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 811-5440
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MFS INTERMEDIATE INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) INTERMEDIATE INCOME TRUST 4/30/05
SEMIANNUAL REPORT
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M F S(SM)
INVESTMENT MANAGEMENT(R)
SEMIANNUAL REPORT
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 3
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PERFORMANCE SUMMARY 6
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DIVIDEND REINVESTMENT AND
CASH PURCHASE PLAN 9
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PORTFOLIO OF INVESTMENTS 10
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FINANCIAL STATEMENTS 15
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NOTES TO FINANCIAL STATEMENTS 21
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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM 33
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RESULTS OF SHAREHOLDER MEETING 34
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PROXY VOTING POLICIES AND INFORMATION 35
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QUARTERLY PORTFOLIO DISCLOSURE 35
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
As a professional investor for more than 20 years, I've often been asked to
name the single most important factor in investment success. My answer is
always the same: diversification. At MFS we talk about applying a disciplined
diversification(SM) strategy to a portfolio as a three step process: allocate
among the major asset classes; diversify within each asset class; and
rebalance regularly to avoid unnecessary risk.
Individual investors sometimes assume that the amount they're putting away is
too small to allow for diversification. My response would be that a good
investment plan, developed with the help of an investment professional, should
provide a way to properly diversify your contributions.
Remember that the purpose of diversification is to own investments that
historically have not moved in sync with each other - in the hope that, in any
given period, underperforming holdings will be somewhat counteracted by other
outperforming holdings. If none of your asset classes did badly in the past
year or so, you're probably not properly diversified.
Americans today have more of their wealth tied up in the markets than in any
previous period of our history, but we are not yet making the most of our
opportunities. While neither asset allocation nor diversification can
guarantee a profit or protect against a loss, I would voice the opinion that,
to a large extent, a failure to have a plan, diversify contributions, and
rebalance a portfolio annually has been behind many U.S. investors" failure to
reach their long-term financial goals.
For more information on how to apply a disciplined diversification(SM)
strategy to your portfolio, I would urge you to contact your own investment
professional. You may also want to refer to information on the subject on our
Website, MFS.COM.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2005
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
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PORTFOLIO COMPOSITION
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PORTFOLIO STRUCTURE*
Bonds 98.2%
Cash & Other Net Assets 1.8%
BOND MARKET SECTORS*
International Markets 28.7%
------------------------------------------------
U.S. Treasuries 23.1%
------------------------------------------------
Mortgage-Backed Securities 20.9%
------------------------------------------------
U.S. Government Agencies 19.2%
------------------------------------------------
Emerging Market Bonds 4.0%
------------------------------------------------
Commercial Mortgage-Backed
Securities 1.9%
------------------------------------------------
Cash & Other Net Assets 1.8%
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Residential Mortgage Backed Securities 0.3%
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High Grade Corporates 0.1%
------------------------------------------------
CREDIT QUALITY OF BONDS**
AAA 94.2%
------------------------------------------------
AA 1.7%
------------------------------------------------
A 1.2%
------------------------------------------------
BBB 1.9%
------------------------------------------------
BB 0.6%
------------------------------------------------
B 0.4%
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PORTFOLIO FACTS
Average Duration 3.5
------------------------------------------------
Average Life 5.4 yrs.
------------------------------------------------
Average Maturity*** 8.7 yrs.
------------------------------------------------
Average Credit Quality**** AAA
------------------------------------------------
Average Short-Term Credit Quality A-1
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COUNTRY WEIGHTINGS
United States 67.2%
------------------------------------------------
Germany 6.7%
------------------------------------------------
Spain 4.3%
------------------------------------------------
Ireland 2.9%
------------------------------------------------
Finland 2.9%
------------------------------------------------
Netherlands 2.7%
------------------------------------------------
United Kingdom 2.5%
------------------------------------------------
France 2.3%
------------------------------------------------
New Zealand 2.1%
------------------------------------------------
Other 6.4%
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* For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
** Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in a "AAA"-rating
category. Percentages are based on the total market value of investments
as of 4/30/05.
*** The average maturity shown is calculated using the final stated maturity
on the portfolio's holdings without taking into account any holdings
which have been pre-refunded to an earlier date or which have a mandatory
put date prior to the stated maturity. The average life shown takes into
account these earlier dates.
**** The Portfolio Average Credit Quality rating is based upon a market
weighted average of portfolio holdings.
Percentages are based on net assets as of 4/30/05, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the six months ended April 30, 2005, the MFS Intermediate Income Trust
provided a total return of 1.10%, at net asset value. In comparison, the
trust's benchmarks, the Citigroup World Government Bond Non-dollar Hedged
Index, returned 4.02% while the Citigroup Medium-Term (1-10 years) Treasury
Government Sponsored Index, returned 0.07%. The trust's investment objective
is to preserve capital and provide high current income. The trust invests in
obligations issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities and in obligations issued or guaranteed by a
foreign government or any of its political subdivisions, authorities, agencies
or instrumentalities.
MARKET ENVIRONMENT
The U.S. fixed-income market experienced a flattening of the yield curve
during the six-month period. (A yield curve for bonds shows the relationship
between yield and time to maturity.) The U.S. Federal Reserve Board raised its
target federal funds rate four times, continuing its steady drumbeat of
quarter-point rate hikes that had begun on June 30, 2004. But while the Fed
seemed committed to a course of gradually raising short-term rates, several
factors caused long-term rates to stagnate or retreat.
Job growth, which had shot up in the spring of 2004, ebbed and flowed during
the period; uncertainty about the employment situation helped to push down
yields on longer-dated bonds. Another factor that held long-term rates down
was overseas demand for U.S. Treasuries, especially from foreign central
banks. However, moderate GDP growth and inflation concerns kept shorter-term
interest rates moving up. For the period as a whole, the net effect was a
substantial flattening of the yield curve as short-term rates rose
significantly while long-term rates were generally flat to down.
TRUST POSITIONING
MFS Intermediate Income Trust, a closed-end fund, maintains a portfolio
primarily consisting of short- and intermediate-term U.S. government and high-
grade foreign securities.
We managed the trust during the six-month period on the premise that interest
rates in the United States and abroad were more likely to rise than fall. As a
result, the trust had a shorter duration (less sensitivity to interest rate
changes) than that of our benchmarks. A significant portion of the portfolio
was invested in U.S. government securities while the remainder was invested in
high-grade securities of foreign governments. The majority of our U.S.
holdings were split amongst agencies, mortgage-backed and government
securities. Our foreign holdings were allocated across Europe and Pacific Rim
nations, excluding Japan. We emphasized European government bonds while
avoiding Japan, because we felt that interest rates there were extremely low
and the environment provided little potential for growth. Alternatively, we
invested in Australia, New Zealand and the U.K.
CONTRIBUTORS TO PERFORMANCE
Our shorter duration domestically aided results relative to the benchmarks as
interest rates increased over the period. The trust also had a significant
exposure to mortgage-backed securities which added to performance.
Additionally, our European and U.K. bonds yielded positive results.
DETRACTORS FROM PERFORMANCE
Our shorter duration stance on the foreign portion of the portfolio detracted
from relative results. During the period we believed that foreign rates were
more likely to increase than decrease. Rates over the period however,
decreased and our shorter duration hampered results.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
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PERFORMANCE SUMMARY THROUGH 4/30/05
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All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their
original cost. More recent returns may be more or less than those shown. Past
performance is no guarantee of future results.
PRICE SUMMARY
----------------------------
Six months ended 4/30/05
----------------------------
Date Price
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Net asset value 10/31/04 $7.32
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4/30/05 $7.20
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New York Stock Exchange price 10/31/04 $6.59
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2/11/05 (high)* $6.61
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3/28/05 (low)* $6.27
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4/30/05 $6.48
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* For the period November 1, 2004 through April 30, 2005.
TOTAL RETURN VS BENCHMARKS
----------------------------
Six months ended 4/30/05
----------------------------
New York Stock Exchange price** 1.07%
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Net asset value** 1.10%
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Citigroup World Government Bond Non-dollar Hedged Index# 4.02%
------------------------------------------------------------------------------
Citigroup Medium-Term (1-10 years) Treasury Government
Sponsored Index# 0.07%
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** Includes reinvestment of dividends and capital gains distributions.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
Citigroup World Government Bond Non-dollar Hedged Index - is a market
capitalization weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the U.S. Country eligibility is
determined based upon market capitalization and investability criteria.
Citigroup Medium-Term (1-10 years) Treasury Government Sponsored Index - is a
capitalization-weighted index of U.S. Treasury and U.S. Government agency
securities with fixed-rate coupons and weighted average lives between one and
ten years.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount to net asset value. Shareholders do
not have the right to cause the trust to repurchase their shares at net asset
value. The trust's shares also may trade at a premium to their net asset
value. When trust shares trade at a premium, buyers pay more than the asset
value underlying trust shares, and shares purchased at a premium would receive
less than the amount paid for them in the event of the trust's liquidation. 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 trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes
as a return of capital will reduce each shareholder's basis in his or her
shares and, to the extent the return of capital exceeds such basis, will be
treated as gain to the shareholder from a sale of shares. Returns of
shareholder capital have the effect of reducing the trust's assets and may
increase the trust's expense ratio.
KEY RISK CONSIDERATIONS
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
The portfolio invests in foreign and/or emerging markets securities, which are
more susceptible to changes in interest rates, currency exchange rates,
economic, and political conditions.
The portfolio invests in government-guaranteed securities. These guarantees
apply to the underlying securities only and not to the prices and yields of
the portfolio.
The portfolio can invest a relatively high percentage of its assets in one or
more issuers, thereby making it more susceptible to any single economic,
political or regulatory occurrence.
The portfolio's value will fluctuate in response to market conditions and
issuer, regulatory, economic, or political developments. In general, fixed
income securities will decline when interest rates rise and will increase when
interest rates fall. Many fixed income securities also involve credit risk,
which is the risk that issuers may fail to make timely principal or interest
payments. In addition, fixed income securities with longer maturity dates will
be subject to greater price fluctuations than those with shorter maturity
periods.
These risks will increase share price volatility.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
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The trust offers a Dividend Reinvestment and Cash Purchase Plan that allows
you to reinvest either all of the distributions paid by the trust or only the
long-term capital gains. Purchases are made at the market price unless that
price exceeds the net asset value (the shares are trading at a premium). If
the shares are trading at a premium, purchases will be made at a discounted
price of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments may be made in
any amount over $100 in January and July on the 15th of the month or
shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
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PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/05
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The Portfolio of Investments is a complete list of all securities owned by your trust. It is
categorized by broad-based asset classes.
Bonds - 97.2%
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ISSUER PAR AMOUNT $ VALUE
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Agency - Other - 0.2%
----------------------------------------------------------------------------------------------
Small Business Administration, 7.64%, 2010 $ 2,092,700 $ 2,245,566
----------------------------------------------------------------------------------------------
Asset Backed & Securitized - 2.2%
----------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp.,
1.1569%, 2030^^ $ 85,897,630 $ 3,117,637
----------------------------------------------------------------------------------------------
Commercial Mortgage Acceptance Corp., 6.04%, 2030 6,000,000 6,286,408
----------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 3.4122%, 2023##^^ 14,932,626 1,901,140
----------------------------------------------------------------------------------------------
First Union-Lehman Brothers Bank of America, 6.56%, 2035 5,000,000 5,274,035
----------------------------------------------------------------------------------------------
Multi-Family Capital Access One, Inc., 6.65%, 2024 2,624,423 2,822,912
----------------------------------------------------------------------------------------------
$ 19,402,132
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Banks & Credit Companies - 0.1%
----------------------------------------------------------------------------------------------
SG Capital Trust I, 7.875%, 2010 EUR 375,000 $ 578,414
----------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.6%
----------------------------------------------------------------------------------------------
Korea Development Bank, 4.75%, 2009 $ 1,700,000 $ 1,709,161
----------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.375%, 2008 2,318,000 2,619,340
----------------------------------------------------------------------------------------------
Petroliam Nasional Berhad, 7.75%, 2015 1,177,000 1,426,910
----------------------------------------------------------------------------------------------
$ 5,755,411
----------------------------------------------------------------------------------------------
Emerging Market Sovereign - 3.2%
----------------------------------------------------------------------------------------------
Federal Republic of Brazil, 8%, 2014 $ 3,126,361 $ 3,116,576
----------------------------------------------------------------------------------------------
Republic of Panama, 9.375%, 2023 - 2029 1,560,000 1,840,430
----------------------------------------------------------------------------------------------
Republic of Panama, 8.875%, 2027 292,000 327,040
----------------------------------------------------------------------------------------------
Republic of South Africa, 9.125%, 2009 1,935,000 2,234,925
----------------------------------------------------------------------------------------------
Republic of South Africa, 8.5%, 2017 1,852,000 2,296,480
----------------------------------------------------------------------------------------------
Russian Federation, 3%, 2008 3,277,000 3,051,870
----------------------------------------------------------------------------------------------
Russian Federation, 11%, 2018 1,706,000 2,435,997
----------------------------------------------------------------------------------------------
Russian Ministry of Finance, 12.75%, 2028 1,006,000 1,719,153
----------------------------------------------------------------------------------------------
State of Israel, 5.125%, 2014 5,000,000 5,008,641
----------------------------------------------------------------------------------------------
State of Qatar, 9.75%, 2030 2,165,000 3,236,675
----------------------------------------------------------------------------------------------
United Mexican States, 8.125%, 2019 2,205,000 2,582,055
----------------------------------------------------------------------------------------------
$ 27,849,842
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International Market Quasi-Sovereign - 2.8%
----------------------------------------------------------------------------------------------
KFW International Finance, Inc., 2.375%, 2006 $ 4,120,000 $ 4,048,988
----------------------------------------------------------------------------------------------
KFW International Finance, Inc., 3.25%, 2007 4,200,000 4,144,925
----------------------------------------------------------------------------------------------
Landesbank Baden-Wurttemberg, 5.125%, 2007 7,700,000 7,872,857
----------------------------------------------------------------------------------------------
Province of Ontario, 7%, 2005 8,000,000 8,077,632
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$ 24,144,402
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International Market Sovereign - 25.3%
----------------------------------------------------------------------------------------------
Canada Housing Trust, 4.65%, 2009 CAD 1,435,000 $ 1,183,696
----------------------------------------------------------------------------------------------
Commonwealth of Australia, 6%, 2017 AUD 3,980,000 3,270,035
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.5%, 2008 EUR 28,968,000 38,479,137
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.75%, 2015 EUR 496,000 656,798
----------------------------------------------------------------------------------------------
Federal Republic of Germany, 6.25%, 2030 EUR 1,135,000 1,990,773
----------------------------------------------------------------------------------------------
Government of Canada, 5.5%, 2009 CAD 3,108,000 2,650,761
----------------------------------------------------------------------------------------------
Government of Canada, 5.25%, 2012 CAD 3,387,000 2,896,077
----------------------------------------------------------------------------------------------
Government of Canada, 4.5%, 2015 CAD 518,000 420,481
----------------------------------------------------------------------------------------------
Government of New Zealand, 7%, 2009 NZD 2,964,000 2,256,498
----------------------------------------------------------------------------------------------
Government of New Zealand, 6.5%, 2013 NZD 20,533,000 15,637,982
----------------------------------------------------------------------------------------------
Kingdom of Denmark, 6%, 2011 DKK 1,000 203
----------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5.75%, 2007 EUR 6,148,000 8,402,807
----------------------------------------------------------------------------------------------
Kingdom of Netherlands, 3.75%, 2009 EUR 11,180,000 14,996,145
----------------------------------------------------------------------------------------------
Kingdom of Norway, 6.5%, 2013 NOK 11,060,000 2,098,797
----------------------------------------------------------------------------------------------
Kingdom of Spain, 7%, 2005 $ 7,800,000 7,864,171
----------------------------------------------------------------------------------------------
Kingdom of Spain, 6%, 2008 EUR 7,977,000 11,255,289
----------------------------------------------------------------------------------------------
Kingdom of Spain, 5.35%, 2011 EUR 12,184,000 17,782,706
----------------------------------------------------------------------------------------------
Republic of Finland, 3%, 2008 EUR 9,552,000 12,486,970
----------------------------------------------------------------------------------------------
Republic of Finland, 5.375%, 2013 EUR 7,909,000 11,715,224
----------------------------------------------------------------------------------------------
Republic of France, 4.75%, 2007 EUR 13,370,000 18,100,640
----------------------------------------------------------------------------------------------
Republic of France, 6%, 2025 EUR 657,000 1,097,255
----------------------------------------------------------------------------------------------
Republic of Ireland, 4.25%, 2007 EUR 16,609,000 22,336,559
----------------------------------------------------------------------------------------------
Republic of Ireland, 4.6%, 2016 EUR 1,646,000 2,335,200
----------------------------------------------------------------------------------------------
United Kingdom Treasury, 5.75%, 2009 GBP 4,184,000 8,395,081
----------------------------------------------------------------------------------------------
United Kingdom Treasury, 8%, 2015 GBP 5,090,000 12,542,070
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$220,851,355
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Mortgage Backed - 20.8%
----------------------------------------------------------------------------------------------
Fannie Mae, 5.669%, 2006 $ 6,675,247 $ 6,760,312
----------------------------------------------------------------------------------------------
Fannie Mae, 6.956%, 2007 4,605,597 4,826,369
----------------------------------------------------------------------------------------------
Fannie Mae, 6.022%, 2010 6,800,000 7,339,840
----------------------------------------------------------------------------------------------
Fannie Mae, 4.556%, 2011 9,118,419 9,189,657
----------------------------------------------------------------------------------------------
Fannie Mae, 4.845%, 2013 2,143,441 2,175,231
----------------------------------------------------------------------------------------------
Fannie Mae, 4.652%, 2014 4,770,438 4,782,252
----------------------------------------------------------------------------------------------
Fannie Mae, 4.846%, 2014 4,270,455 4,332,963
----------------------------------------------------------------------------------------------
Fannie Mae, 5.412%, 2014 2,088,239 2,217,911
----------------------------------------------------------------------------------------------
Fannie Mae, 4.62%, 2015 996,492 992,545
----------------------------------------------------------------------------------------------
Fannie Mae, 4.925%, 2015 2,127,834 2,159,751
----------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2016 - 2034 23,513,169 24,202,479
----------------------------------------------------------------------------------------------
Fannie Mae, 5.5%, 2017 - 2018 11,538,653 11,822,106
----------------------------------------------------------------------------------------------
Fannie Mae, 5%, 2018 - 2034 23,161,697 23,137,301
----------------------------------------------------------------------------------------------
Fannie Mae, 4.5%, 2019 13,540,231 13,409,528
----------------------------------------------------------------------------------------------
Fannie Mae, 6.5%, 2031 10,580,942 11,023,857
----------------------------------------------------------------------------------------------
Freddie Mac, 5.5%, 2017 - 2019 12,526,980 12,838,127
----------------------------------------------------------------------------------------------
Freddie Mac, 6%, 2017 - 2034 3,222,685 3,339,069
----------------------------------------------------------------------------------------------
Freddie Mac, 5%, 2019 - 2023 21,083,483 21,329,081
----------------------------------------------------------------------------------------------
Freddie Mac, 3%, 2021 4,700,000 4,595,551
----------------------------------------------------------------------------------------------
Ginnie Mae, 8.5%, 2005 - 2009 1,721,080 1,835,250
----------------------------------------------------------------------------------------------
Ginnie Mae, 7.5%, 2022 - 2023 320,283 345,555
----------------------------------------------------------------------------------------------
Ginnie Mae, 6.5%, 2028 4,351,457 4,561,465
----------------------------------------------------------------------------------------------
Ginnie Mae, 6%, 2033 4,386,232 4,528,288
----------------------------------------------------------------------------------------------
$181,744,488
----------------------------------------------------------------------------------------------
U.S. Government Agencies - 18.7%
----------------------------------------------------------------------------------------------
Fannie Mae, 5.5%, 2006 $ 5,500,000 $ 5,579,541
----------------------------------------------------------------------------------------------
Fannie Mae, 4.75%, 2007 4,000,000 4,047,748
----------------------------------------------------------------------------------------------
Fannie Mae, 6.625%, 2007 5,000,000 5,309,170
----------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2008 10,000,000 10,555,940
----------------------------------------------------------------------------------------------
Fannie Mae, 4.25%, 2009 5,000,000 5,017,365
----------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.25%, 2006 10,415,000 10,265,784
----------------------------------------------------------------------------------------------
Federal Home Loan Bank, 3.625%, 2008 17,000,000 16,745,170
----------------------------------------------------------------------------------------------
Freddie Mac, 4.25%, 2009 7,000,000 7,036,673
----------------------------------------------------------------------------------------------
Freddie Mac, 6.875%, 2010 22,900,000 25,704,151
----------------------------------------------------------------------------------------------
Freddie Mac, 5.125%, 2012 27,600,000 28,766,404
----------------------------------------------------------------------------------------------
Small Business Administration, 5.34%, 2021 7,799,981 8,027,893
----------------------------------------------------------------------------------------------
Small Business Administration, 6.34%, 2021 3,320,424 3,523,756
----------------------------------------------------------------------------------------------
Small Business Administration, 6.35%, 2021 4,322,118 4,591,285
----------------------------------------------------------------------------------------------
Small Business Administration, 6.44%, 2021 2,969,456 3,160,075
----------------------------------------------------------------------------------------------
Small Business Administration, 6.625%, 2021 3,402,908 3,653,882
----------------------------------------------------------------------------------------------
Small Business Administration, 4.93%, 2024 2,843,289 2,859,723
----------------------------------------------------------------------------------------------
U.S. Department of Housing & Urban Development,
5.53%, 2008 11,000,000 11,479,534
----------------------------------------------------------------------------------------------
U.S. Department of Housing & Urban Development,
7.198%, 2009 6,000,000 6,694,722
----------------------------------------------------------------------------------------------
U.S. Department of Veteran Affairs, 6%, 2021 2,881 2,879
----------------------------------------------------------------------------------------------
$163,021,695
----------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 23.2%
----------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 13.875%, 2011 $ 25,500,000 $ 28,176,505
----------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 10.375%, 2012 48,600,000 56,345,625
----------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 12%, 2013 42,500,000 53,211,317
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.625%, 2006 7,000,000 7,085,862
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.125%, 2007### 15,000,000 15,806,250
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5%, 2010 4,500,000 5,009,238
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.875%, 2012 5,000,000 5,252,930
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25%, 2013 26,220,000 26,430,992
----------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.75%, 2014 4,700,000 4,899,383
----------------------------------------------------------------------------------------------
$202,218,102
----------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.1%
----------------------------------------------------------------------------------------------
HQI Transelec Chile S.A., 7.875%, 2011 $ 686,000 $ 780,955
----------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $841,691,193) $848,592,362
----------------------------------------------------------------------------------------------
Short-Term Obligation - 1.5%
----------------------------------------------------------------------------------------------
General Electric Capital Corp., 2.95%, due 5/02/05,
at Amortized Cost< $ 12,829,000 $ 12,827,949
----------------------------------------------------------------------------------------------
Repurchase Agreement
----------------------------------------------------------------------------------------------
Morgan Stanley, 2.95%, dated 4/29/05, due 5/02/05, total
to be received $3,001 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $ 3,000 $ 3,000
----------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $854,522,142) $861,423,311
----------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.3% 11,588,076
----------------------------------------------------------------------------------------------
Net Assets - 100.0% $873,011,387
----------------------------------------------------------------------------------------------
< The rate shown represents an annualized yield at time of purchase.
## SEC Rule 144A restriction.
### Security segregated as collateral for open futures contracts.
^^ 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.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. All amounts are stated in U.S.
dollars unless otherwise indicated. A list of abbreviations is shown below.
AUD = Australian Dollar GBP = British Pound
CAD = Canadian Dollar NOK = Norwegian Krone
CHF = Swiss Franc NZD = New Zealand Dollar
DKK = Danish Krone SEK = Swedish Krona
EUR = Euro
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES (unaudited)
--------------------------------------------------------------------------------------------------
This statement represents your trust's balance sheet, which details the assets
and liabilities composing the total value of your trust.
AT 4/30/05
ASSETS
Investments, at value (identified cost, $854,522,142) $861,423,311
--------------------------------------------------------------------------------------------------
Cash 1,410
--------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost, $170) 167
--------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange contracts 615,537
--------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 23,706
--------------------------------------------------------------------------------------------------
Receivable for daily variation margin on open
futures contracts 15,000
--------------------------------------------------------------------------------------------------
Interest receivable 15,241,617
--------------------------------------------------------------------------------------------------
Other assets 23,012
--------------------------------------------------------------------------------------------------
Total assets $877,343,760
--------------------------------------------------------------------------------------------------
LIABILITIES
Payable to dividend disbursing agent $229,455
--------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts 1,018,603
--------------------------------------------------------------------------------------------------
Payable for investments purchased 2,120,396
--------------------------------------------------------------------------------------------------
Payable for trust shares reacquired 364,441
--------------------------------------------------------------------------------------------------
Payable to affiliates
--------------------------------------------------------------------------------------------------
Management fee 38,322
--------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 72,784
--------------------------------------------------------------------------------------------------
Administrative fee 740
--------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 487,632
--------------------------------------------------------------------------------------------------
Total liabilities $4,332,373
--------------------------------------------------------------------------------------------------
Net assets $873,011,387
--------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities (unaudited) - continued
NET ASSETS CONSIST OF
Paid-in capital $950,336,114
--------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 6,452,486
--------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (72,256,830)
--------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (11,520,383)
--------------------------------------------------------------------------------------------------
Net assets $873,011,387
--------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
(129,603,566 issued, less 8,404,650 treasury shares) 121,198,916
--------------------------------------------------------------------------------------------------
Net asset value per share
(net assets of $873,011,387/121,198,916 shares of
beneficial interest outstanding) $7.20
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS (unaudited)
--------------------------------------------------------------------------------------------------
This statement describes how much your trust received in investment income and
paid in expenses. It also describes any gains and/or losses generated by trust
operations.
SIX MONTHS ENDED 4/30/05
NET INVESTMENT INCOME
Interest income $21,613,406
---------------------------------------------------------------------------------------------------
Expenses
---------------------------------------------------------------------------------------------------
Management fee $2,817,562
---------------------------------------------------------------------------------------------------
Trustees' compensation 64,304
---------------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing costs 180,931
---------------------------------------------------------------------------------------------------
Administrative fee 39,735
---------------------------------------------------------------------------------------------------
Custodian fee 263,637
---------------------------------------------------------------------------------------------------
Printing 21,800
---------------------------------------------------------------------------------------------------
Postage 176,367
---------------------------------------------------------------------------------------------------
Auditing fees 31,023
---------------------------------------------------------------------------------------------------
Legal fees 12,369
---------------------------------------------------------------------------------------------------
Miscellaneous 219,439
---------------------------------------------------------------------------------------------------
Total expenses $3,827,167
---------------------------------------------------------------------------------------------------
Fees paid indirectly (18,710)
---------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (1,982)
---------------------------------------------------------------------------------------------------
Net expenses $3,806,475
---------------------------------------------------------------------------------------------------
Net investment income $17,806,931
---------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
---------------------------------------------------------------------------------------------------
Investment transactions $11,687,600
---------------------------------------------------------------------------------------------------
Foreign currency transactions (9,728,479)
---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $1,959,121
---------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
---------------------------------------------------------------------------------------------------
Investments $(19,065,262)
---------------------------------------------------------------------------------------------------
Futures contracts (39,705)
---------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 5,650,658
---------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(13,454,309)
---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(11,495,188)
---------------------------------------------------------------------------------------------------
Change in net assets from operations $6,311,743
---------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
---------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
---------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/05 10/31/04
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
Net investment income $17,806,931 $39,129,944
--------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 1,959,121 11,383,756
--------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation (13,454,309) (16,494,518)
-------------------------------------------------------- ------------ ------------
Change in net assets from operations $6,311,743 $34,019,182
-------------------------------------------------------- ------------ ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(22,032,379) $(46,430,094)
-------------------------------------------------------- ------------ ------------
Change in net assets from trust share transactions $(16,380,464) $(19,130,079)
-------------------------------------------------------- ------------ ------------
Total change in net assets $(32,101,100) $(31,540,991)
-------------------------------------------------------- ------------ ------------
NET ASSETS
At beginning of period $905,112,487 $936,653,478
--------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $11,520,383 and
$5,363,096, respectively) $873,011,387 $905,112,487
--------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in
the table represent the rate by which an investor would have earned (or lost) on an investment in the trust (assuming
reinvestment of all distributions) held for the entire period.
SIX MONTHS YEAR ENDED 10/31
ENDED ------------------------------------------------------------------
4/30/05 2004 2003 2002 2001 2000
(UNAUDITED)
Net asset value, beginning of period $7.32 $7.40 $7.57 $7.54 $7.06 $7.25
------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#(S)(S)
Net investment income(S) $0.15 $0.31 $0.31 $0.38 $0.48 $0.49
------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments and foreign
currency transactions (0.09) (0.04) (0.08) 0.09 0.48 (0.20)
---------------------------------------- ------- ------ ------ ------ ------ ------
Total from investment operations $0.06 $0.27 $0.23 $0.47 $0.96 $0.29
---------------------------------------- ------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net investment income $(0.18) $(0.37) $(0.40) $(0.44) $(0.49) $(0.33)
------------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- -- -- (0.21)
---------------------------------------- ------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.18) $(0.37) $(0.40) $(0.44) $(0.49) $(0.54)
---------------------------------------- ------- ------ ------ ------ ------ ------
Net increase from repurchase of
capital shares $0.00+++ $0.02 $-- $0.00+++ $0.01 $0.06
---------------------------------------- ------- ------ ------ ------ ------ ------
Net asset value, end of period $7.20 $7.32 $7.40 $7.57 $7.54 $7.06
---------------------------------------- ------- ------ ------ ------ ------ ------
Per share market value,
end of period $6.48 $6.59 $6.89 $6.91 $6.95 $6.38
---------------------------------------- ------- ------ ------ ------ ------ ------
Total return at market value (%) 1.07++ 1.02 5.49 5.33 16.93 10.95
------------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
SIX MONTHS YEAR ENDED 10/31
ENDED --------------------------------------------------------------
4/30/05 2004 2003 2002 2001 2000
(UNAUDITED)
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.87+ 0.84 0.86 0.90 0.93 0.95
------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.06+ 4.24 4.14 5.09 6.62 6.93
------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 21 45 90 115 72 93
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000,000 Omitted) $873 $905 $937 $959 $959 $906
------------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the trust for its proportional share
of substantially all of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been
incurred by the trust, the net investment income per share and the ratios would have been:
Net investment income $0.15^ $0.31^ $-- $-- $-- $--
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 0.87^+ 0.84^ -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 4.06^+ 4.24^ -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^ The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
(S)(S) As required, effective November 1, 2001, the trust adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
October 31, 2002 was to decrease net investment income per share by $0.06, and increase realized and unrealized gains
and losses per share by $0.06, and decrease the ratio of net investment income to average net assets by 0.78%. Per
share, ratios, and supplemental data for periods prior to November 1, 2001 have not been restated to reflect this
change in presentation.
SEE NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
-------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Intermediate Income Trust (the trust) is a non-diversified trust that is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a closed-end management
investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
trust can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
INVESTMENT VALUATIONS - Bonds and other fixed income securities (other than
short-term obligations) in the trust's portfolio are valued at an evaluated
bid price as reported by an independent pricing service, or to the extent a
valuation is not reported by a pricing service, such securities are valued on
the basis of quotes from brokers and dealers. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Futures contracts are valued at the
settlement price as reported by an independent pricing service on the primary
exchange on which they are traded. Forward foreign currency contracts are
valued using spot rates and forward points as reported by an independent
pricing source. Short-term obligations with a remaining maturity in excess of
60 days will be valued upon dealer-supplied valuations. All other short-term
obligations in the trust's portfolio are valued at amortized cost, which
approximates market value as determined by the Board of Trustees. 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. When pricing service information or market quotations
are not readily available, securities are priced at fair value as determined
under the direction of the Board of Trustees.
REPURCHASE AGREEMENTS - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the trust to
obtain those securities in the event of a default under the repurchase
agreement. The trust monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the trust under each such repurchase agreement. The trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS),
may utilize a joint trading account for the purpose of entering into one or
more repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of
both realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the trust or other MFS funds selected
by the Trustee. Deferred amounts represent an unsecured obligation of the
trust until distributed in accordance with the Plan. Included in other assets,
and accrued expenses and other liabilities, is $15,804 of Deferred Trustees'
Compensation.
FUTURES CONTRACTS - The trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the trust is
required to deposit with the broker, either in cash or securities, an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the trust each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes
as unrealized gains or losses by the trust. The trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
rates. Investments in interest rate futures for purposes other than hedging
may be made to modify the duration of the portfolio without incurring the
additional transaction costs involved in buying and selling the underlying
securities. Investments in currency futures for purposes other than hedging
may be made to change the trust's relative position in one or more currencies
without buying and selling portfolio assets. Investments in equity index
contracts or contracts on related options for purposes other than hedging may
be made when the trust has cash on hand and wishes to participate in
anticipated market appreciation while the cash is being invested. Should
interest rates move unexpectedly, the trust may not achieve the anticipated
benefits of the futures contracts and may realize a loss.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The trust may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the trust may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The trust may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the trust may enter into contracts with the intent of changing the
relative exposure of the trust'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.
DOLLAR ROLL TRANSACTIONS - The trust enters into dollar roll transactions,
with respect to mortgage backed securities issued by Ginnie Mae, Fannie Mae,
and Freddie Mac, in which the trust sells mortgage backed securities to
financial institutions and simultaneously agrees to accept substantially
similar (same type, coupon, and maturity) securities at a later date at an
agreed-upon price. During the period between the sale and repurchase in a
dollar roll transaction the trust will not be entitled to receive interest and
principal payments on the securities sold but is compensated by interest
earned on the proceeds of the initial sale and by a lower purchase price on
the securities to be repurchased which enhances the trust's total return. The
trust accounts for dollar roll transactions as purchases and sales. If certain
criteria are met these dollar roll transactions may be considered a financing
transaction whereby the difference in the sales price and the future purchase
price is recorded as an adjustment to interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Some securities may be purchased on a "when-issued" or
"forward delivery" basis, which means that the securities will be delivered to
the trust at a future date, usually beyond customary settlement time. Interest
income is recorded on the accrual basis. All premium and discount is amortized
or accreted for financial statement purposes in accordance with U.S. generally
accepted accounting principles. All discount is accreted for tax reporting
purposes as required by federal income tax regulations. The trust may receive
proceeds from litigation settlements involving its portfolio holdings. Any
proceeds received are reflected in realized gain/loss in the statement of
operations, or in unrealized gain/loss if the security is still held by the
trust.
The trust may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date. Although the unit
price has been established, the principal value has not been finalized.
However, the principal amount of the commitments will not fluctuate more than
0.01%. The trust holds, and maintains until settlement date, cash or high-
grade debt obligations in an amount sufficient to meet the purchase price, or
the trust may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk
of decline in the value of the trust's other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities.
The trust may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
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, for the six months ended April 30, 2005, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for foreign currency transactions, derivatives, defaulted bonds,
straddle loss deferrals, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended October 31,
2004 and October 31, 2003 was as follows:
10/31/04 10/31/03
Distributions declared from:
--------------------------------------------------------------
Ordinary income $46,430,094 $51,230,803
--------------------------------------------------------------
As of October 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $3,734,204
----------------------------------------------------------
Capital loss carryforward (55,849,119)
----------------------------------------------------------
Unrealized appreciation 4,246,415
----------------------------------------------------------
Other temporary differences (14,830,484)
----------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration as follows:
EXPIRATION DATE
October 31, 2006 $(11,137,819)
----------------------------------------------------------
October 31, 2007 (11,376,973)
----------------------------------------------------------
October 31, 2008 (11,439,294)
----------------------------------------------------------
October 31, 2010 (1,074,810)
----------------------------------------------------------
October 31, 2012 (20,820,223)
----------------------------------------------------------
Total $(55,849,119)
----------------------------------------------------------
(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 0.32% of the trust's average daily net assets and 5.65% of gross
investment income. Management fees from net assets and gross investment income
incurred for the six months ended April 30, 2005 were at an effective rate of
0.64% of average daily net assets on an annualized basis.
The trust pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, and pays no compensation directly to its Trustees who are
officers of the investment adviser, or to officers of the trust, all of whom
receive remuneration for their services to the trust from MFS. Certain
officers and Trustees of the trust are officers or directors of MFS and MFS
Service Center, Inc. (MFSC). The trust has an unfunded, defined benefit plan
for retired Independent Trustees and an unfunded retirement benefit deferral
plan for current Independent Trustees. Included in Trustees' compensation is a
net decrease of $405 as a result of the change in the trust's unfunded
retirement benefit deferral plan for certain current Independent Trustees and
a pension expense of $8,942 for retired Independent Trustees for the six
months ended April 30, 2005.
This trust and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. The
trust paid MFS an administrative fee up to the following annual percentage
rates of the trust's average daily net assets:
BEGINNING OF
PERIOD THROUGH
EFFECTIVE DATE 2/28/05 3/01/05
First $2 billion 0.01120% 0.01626%
----------------------------------------------------------------------------
Next $2.5 billion 0.00832% 0.01206%
----------------------------------------------------------------------------
Next $2.5 billion 0.00032% 0.00056%
----------------------------------------------------------------------------
In excess of $7 billion 0.00000% 0.00000%
----------------------------------------------------------------------------
For the six months ended April 30, 2005, the trust paid MFS $39,735,
equivalent to 0.00905% of average daily net assets, to partially reimburse MFS
for the costs of providing administrative services.
TRANSFER AGENT - Included in transfer agent and dividend disbursing costs is a
fee paid to MFSC, a wholly owned subsidiary of MFS, for its services 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. These fees amounted to
$75,475 for the six months ended April 30, 2005. Also included in transfer
agent and dividend disbursing costs are out-of-pocket expenses, paid to MFSC,
which amounted to $92,802 for the six months ended April 30, 2005, as well as
other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $65,902,581 $68,926,575
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $116,905,913 $154,593,321
-------------------------------------------------------------------------------
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 $878,391,365
----------------------------------------------------------
Gross unrealized appreciation $16,691,558
----------------------------------------------------------
Gross unrealized depreciation (33,659,612)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(16,968,054)
----------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. The Trustees have
authorized the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. The trust repurchased and retired 2,528,900 shares of
beneficial interest during the six months ended April 30, 2005 at an average
price per share of $6.48 and a weighted average discount of 10.50% per share.
Six months ended 4/30/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
Treasury shares
reacquired (2,528,900) $(16,380,464) (2,927,500) $(19,130,079)
--------------------------------------------------------------------------------
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
line of credit provided by a syndication of banks under a 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 Federal
Reserve funds rate plus 0.35%. In addition, a commitment fee, based on the
average daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the trust for the six months ended April 30, 2005, was $3,459,
and is included in miscellaneous expense. The trust had no significant
borrowings during the year six months ended April 30, 2005.
(7) FINANCIAL INSTRUMENTS
The trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts and
futures contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
Sales and purchases in the table below are netted by currency.
----------
SALES
----------
NET
IN UNREALIZED
CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
6/07/05 AUD 4,047,153 $3,083,744 $3,151,691 $(67,947)
6/08/05-6/27/05 EUR 126,144,222 163,007,737 162,502,019 505,718
5/09/05 GBP 10,979,784 20,905,508 20,940,750 (35,242)
5/03/05-6/08/05 NOK 27,730,439 4,357,849 4,398,368 (40,519)
6/08/05 NZD 24,195,148 17,101,131 17,638,569 (537,438)
------------ ------------ ---------
$208,455,969 $208,631,397 $(175,428)
============ ============ =========
----------
PURCHASES
----------
6/08/05 CHF 2,584,813 $2,150,489 $2,167,394 $16,905
5/09/05 DKK 733,546 126,724 126,802 78
6/08/05-6/27/05 EUR 4,760,013 6,192,671 6,132,276 (60,395)
5/03/05-6/08/05 NOK 27,800,000 4,442,032 4,409,408 (32,624)
5/06/05-6/14/05 SEK 34,367,873 4,966,403 4,814,801 (151,602)
------------ ------------ ---------
$17,878,319 $17,650,681 $(227,638)
============ ============ =========
At April 30, 2005, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $23,706 with
Merrill Lynch International.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown on
page 14.
At April 30, 2005, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
U.S. Treasury Notes
5 year futures June 2005 60 Short $(39,705)
-------------------------------------------------------------------------------
At April 30, 2005, the trust had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the
Securities and Exchange Commission ("SEC") regarding disclosure of brokerage
allocation practices in connection with MFS fund sales (the term "MFS funds"
means the open-end registered management investment companies sponsored by
MFS). Under the terms of the settlement, in which MFS neither admitted nor
denied any wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement
and $50 million in penalty to certain MFS funds, pursuant to a plan developed
by an independent distribution consultant. The brokerage allocation practices
which were the subject of this proceeding were discontinued by MFS in November
2003. The agreement with the SEC is reflected in an order of the SEC. The SEC
settlement order states that MFS failed to adequately disclose to the Boards
of Trustees and to shareholders of the MFS funds the specifics of its
preferred arrangements with certain brokerage firms selling MFS fund shares.
The SEC settlement order states that MFS had in place policies designed to
obtain best execution of all MFS fund trades. As part of the settlement, MFS
retained an independent compliance consultant to review the completeness of
its current policies and practices regarding disclosure to MFS fund trustees
and to MFS fund shareholders of strategic alliances between MFS or its
affiliates and broker-dealers and other financial intermediaries who support
the sale of MFS fund shares. Pursuant to the SEC order, on July 28, 2004, MFS
transferred these settlement amounts to the SEC, and those MFS funds entitled
to these settlement amounts accrued an estimate of their pro rata portion of
these amounts. The final distribution plan was approved by the SEC on January
21, 2005, and the affected MFS funds received the payment on February 16,
2005.
In addition, in February 2004, MFS reached agreement with the SEC, the New
York Attorney General ("NYAG") and the Bureau of Securities Regulation of the
State of New Hampshire ("NH") to settle administrative proceedings alleging
false and misleading information in certain MFS open-end retail fund ("MFS
retail funds") prospectuses regarding market timing and related matters (the
"February Settlements"). These regulators alleged that prospectus language for
certain MFS retail funds was false and misleading because, although the
prospectuses for those funds in the regulators' view indicated that they
prohibited market timing, MFS did not limit trading activity in 11 domestic
large cap stock, high grade bond and money market retail funds. MFS' former
Chief Executive Officer and former President also reached agreement with the
SEC in which they agreed to, among other terms, monetary fines and temporary
suspensions from association with any investment adviser or registered
investment company. These individuals have resigned their positions with, and
will not be returning to, MFS and the MFS funds. Under the terms of the
February Settlements, MFS and the executives neither admit nor deny
wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds,
which has been funded by MFS and of which $50 million is characterized as a
penalty. This pool will be distributed in accordance with a methodology
developed by an independent distribution consultant in consultation with MFS
and the Board of Trustees of the MFS retail funds, and acceptable to the SEC.
MFS has further agreed with NYAG to reduce its management fees in the
aggregate amount of approximately $25 million annually over the next five
years, and not to increase certain management fees during this period. MFS has
also paid an administrative fine to NH in the amount of $1 million, which will
be used for investor education purposes (NH retained $250,000 and $750,000 was
contributed to the North American Securities Administrators Association's
Investor Protection Trust). In addition, under the terms of the February
Settlements, MFS is in the process of adopting certain governance changes and
reviewing its policies and procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center,
Inc., MFS Corporation Retirement Committee, Sun Life Financial Inc., various
MFS funds, certain current and/or former Trustees of these MFS funds, and
certain officers of MFS have been named as defendants in multiple lawsuits
filed in federal and state courts. The lawsuits variously have been commenced
as class actions or individual actions on behalf of investors who purchased,
held or redeemed shares of the MFS funds during specified periods, as ERISA
actions by participants in certain retirement plan accounts on behalf of those
accounts, or as derivative actions on behalf of the MFS funds. The lawsuits
relating to market timing and related matters have been transferred to, and
consolidated before, the United States District Court for the District of
Maryland, as part of a multi-district litigation of market timing and related
claims involving several other fund complexes (In re Mutual Funds Investment
Litigation (Alger, Columbia, Janus, MFS, One Group, Putnam, Allianz Dresdner),
No. 1:04-md-15863 (transfer began March 19, 2004)). The market timing cases
related to the MFS complex are Riggs v. MFS et al., Case No. 04-cv-01162-JFM
(direct), Hammerslough v. MFS et al., Case No. 04-md-01620 (derivative) and
Anita Walker v. MFS et al., Case No. 1:04-CV-01758 (ERISA). The plaintiffs in
these consolidated lawsuits generally seek injunctive relief including removal
of the named Trustees, adviser and distributor, rescission of contracts and
12b-1 Plans, disgorgement of fees and profits, monetary damages, punitive
damages, attorney's fees and costs and other equitable and declaratory relief.
Two lawsuits alleging improper brokerage allocation practices and excessive
compensation are pending in the United States District Court for the District
of Massachusetts (Forsythe v. Sun Life Financial Inc., et al., No. 04cv10584
(GAO) (a consolidated action) and Marcus Dumond, et al. v. Massachusetts
Financial Servs. Co., et al., No. 04cv11458 (GAO)). The plaintiffs in these
lawsuits generally seek compensatory damages, punitive damages, recovery of
fees, rescission of contracts, an accounting, restitution, declaratory relief,
equitable and/or injunctive relief and attorney's fees and costs. The various
lawsuits generally allege that some or all of the defendants (i) permitted or
acquiesced in market timing and/or late trading in some of the MFS funds,
inadequately disclosed MFS' internal policies concerning market timing and
such matters (ii) received excessive compensation as fiduciaries to the MFS
funds, or (iii) permitted or acquiesced in the improper use of fund assets by
MFS to support the distribution of MFS fund shares and inadequately disclosed
MFS' use of fund assets in this manner. The actions assert that some or all of
the defendants violated the federal securities laws, including the Securities
Act of 1933 and the Securities Exchange Act of 1934, the Investment Company
Act of 1940 and the Investment Advisers Act of 1940, the Employee Retirement
Income Security Act of 1974, as well as fiduciary duties and other violations
of common law. Insofar as any of the actions is appropriately brought
derivatively on behalf of any of the MFS funds, any recovery will inure to the
benefit of the MFS funds. In February, March, and April 2005, the defendants
filed separate motions to dismiss all claims of the various lawsuits. The
parties continue to brief the issues for the courts and various hearing dates
have been scheduled. Additional lawsuits based on similar allegations may be
filed in the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS
has established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they
allegedly sustained as a result of market timing or late trading in certain of
the MFS retail funds, and distributed $50 million to affected MFS funds to
compensate those funds based upon the amount of brokerage commissions
allocated in recognition of MFS fund sales. It is not clear whether these
amounts will be sufficient to compensate shareholders for all of the damage
they allegedly sustained, whether certain shareholders or putative class
members may have additional claims to compensation, or whether the damages
that may be awarded in any of the actions will exceed these amounts. In the
event the MFS funds incur any losses, costs or expenses in connection with
such lawsuits, the Boards of Trustees of the affected MFS funds may pursue
claims on behalf of such funds against any party that may have liability to
the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments,
will not result in increased fund redemptions, reduced sales of fund shares,
or other adverse consequences to the MFS funds.
While these developments relate to MFS and the MFS' open-end funds, there can
be no assurance that these developments, or the adverse publicity associated
with these developments, will not result in an increase to the market
discount of the MFS closed-end fund shares or other adverse consequences.
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------------------------------
To the Trustees and Shareholders of MFS Intermediate Income Trust:
We have reviewed the accompanying statement of assets and liabilities,
including the portfolio of investments, of the MFS Intermediate Income Trust
(the "Trust"), as of April 30, 2005, and the related statement of operations,
statement of changes in net assets, and the financial highlights for the six-
month period then ended. These interim financial statements are the
responsibility of the Trust'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 such interim financial statements for them to be in
conformity with accounting principles generally accepted in the United States
of America.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of assets
and liabilities, including the portfolio of investments, of the MFS
Intermediate Income Trust (the "Trust"), as of October 31, 2004, 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;
and in our report dated December 20, 2004, we expressed an unqualified opinion
on those financial statements.
The statement of changes in net assets for the year ended October 31, 2004 and
the financial highlights for the five year in period ended October 31, 2004
taken from these finacial statements are included herein.
DELOITTE & TOUCHE LLP
June 23, 2005
-------------------------------------------------------------------------------
RESULTS OF SHAREHOLDER MEETING (unaudited) - 4/30/05
-------------------------------------------------------------------------------
At the annual meeting of shareholders of MFS Intermediate Income Trust, which
was held on March 23, 2005, the following actions were taken:
ITEM 1. To elect Trustees:
NUMBER OF SHARES
-----------------------------------
NOMINEE FOR WITHHOLD AUTHORITY
Lawrence H. Cohn, M.D. 108,040,091.754 2,279,160.924
-------------------------------------------------------------------------------
David H. Gunning 108,200,470.730 2,118,781.948
-------------------------------------------------------------------------------
William R. Gutow 108,122,547.051 2,196,705.627
-------------------------------------------------------------------------------
Michael Hegarty 108,114,189.631 2,205,063.047
-------------------------------------------------------------------------------
J. Atwood Ives 108,100,398.682 2,218,853.996
-------------------------------------------------------------------------------
Amy B. Lane 108,212,072.538 2,107,180.140
-------------------------------------------------------------------------------
Robert J. Manning 108,163,116.631 2,156,136.047
-------------------------------------------------------------------------------
Lawrence T. Perara 108,115,816.416 2,203,436.262
-------------------------------------------------------------------------------
Robert C. Pozen 108,165,900.631 2,153,352.047
-------------------------------------------------------------------------------
J. Dale Sherratt 108,122,497.556 2,196,755.122
-------------------------------------------------------------------------------
Laurie J. Thomsen 108,099,516.631 2,219,736.047
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
-------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
-------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
-------------------------------------------------------------------------------
The 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. The fund's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of April 30, 2005, our records indicate that there are 7,589 registered
shareholders and approximately 55,353 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
State Street Bank and Trust Company
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MIN-SEM-06/05 74M
ITEM 2. CODE OF ETHICS.
The Registrant has amended its Code of Ethics to reflect that the Registrant's
Principal Financial Officer has changed.
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 of the Registrant is included as part of the report to
shareholders of the Registrant under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable at this time.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
========================================================================================================
MFS INTERMEDIATE INCOME TRUST
--------------------------------------------------------------------------------------------------------
(C) TOTAL
NUMBER OF (D) MAXIMUM NUMBER
PART OF (OR APPROXIMATE
SHARES DOLLAR VALUE)
PURCHASED AS OF SHARES THAT
(A) TOTAL PUBLICLY MAY YET BE
NUMBER OF (B) AVERAGE ANNOUNCED PURCHASED UNDER
SHARES PRICE PAID PLANS OR THE PLANS
PERIOD PURCHASED PER SHARE PROGRAMS OR PROGRAMS
========================================================================================================
11/1/04-11/30/04 576,500 $6.51 576,500 9,161,532
--------------------------------------------------------------------------------------------------------
12/1/04-12/31/04 714,600 $6.46 714,600 8,446,932
--------------------------------------------------------------------------------------------------------
1/1/05-1/31/05 317,200 $6.54 317,200 8,129,732
--------------------------------------------------------------------------------------------------------
2/1/05-2/28/05 119,500 $6.61 119,500 8,010,232
--------------------------------------------------------------------------------------------------------
3/1/05-3/31/05 441,600 $6.41 441,600 11,758,402
--------------------------------------------------------------------------------------------------------
4/1/05-4/30/05 359,500 $6.44 359,500 11,398,902
--------------------------------------------------------------------------------------------------------
Total 2,528,900 $6.48 2,528,900
========================================================================================================
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, 2005 plan year are 12,200,002.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A.
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 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 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: Code of
Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act sent or given during the period covered by the report by or on
behalf of the Registrant to 10 or more persons. Not applicable.
(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.
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 INTERMEDIATE INCOME TRUST
---------------------------------------------------------------------
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President
Date: June 23, 2005
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)* ROBERT J. MANNING
------------------------------------------------------
Robert J. Manning, President
(Principal Executive Officer)
Date: June 23, 2005
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: June 23, 2005
* Print name and title of each signing officer under his or her signature.