<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) SPECIAL
VALUE TRUST
ANNUAL REPORT o OCTOBER 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Results of Shareholder Meeting ............................................ 10
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 21
Independent Auditors' Report ............................................. 28
Trustees and Officers ..................................................... 30
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years in the investment management business, we've developed a
number of beliefs about the best ways to invest over a variety of market
conditions. First, we believe in bottom-up research, which means we use a
company-by-company, one-security-at-a-time approach to building a portfolio.
What we look for is the truth about the fundamentals of a company's business
-- things such as the ability of management to execute its business plan, the
ability of that plan to be scaled up as the company grows, actual demand for
the company's products and services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with
the multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of
Original Research(SM) is doing our best to project a company's future earnings
and determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances,
and avoid mistakes. All of these are based on bottom-up research. In both
domestic and international markets, early discovery has historically been a
hallmark of our investment style. Some of the stocks with which MFS has been
most successful are those in which we've taken large positions before the
market discovered or believed in them. Similarly, some of our best fixed-
income investments have been early positions in companies or governments that
our research revealed were potential candidates for credit upgrades.
(A credit upgrade causes the value of a bond to rise because it indicates the
market has increased confidence that principal and interest on the bond will
be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled
but that we believe still have the potential to be market leaders. For
example, a quarterly earnings shortfall of a few cents may cause the market to
temporarily lose confidence in a company. If we believe the business remains
fundamentally strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help
performance. In fixed-income investing this means, among other things, trying
to be better than our peers at avoiding bond issuers that may default. In
equity investing, avoiding mistakes means we strive to know a company and its
industry well enough to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form
of daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without
barriers between equity and fixed-income, international and domestic, or value
and growth investment areas. We believe this allows each of our portfolio
managers -- and thus each of our investors -- to potentially benefit from any
relevant item of Original Research.
John Ballen, our President and Chief Investment Officer, has often said that
the thought he hopes managers will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group
of industries in a specific region of the globe. In pursuing their research,
our analysts and portfolio managers each year will visit more than 2,000
companies throughout the world, meet with representatives from more than 3,000
companies at one of our four worldwide offices, attend roughly 5,000 company
presentations sponsored by major Wall Street firms, and consult with over
1,000 analysts from hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on
a wide range of potential investments for all of our portfolios. In the end,
the goal of Original Research is to try to give our portfolio managers an
advantage over their peers -- to enable our managers to deliver competitive
performance by finding opportunities before they are generally recognized by
the market, and by avoiding mistakes whenever possible. Original Research
does, we believe, make a difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
[Jeffrey L. Shames Signature]
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 2000
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Robert J. Manning]
Robert J. Manning
Dear Shareholders,
For the 12 months ended October 31, 2000, the trust provided a total return of
-4.33% based on its beginning and ending stock market prices and assuming the
reinvestment of any distributions paid during the period. The trust's total
return based on its net asset value (NAV) was -5.09%. During the same period,
the trust's benchmark, the Lehman Brothers High Yield Bond Index, an unmanaged
index of below- investment-grade corporate debt, returned -1.61%.
During the period, the trust maintained its annual distribution rate of 11%,
or $1.65 based on its original New York Stock Exchange offering price of $15
per share. These distributions were paid through income earned from dividends,
bond coupon payments, short- and long-term capital gains, and paid-in capital.
As of October 31, 2000, approximately 44% of the portfolio was invested in
high-yield securities, 42% was invested in common stocks, 5% in emerging
markets debt, 1.5% in "BB"-rated commercial mortgage-backed securities, and
7.5% was held in cash.
Given persistent weakness in the high-yield and equity markets, we maintained
a relatively large cash position in order to take advantage of opportunities
that could quickly emerge in the market. We also tried to use the market's
volatility to selectively add to positions in the high-yield market that we
viewed as attractively valued. Within our holdings in high-yield securities,
we maintained our overweighted exposure to telecommunications, and media
companies.
On the equity side, we continued to concentrate our holdings and research on
what we believe to be potential turnaround situations. In our view, these
holdings have an above-average chance of improving their business operations
and providing significant returns if the market begins to recognize their
improving fundamentals.
Another strategy we employed in an effort to improve performance was to sell
call options against one of our largest equity positions.
The overall strategy for the portfolio continues to be based upon our
extensive bottom-up fundamental research and value-oriented investment style.
While the recent market environment has been difficult, we believe
this approach helps us to find compelling opportunities in both the equity and
high-yield marketplaces over the long run.
Respectfully,
/s/ [Robert J. Manning]
Robert J. Manning
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO MANAGER'S PROFILE
ROBERT J. MANNING IS SENIOR VICE PRESIDENT, CHIEF FIXED INCOME STRATEGIST, AND
DIRECTOR OF FIXED INCOME RESEARCH OF MFS INVESTMENT MANAGEMENT(R). HE IS
PORTFOLIO MANAGER OF THE HIGH-YIELD BOND PORTFOLIOS OF OUR MUTUAL FUNDS AND
MFS(R) SPECIAL VALUE TRUST, A CLOSED-END FUND.
ROB JOINED MFS IN 1984 AS A RESEARCH ANALYST IN THE HIGH YIELD BOND DEPARTMENT.
HE WAS NAMED VICE PRESIDENT IN 1988, PORTFOLIO MANAGER IN 1992, SENIOR VICE
PRESIDENT IN 1993, AND CHIEF FIXED INCOME STRATEGIST AND DIRECTOR OF FIXED
INCOME RESEARCH IN 1999. HE IS A GRADUATE OF THE UNIVERSITY OF LOWELL AND EARNED
A MASTER OF SCIENCE DEGREE IN FINANCE FROM BOSTON COLLEGE.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
<PAGE>
OBJECTIVE: To maintain an annual distribution rate of 11% based on the original
offering price, while also seeking opportunities for capital appreciation.
NEW YORK STOCK EXCHANGE SYMBOL: MFV
PERFORMANCE SUMMARY
(For the year ended October 31, 2000)
NET ASSET VALUE PER SHARE
October 31, 1999 $14.34
October 31, 2000 $11.67
NEW YORK STOCK EXCHANGE PRICE
October 31, 1999 $16.75
November 2, 1999 (high)* $16.75
April 14, 2000 (low)* $13.00
October 31, 2000 $13.75
*For the period November 1, 1999, through October 31, 2000.
NOTES TO PERFORMANCE SUMMARY
The trust may invest in derivative securities which may include futures and
options. These types of hedging instruments can increase price flucuation.
Investments in lower-rated securities may provide greater returns but may have
greater-than-average risk.
These risks may increase share price volatility. Please see the prospectus
for details.
NUMBER OF SHAREHOLDERS
As of October 31, 2000, our records indicate that there are 876 registered
shareholders and approximately 6,500 shareholders owning Trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the Trust, please write or
call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
<PAGE>
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the
shares are trading at a premium, purchases will be made at a discounted price
of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments from $100 to
$500 can be made in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf.
If the nominee does not offer the plan, you may wish to request that your
shares be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75
is charged for each cash purchase as well as a pro rata share of the brokerage
commissions. The automatic reinvestment of distributions does not relieve you
of any income tax that may be payable (or required to be withheld) on the
distributions.
To enroll in or withdraw from the plan, or if you have any questions call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw, you can receive the value of the reinvested shares in one of two ways:
a check for the value of the full and fractional shares, or a certificate for
the full shares and a check for the fractional shares.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
<PAGE>
RESULTS OF SHAREHOLDER MEETING (Unaudited)
At the annual meeting of shareholders of MFS(R) Special Value Trust, which was
held on October 19, 2000, the following actions were taken:
ITEM 1. The election of Lawrence H. Cohn, M.D., Abby M. O'Neill, and Ward
Smith as Trustees of the trust.
NOMINEE FOR WITHHOLD AUTHORITY
--------------------------------------------------------------------------------
Lawrence H. Cohn, M.D. 5,412,842.888 45,287.816
Abby M. O'Neill 5,409,705.925 48,424.779
Ward Smith 5,409,705.925 48,424.779
Trustees continuing in office who were not subject to re-election at this
meeting are Marshall N. Cohan, Sir J. David Gibbons, Walter E. Robb III,
Arnold D. Scott, Jeffrey L. Shames, and J. Dale Sherratt.
ITEM 2. The ratification of Ernst & Young LLP as the independent public
accountants to be employed by the trust for the fiscal year ending
October 31, 2001.
NUMBER OF SHARES
--------------------------------------------------------------------------------
For 5,363,631.831
Against 14,828.000
Abstain 79,670.873
<PAGE>
PORTFOLIO OF INVESTMENTS -- October 31, 2000
<TABLE>
Bonds - 44.2%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
U.S. Bonds - 32.9%
Building - 0.6%
Formica Corp., 10.875s, 2009 $ 1,000 $ 430,000
------------------------------------------------------------------------------------------------------
Chemicals - 2.3%
Applied Extrusion Technologies, Inc., 11.5s, 2002 $ 950 $ 871,625
Sterling Chemicals, Inc., 11.25s, 2007 1,000 530,000
Sterling Chemicals, Inc., 0s to 2001, 13.5 to 2008 1,100 308,000
-----------
$ 1,709,625
------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 2.0%
General Binding Corp., 9.375s, 2008 $ 1,000 $ 770,000
Samsonite Corp., 10.75s, 2008 1,000 767,500
-----------
$ 1,537,500
-----------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 4.0%
Gaylord Container Corp., 9.75s, 2007 $ 970 $ 640,200
Gaylord Container Corp., 9.875s, 2008 1,900 570,000
Riverwood International Corp., 10.875s, 2008 1,000 910,000
U.S. Timberlands, 9.625s, 2007 1,000 897,500
-----------
$ 3,017,700
------------------------------------------------------------------------------------------------------
Corporate Asset Backed - 2.0%
Morgan Stanley Capital, Inc., 7.738s, 2039 $ 1,070 $ 826,786
Nationslink Funding Corp., 5s, 2009 1,000 691,094
-----------
$ 1,517,880
------------------------------------------------------------------------------------------------------
Energy - 2.1%
Continental Resources, Inc., 10.25s, 2008 $ 750 $ 671,250
Forest Oil Corp., 10.5s, 2006 920 933,800
-----------
$ 1,605,050
------------------------------------------------------------------------------------------------------
Industrial - 3.3%
Haynes International, Inc., 11.625s, 2004 $ 1,000 $ 700,000
Numatics, Inc., 9.625s, 2008 1,000 765,000
Simonds Industries, Inc., 10.25s, 2008 500 350,000
Thermadyne Manufacturing/Capital Corp., 9.875s, 2008 985 709,200
-----------
$ 2,524,200
------------------------------------------------------------------------------------------------------
Media - 6.9%
American Lawyer Media Holdings, Inc., 0s to 2002,
12.25s to 2008 $ 765 $ 497,250
CD Radio, Inc., 14.5s, 2009 900 756,000
Golden Books Publishing, Inc., 10.75s, 2004 1,168 292,023
Marvel Holdings, Inc., 0s, 2000(+)* 2,885 0
NTL Communications Corp., 0s to 2003, 12.375s to 2006 1,400 784,000
Telemundo Holdings, Inc., 0s to 2003, 11.5s to 2008 2,000 1,422,500
United International Holdings, 0s to 2003, 10.75s to 2008 2,435 1,461,000
-----------
$ 5,212,773
------------------------------------------------------------------------------------------------------
Metals and Minerals - 4.9%
Doe Run Resources Corp., 11.25s, 2005 $ 750 $ 375,000
Metallurg Holdings, Inc., 0s to 2003, 12.75s to 2008 2,600 663,000
Metallurg, Inc., 11s, 2007 1,250 993,750
Metals Management, Inc., 10s, 2008 1,500 210,000
Northwestern Steel & Wire Co., 9.5s, 2001 1,425 644,813
Renco Steel Holdings, Inc., 10.875s, 2005 925 777,000
-----------
$ 3,663,563
------------------------------------------------------------------------------------------------------
Retail - 1.3%
J. Crew Group, Inc., 0s to 2002, 13.125s to 2008 $ 1,675 $ 971,500
------------------------------------------------------------------------------------------------------
Supermarkets
Jitney-Jungle Stores of America, Inc., 12s, 2006+** $ 1,500 $ 28,125
Penn Traffic Co., 11s, 2009 9 7,076
-----------
$ 35,201
------------------------------------------------------------------------------------------------------
Telecommunications - 3.5%
AMSC Acquisition Co., Inc., 12.25s, 2008 $ 845 $ 621,075
DTI Holdings, Inc., 0s to 2003, 12.5s to 2008 865 294,100
Leap Wireless International, Inc., 0s to 2005, 14.5s to 2010 2,000 710,000
McCaw International Ltd., 0s to 2002, 13s to 2007 725 522,000
Spectrasite Holdings, Inc., 0s to 2004, 11.25s to 2009 1,000 516,250
-----------
$ 2,663,425
------------------------------------------------------------------------------------------------------
Total U.S. Bonds 24,888,417
------------------------------------------------------------------------------------------------------
Foreign Bonds - 11.3%
Canada - 0.5%
International Utility Structures, 10.75s, 2008
(Utilities - Electric) $ 475 $ 342,000
------------------------------------------------------------------------------------------------------
Greece - 0.8%
Fage Dairy Industries S.A., 9s, 2007 (Food and
Beverage Products) $ 750 $ 562,500
------------------------------------------------------------------------------------------------------
Luxembourg - 1.7%
Millicom International Cellular, 0s to 2001, 13.50s to
2006 (Telecommunications) $ 1,000 $ 845,000
PTC International Finance II S.A., 11.25s, 2009 (Telecommunications) 500 450,000
-----------
$ 1,295,000
------------------------------------------------------------------------------------------------------
Mexico - 0.8%
Satelites Mexicanos S.A. de CV, 10.125s, 2004
(Telecommunications) $ 1,000 $ 630,000
------------------------------------------------------------------------------------------------------
Netherlands - 1.2%
Completel Europe N.V. 0s to 2004, 14s to 2009
(Telecommunications) $ 2,000 $ 900,000
------------------------------------------------------------------------------------------------------
Foreign Bonds - continued
Russia - 2.0%
Russian Federation, 8.25s, 2010## $ 164 $ 105,244
Russian Federation, 2.5s, 2030## 3,826 1,425,185
-----------
$ 1,530,429
------------------------------------------------------------------------------------------------------
Sweden - 1.1%
Tele1 Europe BV, 13s, 2009 (Telecommunications) $ 1,000 $ 840,000
------------------------------------------------------------------------------------------------------
United Kingdom - 3.2%
British Telecom PLC, 11.875s, 2008
(Telecommunications) $ 650 $ 759,681
Dolphin Telecom PLC, 0s to 2003, 11.50 to 2008
(Telecommunications) 750 142,500
Jazztel PLC, 14s, 2009 (Telecommunications) 1,000 750,000
Ono Finance PLC, 13s, 2009 (Media) 1,000 770,000
-----------
$ 2,422,181
------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 8,522,110
------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $45,486,544) 33,410,527
------------------------------------------------------------------------------------------------------
Stocks - 38.4%
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
U.S. Stocks - 32.0%
Aerospace - 3.3%
B.E. Aerospace, Inc.* 80,200 $ 1,323,300
Moog, Inc., "A" * 39,750 1,157,719
-----------
$ 2,481,019
------------------------------------------------------------------------------------------------------
Building - 2.1%
Associate Materials, Inc. 70,000 $ 962,500
Atlantic Gulf Communities Corp.+* 250 15
Walter Industries, Inc.* 79,600 592,025
-----------
$ 1,554,540
------------------------------------------------------------------------------------------------------
Chemicals - 0.2%
Applied Extrusion Technologies, Inc.* 57,500 $ 176,094
------------------------------------------------------------------------------------------------------
Conglomerates - 14.9%
Tyco International Ltd. 198,512 11,253,149
------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.7%
Westpoint Stevens, Inc., "A"* 75,500 $ 542,656
------------------------------------------------------------------------------------------------------
Containers - 1.3%
Atlantis Plastics, Inc.* 116,550 $ 509,906
Gaylord Container Corp.* 226,000 494,375
-----------
$ 1,004,281
------------------------------------------------------------------------------------------------------
Machinery
Thermadyne Holdings Corp.* 7,554 $ 37,770
------------------------------------------------------------------------------------------------------
Media - 0.2%
Cumulus Media, Inc.* 21,000 $ 131,250
Golden Books Family Entertainment, Inc.* 53,266 26,633
-----------
$ 157,883
------------------------------------------------------------------------------------------------------
Metals and Mining - 0.6%
MAXXAM, Inc.* 23,000 $ 437,000
------------------------------------------------------------------------------------------------------
Photographic Products
Anacomp, Inc.* 108,663 $ 18,473
------------------------------------------------------------------------------------------------------
Retail - 0.5%
Musicland Stores Corp.* 50,000 $ 406,250
------------------------------------------------------------------------------------------------------
Supermarkets - 1.9%
Ingles Markets, Inc., "A" 88,300 $ 871,962
Marsh Supermarkets 42,700 539,088
-----------
$ 1,411,050
------------------------------------------------------------------------------------------------------
Telecommunications - 3.4%
Adelphia Business Solutions, Inc. 40,000 $ 250,000
Commonwealth Telephone Enterprises, Inc.* 35,133 1,216,480
Crown Castle International Corp.* 26,000 788,125
PSINet, Inc.* 41,600 276,900
-----------
$ 2,531,505
------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.9%
El Paso Electric Co.* 179,700 $ 2,154,603
------------------------------------------------------------------------------------------------------
Total U.S. Stocks 24,166,273
------------------------------------------------------------------------------------------------------
Foreign Stocks - 6.4%
Canada - 0.9%
Gulf Canada Resources Ltd. (Oil Services)* 106,500 $ 452,625
International Utility Structures (Utilities -
Electric)* 254,700 208,497
-----------
$ 661,122
------------------------------------------------------------------------------------------------------
Netherlands - 1.0%
Completel Europe N.V. (Telecommunications)* 100,000 $ 750,000
------------------------------------------------------------------------------------------------------
Sweden - 0.2%
Tele1 Europe Holdings AB, ADR (Telecommunications)* 17,612 $ 138,694
------------------------------------------------------------------------------------------------------
United Kingdom - 4.3%
News Corp. Ltd., ADR (Entertainment) 90,217 $ 3,264,728
------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 4,814,544
------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $20,430,809) 28,980,817
------------------------------------------------------------------------------------------------------
Consumer Goods and Services
Renaissance Cosmetics, Inc., 14s 1,266 $ 0
------------------------------------------------------------------------------------------------------
Media - 1.4%
Paxon Communications Corp., 13.25s 121 $ 1,089,000
------------------------------------------------------------------------------------------------------
Telecommunications - 4.3%
Crown Castle International Corp., 12.75s 1,167 $ 1,166,417
Global Crossings Holdings Ltd., 10.5s 10,000 990,000
Nextel Communications, Inc., 11.125s 1,088 1,064,064
-----------
$ 3,220,481
------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $5,001,226) $ 4,309,481
------------------------------------------------------------------------------------------------------
Convertible Bonds - 1.3%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------------------------------
Energy - 0.4%
Lomak Petroleum, Inc., 6s, 2007 $ 500 $ 345,000
------------------------------------------------------------------------------------------------------
Special Products and Services - 0.9%
Telewest Finance Ltd., 6s, 2005 $ 960 $ 666,000
------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $989,757) $ 1,011,000
------------------------------------------------------------------------------------------------------
Warrants - 0.9%
------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------
U.S. Warrants - 0.4%
DTI Holdings, Inc. (Telecommunications)* 8,325 $ 83
Leap Wireless International, Inc.
(Telecommunications)* 2,000 10,000
Metricom, Inc. (Telecommunications)* 775 7,750
Motient Corp. (Telecommunications)##* 845 32,110
Renaissance Cosmetics, Inc. (Consumer Goods
and Services)* 1,024 0
Sirius Satellite Radio Inc. (Media)##* 2,700 229,500
------------------------------------------------------------------------------------------------------
Total U.S. Warrants $ 279,443
------------------------------------------------------------------------------------------------------
Foreign Warrants - 0.5%
Jazztel PLC (Telecommunications)##* 5,000 $ 304,845
Ono Finance PLC (Media)* 1,000 70,000
------------------------------------------------------------------------------------------------------
Total Foreign Warrants $ 374,845
------------------------------------------------------------------------------------------------------
Total Warrants (Identified Cost, $512,919) $ 654,288
------------------------------------------------------------------------------------------------------
Repurchase Agreement - 7.8%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 10/31/00, due 11/01/00, total to
be received $5,906,079 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account),
at Cost $ 5,905 $ 5,905,000
------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $78,326,255) 74,271,113
Call Options Written - (0.2)%
------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
------------------------------------------------------------------------------------------------------
Tyco International Ltd./January/65
(Premiums Received, $178,250) 1 $ (178,250)
------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.9% 1,452,612
------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $75,545,475
------------------------------------------------------------------------------------------------------
</TABLE>
*Non-income producing security.
**Non-income producing security, in default.
##SEC Rule 144A restriction.
+Restricted security.
(+)Security valued by or at the direction of the Trustees.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
OCTOBER 31, 2000
--------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $78,326,255) $74,271,113
Investment of cash collateral for securities loaned, at
identified cost and value 6,802,572
Cash 123,066
Net receivable for forward foreign currency exchange
contracts subject to master netting agreements 62,745
Premium receivable on options written 178,250
Receivable for investments sold 326,819
Interest and dividends receivable 1,087,531
Other assets 1,108
------------
Total assets $82,853,204
------------
Liabilities:
Payable to dividend disbursing agent $ 95,508
Collateral for securities loaned, at value 6,802,572
Written options outstanding, at value (premiums received,
$178,250) 178,250
Payable to affiliates -
Management fee 3,263
Administrative fee 36
Accrued expenses and other liabilities 228,100
------------
Total liabilities $ 7,307,729
------------
Net assets $ 75,545,475
============
Net assets consist of:
Paid-in capital $79,901,575
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (3,992,406)
Accumulated distributions in excess of net investment
income (363,694)
------------
Total $ 75,545,475
============
Shares of beneficial interest outstanding 6,473,828
=========
Net asset value per share (net assets / shares of beneficial
interest outstanding) $11.67
======
See notes to financial statements.
<PAGE>
Statement of Operations
------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000
------------------------------------------------------------------------
Net investment income (loss):
Income -
Interest $ 7,190,167
Dividends 459,696
Foreign taxes withheld (2,309)
------------
Total investment income $ 7,647,554
------------
Expenses -
Management fee $ 846,082
Trustees' compensation 124,383
Administrative fee 12,297
Transfer and dividend disbursing agent fee 19,470
Custodian fee 36,399
Printing 27,335
Postage 3,981
Auditing fees 24,677
Legal fees 2,257
Miscellaneous 78,966
------------
Total expenses $ 1,175,847
Fees paid indirectly (28,312)
------------
Net expenses $ 1,147,535
------------
Net investment income $ 6,500,019
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,247,203
Written option transactions 320,000
Securities sold short 149,078
Foreign currency transactions (9,046)
------------
Net realized gain on investments and
foreign currency transactions $ 2,707,235
------------
Change in unrealized appreciation (depreciation) -
Investments $(12,696,994)
Translation of assets and liabilities in
foreign currencies 62,738
------------
Net unrealized loss on investments and foreign
currency translation $(12,634,256)
------------
Net realized and unrealized loss on investments
and foreign currency $ (9,927,021)
------------
Decrease in net assets from operations $ (3,427,002)
============
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
--------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999
--------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
<S> <C> <C>
Net investment income $ 6,500,019 $ 3,648,790
Net realized gain on investments and foreign currency
transactions 2,707,235 10,041,563
Net unrealized gain (loss) on investments and foreign
currency translation (12,634,256) 369,007
------------ ------------
Increase (decrease) in net assets from operations $ (3,427,002) $ 14,059,360
------------ ------------
Distributions declared to shareholders -
From net investment income $ (6,500,019) $ (3,648,790)
From net realized gain on investments and foreign
currency transactions (6,089,003) (6,324,253)
In excess of net investment income (59,917) (516,404)
From paid-in capital (1,179,812) --
------------ ------------
Total distributions declared to shareholders $(13,828,751) $(10,489,447)
------------ ------------
Net increase in net assets from trust share
transactions $ 1,198,648 $ 1,095,841
------------ ------------
Total increase (decrease) in net assets $(16,057,105) $ 4,665,754
Net assets:
At beginning of period 91,602,580 86,936,826
------------ ------------
At end of period (including accumulated distributions
in excess of net investment income of $393,694 and
$692,437 respectively) $ 75,545,475 $ 91,602,580
============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding
throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $14.34 $13.76 $15.03 $15.23 $13.93
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 1.01 $ 0.57 $ 0.04 $ 0.11 $ 0.13
Net realized and unrealized gain (loss) on
investments and foreign currency (1.53) 1.66 1.01 2.66 2.82
------ ------ ------ ------ ------
Total from investment operations $ (0.52) $ 2.23 $ 1.05 $ 2.77 $ 2.95
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(1.01) $(0.57) $(0.04) $(0.10) $(0.13)
From net realized gain on investments and
foreign currency transactions (0.95) (1.00) (2.28) (2.87) (1.52)
In excess of net investment income (0.01) (0.08) -- -- --
From paid in capital (0.18) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.15) $(1.65) $(2.32) $(2.97) $(1.65)
------ ------ ------ ------ ------
Net asset value - end of period $11.67 $14.34 $13.76 $15.03 $15.23
====== ====== ====== ====== ======
Per share market value - end of period $13.750 $16.750 $16.750 $19.000 $18.250
Total return (4.33)% 11.08% 0.26% 23.29% 22.20%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.35% 1.23% 1.10% 1.12% 1.14%
Net investment income 7.46% 3.79% 0.26% 0.72% 0.85%
Portfolio turnover 32% 137% 85% 119% 96%
Net assets at end of period (000 Omitted) $75,545 $91,603 $86,937 $93,665 $93,161
#Per share data is based on average shares outstanding.
##Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Special Value Trust (the trust) is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as a closed-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in 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. The trust can invest in high-yield
securities rated below investment grade. Investments in high-yield securities
involve greater degrees of credit and market risk than investments in higher-
rated securities and tend to be more sensitive to economic conditions.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data,
without exclusive reliance upon exchange or over-the-counter prices. Equity
securities listed on securities exchanges or reported through the NASDAQ
system are reported at market value using last sale prices. Unlisted equity
securities or listed equity securities for which last sale prices are not
available are reported at market value using last quoted bid prices. Short-
term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Options listed on commodity exchanges
are reported at market value using closing settlement prices. Over-the-counter
options on securities are valued by brokers. Over-the-counter currency options
are valued through the use of a pricing model which takes into account foreign
currency exchange spot and forward rates, implied volatility, and short-term
repurchase rates. Securities for which there are no such quotations or
valuations are valued in good faith, at fair value, by the Trustees.
Repurchase Agreements - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the trust to
obtain those securities in the event of a default under the repurchase
agreement. The trust monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the fund under each such repurchase agreement. The trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred
Compensation Plan (the plan) independent Trustees may elect to defer receipt
of all or a portion of their annual compensation. Deferred amounts are treated
as though equivalent dollar amounts had been invested in shares of the fund or
other MFS funds selected by the Trustee. Deferred amounts represent an
unsecured obligation of the fund until distributed in accordance with the
plan.
Written Options - The trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is
subsequently adjusted to the current value of the option contract. When a
written option expires, the trust realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the
premium received is offset against the proceeds to determine the realized gain
or loss. When a written put option is exercised, the premium reduces the cost
basis of the security purchased by the trust. The trust, as writer of an
option, may have no control over whether the underlying securities may be sold
(call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the trust's management on the direction of
interest rates.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the trust to certain qualified
institutions (the "Borrowers") approved by the trust. The loans are
collateralized at all times by cash in an amount at least equal to the market
value of the securities loaned. State Street provides the trust with
indemnification against Borrower default. The trust bears the risk of loss
with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the trust and the lending agent. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
At October 31, 2000, the value of securities loaned was $6,462,986. These
loans were collateralized by cash of $6,802,572, which was invested in the
following short-term obligation:
<TABLE>
<CAPTION>
IDENTIFIED COST
SHARES AND VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Navigator Securities Lending Prime Portfolio 6,802,572 $6,802,572
</TABLE>
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The trust may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the trust may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The trust may also use contracts in a manner intended
to protect foreign currency-denominated securities from declines in value due
to unfavorable exchange rate movements. For non-hedging purposes, the trust
may enter into contracts with the intent of changing the relative exposure of
the trust's portfolio of securities to different currencies to take advantage
of anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
Short Sales - The trust may enter into short sales. A short sale transaction
involves selling a security which the trust does not own with the intent of
purchasing it later at a lower price. The trust will realize a gain if the
security price decreases and a loss if the security price increases between
the date of the short sale and the date on which the trust must replace the
borrowed security. Losses can exceed the proceeds from short sales and can be
greater than losses from the actual purchase of a security. The amount of any
gain will be decreased, and the amount of any loss increased, by the amount of
the premium, dividends, or interest the trust may be required to pay in
connection with a short sale. Whenever the trust engages in short sales, its
custodian segregates cash or marketable securities in an amount that, when
combined with the amount of proceeds from the short sale deposited with the
broker, at least equals the current market value of the security sold short.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
Legal fees and other related expenses incurred to preserve and protect the
value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions made directly to the security issuer,
which are generally non-recurring, incurred to protect or enhance the value of
high-yield debt securities, are reported as additions to the cost basis of the
security. Costs that are incurred to negotiate the terms or conditions of
capital infusions or that are expected to result in a plan of reorganization
are reported as realized losses. Ongoing costs incurred to protect or enhance
an investment, or costs incurred to pursue other claims or legal actions, are
expensed.
Fees Paid Indirectly - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the trust. This amount is shown as a reduction of total expenses on the
Statement of Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended October 31, 2000, $388,660 was reclassified from accumulated
undistributed net realized gain on investments and foreign currency transactions
to accumulated distributions in excess of net investment income due to
differences between book and tax accounting for defaulted bonds and foreign
currency transactions. This change had no effect on the net assets or net asset
value per share. In addition, $1,179,812 was redesignated as a tax return of
capital distribution.
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at an annual rate of
0.68% of the trust's average daily net assets and 3.40% of investment income.
The trust pays no compensation directly to its Trustees who are officers of
the investment adviser, or to officers of the trust, all of whom receive
remuneration for their services to the trust from MFS. Certain officers and
Trustees of the trust are officers or directors of MFS, and MFS Service
Center, Inc. (MFSC). The trust has an unfunded defined benefit plan for all of
its independent Trustees. Included in Trustees' compensation is a net periodic
pension expense of $35,000 for the year ended October 31, 2000.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust incurs an administrative fee
at the following annual percentages of the trust's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Transfer Agent - MFSC acts as registrar and dividend disbursing agent for the
trust. The agreement provides that the trust will pay MFSC an account
maintenance fee of no more than $9.00 and a dividend services fee of $0.75 per
reinvestment and will reimburse MFSC for reasonable out-of-pocket expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than short-term obligations,
aggregated $26,237,946 and $38,343,349, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $ 78,326,255
------------
Gross unrealized depreciation $(19,708,269)
Gross unrealized appreciation 15,653,127
------------
Net unrealized depreciation $ (4,055,142)
============
(5) Shares of Beneficial Interest
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized 6,473,828.219 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 2000 YEAR ENDED OCTOBER 31, 1999
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares issued to shareholders in
reinvestment of distributions 84,591 $1,198,648 70,078 $1,095,841
------ ----------- ------ ----------
</TABLE>
(6) Line of Credit
The trust and other affiliated trusts participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at
the end of each quarter. The commitment fee allocated to the trust for the
year ended October 31, 2000, was $631. The trust had no borrowings during the
year.
(7) Financial Instruments
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, and forward foreign currency
exchange contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
------------------------------------------------------------------------------
Outstanding, beginning of period 0 $ 0
Options written 2 498,250
Options expired (1) (320,000)
---------
Outstanding, end of period 1 $ 178,250
= =========
At October 31, 2000, the trust had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts - At October 31, 2000, forward
foreign currency purchases and sales under master netting agreements amounted
to a net receivable of $62,745 with Merrill Lynch.
At October 31, 2000, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Restricted Securities
The trust may invest not more than 20% of its net assets in securities which
are subject to legal or contractual restrictions on resale. At October 31,
2000, the trust owned the following restricted securities, excluding
securities issued under Rule 144A, constituting 0.04% of net assets which may
not be publicly sold without registration under the Securities Act of 1933.
The trust does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations
furnished by dealers or by a pricing service, or if not available, in good
faith, at fair value, by the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
----------------------------------------------------------------------------------------------------------------
Atlantic Gulf Communities Corp. 9/25/95 250 -- $ 15
Jitney-Jungle Stores of America, Inc.,
<S> <C> <C> <C> <C>
12s, 2006 3/5/99 1,500,000 1,278,688 28,125
-------
$28,140
=======
<PAGE>
</TABLE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of MFS Special Value Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Special Value Trust (the fund), including the schedule of portfolio
investments, as of October 31, 2000, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended and the financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of October 31, 2000,
by correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
MFS Special Value Trust at October 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
[Ernst & Young LLP Signature]
Boston, Massachusetts
December 8, 2000
<PAGE>
FEDERAL TAX INFORMATION
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2000.
THE TRUST HAS DESIGNATED $3,186,424 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED OCTOBER 31, 2000.
FOR THE YEAR ENDED OCTOBER 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS IS 2.85%.
<PAGE>
<TABLE>
MFS(R) SPECIAL VALUE TRUST
<S> <C>
TRUSTEES PORTFOLIO MANAGER
Marshall N. Cohan+(1) - Private Investor Robert J. Manning*
Lawrence H. Cohn, M.D.+(2) - Chief of Cardiac TREASURER
Surgery, Brigham and Women's Hospital; Professor James O. Yost*
of Surgery, Harvard Medical School
ASSISTANT TREASURERS
The Hon. Sir J. David Gibbons, KBE+ (2) - Chief Mark E. Bradley*
Executive Officer, Edmund Gibbons Ltd.; Chairman, Robert R. Flaherty*
Colonial Insurance Company, Ltd. Laura F. Healy*
Ellen Moynihan*
Abby M. O'Neill+(2) - Private Investor
SECRETARY
Walter E. Robb, III+(1) - President and Treasurer, Stephen E. Cavan*
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting ASSISTANT SECRETARY
Group, Inc. (office services) James R. Bordewick, Jr.*
Arnold D. Scott* - Senior Executive Vice TRANSFER AGENT, REGISTRAR, AND
President, Director, and Secretary, MFS Investment DIVIDEND DISBURSING AGENT
Management State Street Bank and Trust Company
c/o MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and Chief Executive P.O. Box 9024
Officer, MFS Investment Management Boston, MA 02205-9824
1-800-637-2304
J. Dale Sherratt+(1) - President, Insight
Resources, Inc. (acquisition planning specialists) CUSTODIAN
State Street Bank and Trust Company
Ward Smith+(1) - Former Chairman (until 1994),
NACCO Industries (holding company) AUDITORS
Ernst & Young LLP
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
+ Independent Trustee
* MFS Investment Management
(1) Member of Audit Committee
(2) Member of Portfolio Trading Committee
</TABLE>
<PAGE>
MFS(R) SPECIAL VALUE TRUST ------------
PRSRT STD
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
500 Boylston Street, Boston, MA 02116.
MSVCE-2 12/00 11M
