and renewal of the fund’s Investment Advisory Agreement with MFS is available by clicking on the fund’s name under “Closed End Funds” in the “Products and Performance” section of 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 twelve-month period ended June 30, 2011 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 fund 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. A shareholder can obtain the quarterly portfolio holdings report at mfs.com. The fund’s Form N-Q is also available on the EDGAR database on the Commission’s Internet Web site at http://www.sec.gov, and 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 1-800-SEC-0330. Copies of the fund’s Form N-Q also 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.

FURTHER INFORMATION

From time to time, MFS may post important information about the fund or the MFS funds on the MFS web site (mfs.com). This information is available by visiting the “News & Commentary” section of mfs.com or by clicking on the fund’s name under “Closed End Funds” in the “Products and Performance” section of mfs.com.

 

42


Table of Contents

CONTACT US

Transfer agent, Registrar, and

Dividend Disbursing Agent

Call

1-800-637-2304

9 a.m. to 5 p.m. Eastern time

Write

Computershare Trust Company, N.A.

P.O. Box 43078

Providence, RI 02940-3078

 

New York Stock Exchange Symbol: MFV

 

LOGO


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ITEM 2. CODE OF ETHICS.

During the period covered by this report, the Registrant has not amended any provision in its Code of Ethics (the “Code”) that relates to an element of the Code’s definitions enumerated in paragraph (b) of Item 2 of this Form N-CSR. During the period covered by this report, the Registrant did not grant a waiver, including an implicit waiver, from any provision of the Code.

 

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 manager(s) of the MFS Special Value Trust (the “Fund”) is set forth below. As of January 12, 2012, Brooks A. Taylor was no longer a manager of the fund.

 

Portfolio Manager

  

Primary Role

  

Since

  

Title and Five Year History

William J. Adams    High Yield
Corporate Debt
Securities Portfolio
Manager
   2011    Investment Officer of MFS; employed in the investment area of MFS since 2009, Credit Analyst at MFS from 1997 to 2005.
Nevin P. Chitkara    Equity Securities
Portfolio Manager
   January 2012    Investment Officer of MFS; employed in the investment area of MFS since 1997.
David P. Cole    Debt Portfolio
Manager
   2006    Investment Officer of MFS; employed in the investment area of MFS since 2004.


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Compensation. Portfolio manager compensation is reviewed annually. As of December 31, 2011, portfolio manager total cash compensation is a combination of base salary and performance bonus:

Base Salary – Base salary represents a smaller percentage of portfolio manager total cash compensation than performance bonus.

Performance Bonus – Generally, the performance bonus represents more than a majority of portfolio manager total cash compensation.

The performance bonus is based on a combination of quantitative and qualitative factors, generally with more weight given to the former and less weight given to the latter.

The quantitative portion is based on the pre-tax performance of assets managed by the portfolio manager over one-, three-, and five-year periods relative to peer group universes and/or indices (“benchmarks”). As of December 31, 2011, the following benchmarks were used to measure the portfolio manager’s performance for the Fund and/or comparable accounts:

 

Portfolio Manager

  

Benchmark(s)

William J. Adams   

Barclays Capital U.S. High-Yield Corporate Bond Index JPMorgan Emerging Market Bond Index Global

Russell 1000 Value Index

Nevin P. Chitkara    Russell 1000 Value Index
David P. Cole   

Barclays Capital U.S. High-Yield Corporate Bond Index JPMorgan Emerging Market Bond Index Global

Russell 1000 Value Index

Additional or different benchmarks, including versions of indices and custom indices may also be used. Primary weight is given to portfolio performance over a three-year time


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period with lesser consideration given to portfolio performance over one-year and five-year periods (adjusted as appropriate if the portfolio manager has served for less than five years).

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 investor relations and the investment process (distinct from fund and other account performance).

Portfolio managers also typically benefit from the opportunity to participate in the MFS Equity Plan. Equity interests and/or options to acquire 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 also participate in benefit plans (including a defined contribution plan and health and other insurance plans) and programs available generally to other employees of MFS. The percentage such benefits represent of any portfolio manager’s compensation 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(s) as of the fund’s fiscal year ended October 31, 2011. 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

William J. Adams

   N

Nevin P. Chitkara

   N

David P. Cole

   N


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Other Accounts. In addition to the Fund, the Fund’s portfolio manager is named as a portfolio manager of certain other accounts managed or subadvised by MFS or an affiliate, the number and assets of which, as of fiscal year ended October 31, 2011 were as follows:

 

     Registered Investment
Companies
     Other Pooled Investment
Vehicles
     Other Accounts  

Name

   Number of
Accounts*
   Total Assets*      Number of
Accounts
   Total Assets      Number of
Accounts
   Total Assets  

William J. Adams

   14    $ 4.5 billion       5    $ 1.4 billion       0      N/A   

Nevin P. Chitkara^

   19    $ 42.2 billion       6    $ 2.9 billion       36    $ 10.9 billion   

David P. Cole

   13    $ 4.4 billion       3    $ 818.3 million       0      N/A   

 

* Includes the Fund.
^ As of April 30, 2012.

Advisory fees are not based upon performance of any of the accounts identified in the table above.

Potential Conflicts of Interest.

The Adviser seeks 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.

The management of multiple funds and accounts (including proprietary accounts) gives rise to potential conflicts of interest if the funds and accounts have different objectives and strategies, benchmarks, time horizons and fees as a portfolio manager must allocate his or her time and investment ideas across multiple funds and accounts. In certain instances there are securities which are suitable for the Fund’s portfolio as well as for accounts of the Adviser or its subsidiaries with similar investment objectives. The Fund’s trade allocation policies may give rise to conflicts of interest if the Fund’s orders do not get fully executed or are delayed in getting executed due to being aggregated with those of other accounts of the Adviser or its subsidiaries. A portfolio manager may execute transactions for another fund or account that may adversely affect the value of the Fund’s investments. Investments selected for funds or accounts other than the Fund may outperform investments selected for the Fund.

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 the Adviser 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, the Adviser believes that the Fund’s ability to participate in volume transactions will produce better executions for the Fund.

The Adviser and/or a portfolio manager may have a financial 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 adjustment, and/or include an investment by the portfolio manager.


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ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

MFS Special Value Trust

 

Period

   (a) Total number
of Shares
Purchased
     (b)
Average
Price
Paid per
Share
     (c) Total
Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
     (d) Maximum
Number (or
Approximate
Dollar Value) of
Shares that May
Yet Be Purchased
under the Plans
or Programs
 

11/01/11-11/30/11

     0         N/A         0         685,573   

12/01/11-12/31/11

     0         N/A         0         685,573   

1/01/12-1/31/12

     0         N/A         0         685,573   

2/01/12-2/28/12

     0         N/A         0         685,573   

3/01/12-3/31/12

     0         N/A         0         691,094   

4/01/12-4/30/12

     0         N/A         0         691,094   
  

 

 

       

 

 

    

Total

     0            0      
  

 

 

       

 

 

    

Note: The Board of Trustees approves procedures to repurchase shares annually. The notification to shareholders of the program is part of 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 shares that may be purchased 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 shares available for purchase for the March 1, 2012 plan year is 691,094.

 

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There were no material changes to the procedures by which shareholders may send recommendations to the Board for nominees to the Registrant’s Board since the Registrant last provided disclosure as to such procedures in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K or this Item.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

(a) Based upon their evaluation 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


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  covered by the report that has materially affected, or is 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(a) under the Act (17 CFR 270.30a-2): Attached hereto.

 

  (3) Notices to Trust’s common shareholders in accordance with Investment Company Act Section 19(a) and Rule 19a-1.

 

(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.


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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.


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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)*    JOHN M. CORCORAN
  John M. Corcoran, President

Date: June 18, 2012

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)*    JOHN M. CORCORAN
 

John M. Corcoran, President

(Principal Executive Officer)

Date: June 18, 2012

 

By (Signature and Title)*    DAVID L. DILORENZO
  David L. DiLorenzo, Treasurer (Principal Financial Officer and Accounting Officer)

Date: June 18, 2012

 

* Print name and title of each signing officer under his or her signature.