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, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds 04/30/06
SEMIANNUAL REPORT
MFS(R) INTERMEDIATE INCOME TRUST
A path for pursuing opportunity
M F S(SM)
INVESTMENT MANAGEMENT(R)
[graphic omitted]
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NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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MFS(R) INTERMEDIATE INCOME TRUST 4/30/06
The trust seeks to preserve capital and provide high current income.
New York Stock Exchange Symbol: MIN
TABLE OF CONTENTS
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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PORTFOLIO MANAGER'S PROFILE 3
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PERFORMANCE SUMMARY 4
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 6
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PORTFOLIO OF INVESTMENTS 7
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FINANCIAL STATEMENTS 12
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NOTES TO FINANCIAL STATEMENTS 16
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 23
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 24
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PROXY VOTING POLICIES AND INFORMATION 24
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QUARTERLY PORTFOLIO DISCLOSURE 24
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CONTACT INFORMATION BACK COVER
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
It has been said that change is the only constant in life. As investors have
seen, that theme is still accurate today as we recently have experienced
shifting economic cycles because of natural disasters and political
instability around the globe.
Markets worldwide have fluctuated in the past year as devastating hurricanes
had a dramatic effect on the international economy, particularly on oil
prices. We witnessed political unrest in the Middle East, highlighted by
instability in Iraq, and in Africa, the usually stable Nigeria also
experienced violence. As a result, energy prices have bounced up and down,
with crude oil prices at one point topping a record $70 per barrel.
Such cycles are not uncommon and in fact have almost become the norm in our
everyday lives. What does all of this mean to you as an investor? In times like
these, it helps to know that you're working with a seasoned investment
professional who has experience to guide you through difficult times. At
MFS(R), we believe our investment management team has the knowledge and
confidence to navigate through difficult cycles and at the same time see
through adversity to find investment opportunities for our clients and
shareholders.
Our investment management process, honed over 80 years, combines a unique
concept of teamwork with our unwavering focus on the long term. We firmly
believe that the best way to realize long-term financial goals - be it a
college education, a comfortable retirement, or a secure family legacy - is to
follow a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. Rebalance assets regularly to maintain a desired asset
allocation. Of course, these strategies cannot guarantee a profit or protect
against a loss. This long-term approach requires diligence and patience, two
traits that in our experience are essential to capitalizing on the many
opportunities the financial markets can offer - through both up and down
economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2006
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 94.9%
Cash & Other Net Assets 5.1%
FIXED INCOME MARKET SECTORS (i)
Non-U.S. Sovereigns 28.9%
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U.S. Government Agencies 21.3%
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Mortgage-Backed Securities 21.2%
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U.S. Treasury Securities 18.7%
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Emerging Market Bonds 3.4%
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Commercial Mortgage-Backed
Securities 1.0%
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Residential Mortgage-Backed
Securities 0.3%
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High Grade Corporates 0.1%
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CREDIT QUALITY OF BONDS (r)
AAA 94.9%
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AA 1.5%
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A 1.1%
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BBB 2.0%
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BB 0.2%
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Not Rated 0.3%
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PORTFOLIO FACTS
Average Duration (d) 3.2
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Average Life (m) 4.9 yrs.
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Average Maturity (m) 7.8 yrs.
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Average Credit Quality of Rated
Securities (a) AAA
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Average Short Term Credit Quality A-1
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COUNTRY WEIGHTINGS (i)
United States 67.9%
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Germany 7.2%
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United Kingdom 5.1%
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France 3.3%
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Ireland 2.6%
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Finland 2.5%
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Netherlands 2.5%
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Spain 2.2%
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New Zealand 1.6%
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Other Countries 5.1%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond price is likely to fluctuate with
general changes in interest rates, e.g., if rates rise 1.00%, a fund with a
5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any
derivative holdings, if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded to an earlier date or which have a mandatory put
date prior to the stated maturity. The average life shown takes into
account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in a "AAA"-rating
category. Percentages are based on the total market value of investments as
of 4/30/06.
Percentages are based on net assets as of 4/30/06, unless otherwise noted.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO MANAGER'S PROFILE
James J. Calmas is Senior Vice President of MFS(R) Investment Management
(MFS(R)) and portfolio manager of the limited maturity portfolios of our
mutual funds, variable annuities, and offshore investment products. He is a
member of the MFS Fixed Income Strategy Group. Jim joined MFS(R) in 1988 and
was named portfolio manager in 1998, and Senior Vice President in 2002. He is
a graduate of Dartmouth College and holds an M.B.A. degree from the Amos Tuck
School of Business Administration of Dartmouth College.
Erik S. Weisman, Ph.D., is Vice President of MFS(R) Investment Management
(MFS(R)), a Global Sovereign Fixed Income Research Analyst and a portfolio
manager of our inflation-adjusted bond portfolios of our offshore accounts. He
joined the firm in 2002 as a global sovereign fixed-income research analyst.
Previously, he served for two years as the Assistant to the U.S. Executive
Director for the International Monetary Fund; and for the three years as an
International Economist in the Office of Central and Eastern Europe for the
U.S. Department of the Treasury. Erik earned a bachelor's degree from the
University of Michigan and a master's and Ph.D. degree from Duke University.
PERFORMANCE SUMMARY THROUGH 4/30/06
All results are historical. Investment return and principal value will
fluctuate, and shares, when sold, may be worth more or less than their
original cost. More recent returns may be more or less than those shown. Past
performance is no guarantee of future results.
PRICE SUMMARY
Six months ended
4/30/06
Date Price
Net asset value per share 10/31/05 $7.04
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4/30/06 $6.91
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New York Stock Exchange price 10/31/05 $6.29
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1/13/06 (high) (t) $6.31
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4/13/06 (low) (t) $6.02
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4/30/06 $6.07
TOTAL RETURN VS BENCHMARKS
Six months ended
4/30/06
New York Stock Exchange price (r) -0.68%
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Net asset value (r) 1.02%
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Citigroup World Government Bond Non-dollar Hedged
Index (f) -0.08%
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Citigroup Medium Term (1-10 years) Treasury Government
Sponsored Index (f) 0.78%
(f) Source: FactSet Research Systems, Inc.
(r) Includes reinvestment of dividend and capital gain distributions.
(t) For the period November 1, 2005 through April 30, 2006.
INDEX DEFINITIONS
Citigroup World Government Bond Non-Dollar Hedged Index - a market
capitalization-weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the United States. Country
eligibility is determined based upon market capitalization and investability
criteria.
Citigroup Medium-Term (1-10 years) Treasury Government Sponsored Index - 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. 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 returns that are calculated based on the net asset value
and New York Stock Exchange prices can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes
as a return of capital will reduce each shareholder's basis in his or her
shares and, to the extent the return of capital exceeds such basis, will be
treated as gain to the shareholder from a sale of shares. Returns of
shareholder capital have the effect of reducing the trust's assets and may
increase the trust's expense ratio.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
KEY RISK CONSIDERATIONS
The portfolio's yield and share prices change daily based on the credit
quality of its investments and changes in interest rates. In general, the
value of debt securities will decline when interest rates rise and will
increase when interest rates fall. Debt securities with longer maturity dates
will be subject to greater price fluctuations than those with shorter
maturities. Mortgage securities are subject to prepayment risk which can offer
less potential for gains in a declining interest rate environment and greater
potential for loss in a rising interest rate environment. Derivatives involve
risks different from, and greater than, those of the underlying indicator's in
whose value the derivative is based. The value of the derivative can move in
unexpected ways and result in unanticipated losses and increased volatility if
the value of the underlying indicator(s) does not move in the direction or the
extent anticipated. Foreign investments can be more volatile than U.S.
investments. Changes in currency exchange rates may affect the portfolio's net
asset value, the value of dividends and interest earned and gains and losses
realized on the sale of securities. Investing in emerging markets can involve
risks in addition to those generally associated with investing in more
developed foreign markets. When you sell your shares, they may be worth more
or less than the amount you paid for them.
These risks will increase share price volatility.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of
the trust in the open market at the option of the Board of Trustees and on
such terms as the Trustees shall determine.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The trust offers a Dividend Reinvestment and Cash Purchase Plan that allows
you to reinvest either all of the distributions paid by the trust or only the
long-term capital gains. Purchases are made at the market price unless that
price exceeds the net asset value (the shares are trading at a premium). If
the shares are trading at a premium, purchases will be made at a discounted
price of either the net asset value or 95% of the market price, whichever is
greater. Twice each year you can also buy shares. Investments may be made in
any amount over $100 in January and July on the 15th of the month or shortly
thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the plan on your behalf. If
the nominee does not offer the plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. The automatic
reinvestment of distributions does not relieve you of any income tax that may
be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please
have available the name of the trust and your account and Social Security
numbers. For certain types of registrations, such as corporate accounts,
instructions must be submitted in writing. Please call for additional details.
When you withdraw from the plan, you can receive the value of the reinvested
shares in one of two ways: a check for the value of the full and fractional
shares, or a certificate for the full shares and a check for the fractional
shares.
PORTFOLIO OF INVESTMENTS (unaudited) - 4/30/06
The Portfolio of Investments is a complete list of all securities owned by your trust. It is
categorized by broad-based asset classes.
Bonds - 93.2%
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ISSUER SHARES/PAR VALUE ($)
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Agency - Other - 0.1%
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Small Business Administration, 7.64%, 2010 $ 921,823 $ 967,517
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Asset Backed & Securitized - 1.3%
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Commercial Mortgage Acceptance Corp., FRN, 1.0053%, 2030 (i) $ 76,898,800 $ 2,270,283
Falcon Franchise Loan LLC, FRN, 3.0551%, 2023 (a)(i) 14,171,258 1,595,684
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.3644%, 2043 4,380,726 4,257,822
Multi-Family Capital Access One, Inc., 6.65%, 2024 2,286,879 2,331,848
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$ 10,455,637
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Banks & Credit Companies - 0.1%
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SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 375,000 $ 534,833
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Emerging Market Quasi-Sovereign - 0.5%
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Pemex Project Funding Master Trust, 9.375%, 2008 $ 2,318,000 $ 2,537,051
Petroleum Export Peloil, 5.265%, 2011 (a) 303,760 296,570
Petronas Capital Ltd., 7.875%, 2022 1,158,000 1,344,974
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$ 4,178,595
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Emerging Market Sovereign - 2.1%
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Federative Republic of Brazil, 8%, 2018 $ 183,000 $ 198,647
Republic of Chile, FRN, 5.5256%, 2008 2,321,000 2,330,284
Republic of Panama, 9.375%, 2029 1,486,000 1,855,271
Republic of South Africa, 9.125%, 2009 1,935,000 2,123,016
Russian Federation, 3%, 2008 3,277,000 3,105,285
State of Israel, 5.125%, 2014 5,000,000 4,743,068
United Mexican States, 8.125%, 2019 2,205,000 2,546,775
United Mexican States, 8.3%, 2031 279,000 331,313
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$ 17,233,659
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International Market Quasi-Sovereign - 5.8%
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KfW Bankengruppe, 2.375%, 2006 $ 4,120,000 $ 4,073,102
KfW Bankengruppe, FRN, 2.563%, 2007 EUR 5,408,000 6,815,003
KfW Bankengruppe, 3.25%, 2007 $ 4,200,000 4,096,499
KfW Bankengruppe, 4.625%, 2008 3,525,000 3,482,862
Landesbank Baden-Wurttemberg, FRN, 2.594%, 2007 EUR 1,670,000 2,105,054
Landesbank Baden-Wurttemberg, FRN, 2.704%, 2007 EUR 3,150,000 3,973,010
Landesbank Baden-Wurttemberg, FRN, 2.764%, 2007 EUR 1,791,000 2,258,491
Landesbank Baden-Wurttemberg, 5.125%, 2007 $ 7,700,000 7,684,777
Network Rail MTN Finance PLC, FRN, 2.628%, 2007 EUR 5,468,000 6,896,254
Province of Ontario, 4.75%, 2016 $ 6,000,000 5,669,178
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$ 47,054,230
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International Market Sovereign - 22.6%
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Federal Republic of Germany, 3.5%, 2008 EUR 9,400,000 $ 11,859,761
Federal Republic of Germany, 3.75%, 2015 EUR 9,103,000 11,315,489
Government of New Zealand, 6.5%, 2013 NZD 16,120,000 10,672,502
Government of New Zealand, 6%, 2017 NZD 3,179,000 2,055,412
Kingdom of Netherlands, 5.75%, 2007 EUR 7,197,000 9,261,523
Kingdom of Netherlands, 3.75%, 2009 EUR 8,510,000 10,791,629
Kingdom of Spain, 6%, 2008 EUR 8,405,000 11,056,103
Kingdom of Spain, 5.35%, 2011 EUR 5,191,000 7,036,877
Republic of Austria, 5.5%, 2007 EUR 8,384,000 10,895,180
Republic of Finland, 5.375%, 2013 EUR 14,339,000 19,745,622
Republic of France, 4.75%, 2007 EUR 9,746,000 12,512,507
Republic of France, 4.75%, 2012 EUR 9,714,000 12,899,709
Republic of Ireland, 4.25%, 2007 EUR 14,214,000 18,166,313
Republic of Ireland, 4.6%, 2016 EUR 1,837,000 2,431,391
United Kingdom Treasury, 5.75%, 2009 GBP 7,830,000 14,765,592
United Kingdom Treasury, 8%, 2015 GBP 8,210,000 18,842,157
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$184,307,767
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Mortgage Backed - 21.1%
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Fannie Mae, 5.669%, 2006 $ 6,576,259 $ 6,554,514
Fannie Mae, 7.029%, 2007 2,092,978 2,115,819
Fannie Mae, 6.022%, 2010 6,800,000 6,958,835
Fannie Mae, 4.556%, 2011 8,978,243 8,703,187
Fannie Mae, 4.845%, 2013 2,110,151 2,023,087
Fannie Mae, 4.667%, 2014 4,701,984 4,445,326
Fannie Mae, 4.847%, 2014 4,158,388 3,968,469
Fannie Mae, 5.413%, 2014 2,042,210 2,024,729
Fannie Mae, 4.62%, 2015 982,732 920,341
Fannie Mae, 4.925%, 2015 2,191,374 2,093,109
Fannie Mae, 4%, 2016 5,894,042 5,707,363
Fannie Mae, 5.424%, 2016 2,500,000 2,478,613
Fannie Mae, 6%, 2016 - 2034 17,036,762 17,028,759
Fannie Mae, 5.5%, 2017 - 2035 26,547,724 26,020,919
Fannie Mae, 5%, 2018 - 2019 7,292,206 7,114,260
Fannie Mae, 4.5%, 2019 11,310,354 10,785,680
Fannie Mae, 6.5%, 2031 7,952,719 8,117,777
Freddie Mac, 5.5%, 2017 - 2020 15,645,503 15,516,802
Freddie Mac, 6%, 2017 - 2034 2,490,784 2,514,739
Freddie Mac, 5%, 2019 - 2025 29,398,273 29,040,600
Freddie Mac, 3%, 2021 4,700,000 4,603,123
Ginnie Mae, 6%, 2033 3,154,300 3,167,905
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$171,903,956
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Supranational - 0.3%
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Central American Bank, 4.875%, 2012 (a) $ 3,000,000 $ 2,827,497
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U.S. Government Agencies - 20.8%
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Aid-Egypt, 4.45%, 2015 $ 3,963,000 $ 3,688,387
Fannie Mae, 4.75%, 2007 4,000,000 3,985,484
Fannie Mae, 6.625%, 2007 5,000,000 5,101,140
Fannie Mae, 3.375%, 2008 17,000,000 16,267,929
Fannie Mae, 3.875%, 2008 12,900,000 12,494,269
Fannie Mae, 6%, 2008 10,000,000 10,165,760
Fannie Mae, 4.25%, 2009 5,000,000 4,877,150
Federal Home Loan Bank, 2.25%, 2006 10,415,000 10,403,023
Freddie Mac, 4.25%, 2009 7,000,000 6,811,812
Freddie Mac, 4.125%, 2010 18,994,000 18,202,444
Freddie Mac, 6.875%, 2010 6,337,000 6,733,379
Freddie Mac, 5.125%, 2012 27,600,000 27,327,698
Small Business Administration, 5.34%, 2021 6,798,935 6,767,730
Small Business Administration, 6.34%, 2021 2,833,394 2,922,905
Small Business Administration, 6.35%, 2021 3,609,463 3,724,089
Small Business Administration, 6.44%, 2021 2,514,069 2,601,129
Small Business Administration, 6.625%, 2021 3,019,343 3,145,763
Small Business Administration, 4.93%, 2024 2,611,362 2,508,382
Small Business Administration, 5.36%, 2025 2,755,000 2,699,898
Small Business Administration, 5.39%, 2025 2,020,000 1,982,470
U.S. Department of Housing & Urban Development, 5.53%, 2008 11,000,000 11,082,027
U.S. Department of Housing & Urban Development, 7.198%, 2009 6,000,000 6,357,084
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$169,849,952
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U.S. Treasury Obligations - 18.1%
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U.S. Treasury Bonds, 13.875%, 2011 $ 25,500,000 $ 25,585,655
U.S. Treasury Bonds, 10.375%, 2012 29,100,000 31,426,865
U.S. Treasury Bonds, 12%, 2013 30,000,000 34,580,850
U.S. Treasury Notes, 6.125%, 2007 5,000,000 5,074,610
U.S. Treasury Notes, 6.5%, 2010 4,500,000 4,745,390
U.S. Treasury Notes, 4.875%, 2012 5,000,000 4,981,640
U.S. Treasury Notes, 4.25%, 2013 39,000,000 37,143,825
U.S. Treasury Notes, 4.75%, 2014 4,700,000 4,612,425
------------
$148,151,260
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Utilities - Electric Power - 0.4%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 2,926,000 $ 3,121,533
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TOTAL BONDS (IDENTIFIED COST, $786,827,224) $760,586,436
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Short-Term Obligations - 5.8%
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ISSUER SHARES/PAR VALUE ($)
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Edison Asset Securitization LLC, 4.82%, due 5/01/06 (t)(y) $ 27,398,000 $ 27,398,000
General Electric Capital Corp., 4.82%, due 5/01/06 (y) 19,802,000 19,802,000
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TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 47,200,000
-------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $834,027,224) (k) $807,786,436
-------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.0% 8,495,490
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NET ASSETS - 100.0% $816,281,926
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(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities
may be sold in transactions exempt from registration, normally to qualified institutional buyers.
At period end, the aggregate value of these securities was $4,719,751, representing 0.6% of net
assets.
(i) Interest only security for which the fund receives interest on notional principal (Par amount).
Par amount shown is the notional principal and does not reflect the cost of the security.
(k) As of April 30, 2006, the trust held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $747,808,952 and 92.58% of market value provided by
an independent pricing service using an evaluated bid.
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under Section
4(2) of the Securities Act of 1933.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in the Portfolio of Investments and are defined:
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are netted by currency.
NET UNREALIZED
CONTRACTS TO SETTLEMENT CONTRACTS APPRECIATION
DELIVER/RECEIVE DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
--------------------------------------------------------------------------------------------------------
SALES
CAD2,961,906 5/15/06 $ 2,566,443 $2,647,696 $ (81,253)
DKK733,546 5/10/06 119,979 124,106 (4,127)
EUR134,726,782 5/17/06 - 6/13/06 164,177,429 170,432,031 (6,254,602)
GBP19,927,952 6/05/06 34,859,966 36,320,453 (1,460,487)
NOK13,144,827 5/10/06 2,025,553 2,131,859 (106,306)
NZD34,016,688 6/06/06 20,645,459 21,630,174 (984,715)
SEK1,631,962 5/10/06 213,252 221,843 (8,591)
------------ ------------ -----------
$224,608,081 $233,508,162 $(8,900,081)
------------ ------------ -----------
PURCHASES
CAD711,012 5/15/06 $ 615,395 $635,586 $ 20,191
DKK733,546 5/10/06 117,744 124,106 6,362
EUR4,107,575 5/10/06 - 5/17/06 5,009,907 5,186,744 176,837
GBP937,995 6/05/06 1,674,153 1,709,579 35,426
NOK13,144,827 5/10/06 1,962,530 2,131,859 169,329
NZD13,057,173 6/6/06 8,036,583 8,302,658 266,075
SEK1,631,962 5/10/06 206,679 221,843 15,164
------------ ------------ -----------
$ 17,622,991 $18,312,375 $ 689,384
------------ ------------ -----------
At April 30, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $499,712 with Merrill Lynch International.
At April 30, 2006, the trust had sufficient cash and/or securities to cover any commitments under
these derivative contracts.
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:
CAD Canadian Dollar NOK Norwegian Krone
DKK Danish Krone NZD New Zealand Dollar
EUR Euro SEK Swedish Krona
GBP British Pound
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Assets and Liabilities (unaudited)
This statement represents your trust's balance sheet, which details the assets
and liabilities comprising the total value of the trust.
AT 4/30/06
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $834,027,224) $807,786,436
Cash 34,097
Foreign currency, at value (identified cost, $160) 164
Receivable for forward foreign currency exchange contracts 689,384
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 499,712
Receivable for investments sold 5,348,794
Interest receivable 13,718,936
Other assets 16,083
------------------------------------------------------------------------------------------------------
Total assets $828,093,606
------------------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------------------
Payable to dividend disbursing agent $205,061
Payable for forward foreign currency exchange contracts 8,900,081
Payable for investments purchased 2,219,345
Payable to affiliates
Management fee 43,893
Transfer agent and dividend disbursing costs 31,980
Administrative services fee 1,291
Payable for independent trustees' compensation 242,442
Accrued expenses and other liabilities 167,587
------------------------------------------------------------------------------------------------------
Total liabilities $11,811,680
------------------------------------------------------------------------------------------------------
Net assets $816,281,926
------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
------------------------------------------------------------------------------------------------------
Paid-in capital $931,979,728
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (33,782,579)
Accumulated net realized gain (loss) on investments and foreign
currency transactions (82,580,879)
Undistributed net investment income 665,656
------------------------------------------------------------------------------------------------------
Net assets $816,281,926
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (126,523,366 issued,
less 8,404,650 treasury shares) 118,118,716
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $816,281,926/
118,118,716 shares of beneficial interest outstanding) $6.91
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statement of Operations (unaudited)
This statement describes how much your trust earned in investment income and
accrued in expenses. It also describes any gains and/or losses generated by
trust operations.
SIX MONTHS ENDED 4/30/06
NET INVESTMENT INCOME
-------------------------------------------------------------------------------------------------------
Income
Interest $19,832,156
Foreign taxes withheld (6,842)
-------------------------------------------------------------------------------------------------------
Total investment income $19,825,314
-------------------------------------------------------------------------------------------------------
Expenses
Management fee $2,623,347
Transfer agent and dividend disbursing costs 103,384
Administrative services fee 48,213
Independent trustees' compensation 65,912
Custodian fee 157,007
Shareholder communications 172,174
Auditing fees 41,741
Legal fees 8,599
Miscellaneous 91,644
-------------------------------------------------------------------------------------------------------
Total expenses $3,312,021
-------------------------------------------------------------------------------------------------------
Fees paid indirectly (37,423)
Reduction of expenses by investment adviser (2,501)
-------------------------------------------------------------------------------------------------------
Net expenses $3,272,097
-------------------------------------------------------------------------------------------------------
Net investment income $16,553,217
-------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $(6,222,365)
Futures contracts (374,960)
Foreign currency transactions 4,532,679
-------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(2,064,646)
-------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(635,586)
Futures contracts 330,658
Translation of assets and liabilities in foreign currencies (9,081,850)
-------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(9,386,778)
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(11,451,424)
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $5,101,793
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS Statements of Changes in Net Assets
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/06 10/31/05
(UNAUDITED)
CHANGE IN NET ASSETS
------------------------------------------------------------------------------------------------------
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $16,553,217 $35,033,116
Net realized gain (loss) on investments and foreign
currency transactions (2,064,646) 16,380,745
Net unrealized gain (loss) on investments and foreign
currency translation (9,386,778) (44,302,596)
------------------------------------------------------------------------------------------------------
Change in net assets from operations $5,101,793 $7,111,265
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(21,452,380) $(43,759,496)
------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $(12,401,235) $(23,430,508)
------------------------------------------------------------------------------------------------------
Total change in net assets $(28,751,822) $(60,078,739)
------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------
At beginning of period $845,033,748 $905,112,487
At end of period (including undistributed net investment
income of $665,656 and $5,564,819, respectively) $816,281,926 $845,033,748
------------------------------------------------------------------------------------------------------
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 YEARS ENDED 10/31
ENDED ------------------------------------------------------------------------
4/30/06 2005 2004 2003 2002 2001
(UNAUDITED)
Net asset value, beginning
of period $7.04 $7.32 $7.40 $7.57 $7.54 $7.06
-------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS (x)
-------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.14 $0.29 $0.31 $0.31 $0.38 $0.48
Net realized and unrealized gain (loss)
on investments and foreign currency (0.10) (0.23) (0.04) (0.08) 0.09 0.48
-------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.04 $0.06 $0.27 $0.23 $0.47 $0.96
-------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
-------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.36) $(0.37) $(0.40) $(0.44) $(0.49)
-------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $0.01 $0.02 $0.02 $-- $0.00(w) $0.01
-------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.91 $7.04 $7.32 $7.40 $7.57 $7.54
-------------------------------------------------------------------------------------------------------------------------------
Per share market value, end
of period $6.07 $6.29 $6.59 $6.89 $6.91 $6.95
-------------------------------------------------------------------------------------------------------------------------------
Total return at market
value (%) (r)(s) (0.68)(n) 0.85 1.02 5.49 5.33 16.93
-------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.80(a) 0.84 0.84 0.86 0.90 0.93
Expenses after expense reductions (f) 0.80(a) 0.84 0.84 0.86 0.90 0.93
Net investment income (x) 4.01(a) 4.01 4.24 4.14 5.09 6.62
Portfolio turnover 21 58 45 90 115 72
Net assets at end of period
(000 Omitted) $816,282 $845,034 $905,112 $936,653 $958,663 $958,995
-------------------------------------------------------------------------------------------------------------------------------
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the trust may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
(x) Effective November 1, 2001, the trust adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to October 31, 2002 have not been restated to reflect this change.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) BUSINESS AND ORGANIZATION
MFS Intermediate Income Trust (the trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a closed-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
trust can invest in foreign securities, including securities of emerging
market issuers. Investments in foreign securities are vulnerable to the
effects of changes in the relative values of the local currency and the U.S.
dollar and to the effects of changes in each country's legal, political, and
economic environment. The markets of emerging markets countries are generally
more volatile than the markets of developed countries with more mature
economies. All of the risks of investing in foreign securities previously
described are heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated
bid price as reported by an independent pricing service. Values of debt
instruments obtained from pricing services can utilize both dealer-supplied
valuations and electronic data processing techniques which take into account
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data. Short-term instruments with a maturity at issuance of
397 days or less are generally valued at amortized cost, which approximates
market value. Futures contracts are generally valued at last posted settlement
price as reported by an independent pricing service on the market on which
they are primarily traded. Futures contracts for which there were no trades
that day for a particular position are generally valued at the closing bid
quotation as reported by an independent pricing service on the market on which
they are primarily traded. Forward foreign currency contracts are generally
valued at the mean of bid and asked prices for the time period interpolated
from rates reported by an independent pricing service for proximate time
periods. Securities and other assets generally valued on the basis of
information from an independent pricing service may also be valued at a
broker-dealer quotation. The values of foreign securities and other assets and
liabilities expressed in foreign currencies are converted to U.S. dollars
using the mean of bid and asked prices for rates reported by an independent
pricing service. The Board of Trustees has delegated primary responsibility
for determining or causing to be determined the value of the fund's
investments (including any fair valuation) to the adviser pursuant to
valuation policies and procedures approved by the Board. If the adviser
determines that reliable market quotations are not readily available,
investments are valued at fair value as determined in good faith by the
adviser in accordance with such procedures under the oversight of the Board of
Trustees. Under the fund's valuation policies and procedures, market
quotations are not considered to be readily available for many types of debt
instruments. These investments are generally valued at fair value based on
information from independent pricing services. These valuations can be based
on both dealer-supplied valuations and electronic data processing techniques,
which take into account factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data. The adviser may rely on
independent pricing services or other information (such as the correlation
with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and
financial condition of the issuer; and trading and other market data) to
assist in determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments.
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.
DERIVATIVE RISK - The trust may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the trust uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from
derivative instruments may be substantially greater than the derivative's
original cost. Derivative instruments include forward foreign currency
exchange contracts and futures contracts.
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 fund trust. Upon entering into such
contracts, the trust bears the risk of interest or exchange rates or
securities prices moving unexpectedly, in which case, 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 the contract. The trust may enter into forward foreign currency
exchange contracts for hedging purposes as well as for non-hedging purposes.
For hedging purposes, the trust may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The trust may also use contracts in a manner intended to protect
foreign currency denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the trust may
enter into contracts with the intent of changing the relative exposure of the
trust's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. All premium and original issue discount is amortized or 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.
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, 2006, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to continue to qualify as a
regulated investment company, as defined under Subchapter M of the Internal
Revenue Code, and to distribute all of its taxable income, including realized
capital gains. Accordingly, no provision for federal income tax is required in
the financial statements. Foreign taxes, if any, have been accrued by the
trust in the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principles.
Certain capital accounts in the financial statements are periodically adjusted
for permanent differences in order to reflect their tax character. These
adjustments have no impact on net assets or net asset value per share.
Temporary differences which arise from recognizing certain items of income,
expense, gain or loss in different periods for financial statement and tax
purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income for financial statement and tax purposes. Book/tax
differences primarily relate to amortization and accretion of debt securities,
wash sale loss deferrals, straddle loss deferrals, foreign currency
transactions, and derivative transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
OCTOBER 31, 2005 OCTOBER 31, 2004
Ordinary income (including any
short-term capital gains) $43,759,496 $46,430,094
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF APRIL 30, 2006
Cost of investments $855,637,375
----------------------------------------------------------
Gross appreciation $3,146,760
Gross depreciation (50,997,699)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(47,850,939)
AS OF OCTOBER 31, 2005
Undistributed ordinary income $9,155,083
Capital loss carryforwards (60,299,863)
Other temporary differences (2,050,205)
Net unrealized appreciation (depreciation) (46,152,230)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of April 30, 2006, the trust had available capital loss carryforwards to
offset future realized gains. Such losses expire as follows:
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)
October 31, 2013 (4,450,744)
--------------------------------------------------
$(60,299,863)
(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.
MFS has agreed to reduce its management fee to the lesser of the contractual
management fee as set forth above or 0.85% of the average daily net assets.
The management fee, from net assets and gross investment income, incurred for
the six months ended April 30, 2006 was equivalent to an annual effective rate
of 0.64% of the trust's average daily net assets.
TRANSFER AGENT - The trust pays a portion of transfer agent and dividend-
disbursing costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary
of MFS. MFSC receives a fee from the trust, for its services as registrar and
dividend-disbursing agent. The agreement provides that the trust will pay MFSC
an account maintenance fee of no more than $9.00 and a dividend services fee
of $0.75 per reinvestment. For the six months ended April 30, 2006, these fees
amounted to $72,970. MFSC also receives payment from the trust for out-of-
pocket expenses paid by MFSC on behalf of the trust. For the six months ended
April 30, 2006, these costs amounted to $18,458.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. From July 1, 2005 through March 31, 2006, the trust's annual fixed
amount was $10,000. Effective April 1, 2006, the trust's annual fixed amount
is $17,500. The administrative services fee incurred for the six months ended
April 30, 2006 was equivalent to an annual effective rate of 0.0117% of the
trust's average daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The trust pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The trust does not pay
compensation directly to Trustees 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 MFSC. The trust has an unfunded, defined
benefit plan for certain retired Independent Trustees which resulted in a
pension expense of $7,869. The trust also has an unfunded retirement benefit
deferral plan for certain current independent trustees which resulted in an
expense of $354. Both amounts are included in Independent Trustees'
compensation for the six months ended April 30, 2006. The deferred liability
for retirement benefits payable to certain Trustees under both plans amounted
to $209,764 at April 30, 2006, and is included in payable for independent
trustees' compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
Independent Trustees previously were allowed to elect to defer receipt of all
or a portion of their annual compensation. Trustees are no longer allowed to
defer compensation under the Plan. Amounts previously deferred are treated as
though equivalent dollar amounts had been invested in shares of the trust or
other MFS funds selected by the Trustee. Deferred amounts represent an
unsecured obligation of the trust until distributed in accordance with the
Plan. Included in other assets and payable for independent trustees'
compensation is $16,083 of Deferred Trustees' Compensation.
OTHER - The trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended April 30, 2006, the fee paid to Tarantino
LLC was $3,527. MFS has agreed to reimburse the fund for a portion of the
payments made by the funds to Tarantino LLC in the amount of $2,501, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office
space, other administrative support, and supplies provided to the ICCO.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $70,057,365 $23,829,130
-------------------------------------------------------------------------------
Investments (non-U.S. government securities) $91,813,295 $184,069,573
-------------------------------------------------------------------------------
(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 1,991,200 shares of
beneficial interest during the six months ended April 30, 2006 at an average
price per share of $6.23 and a weighted average discount of 10.85% per share.
The trust repurchased and retired 3,617,900 shares of beneficial interest
during the year ended October 31, 2005 at an average price per share
of $6.48 and a weighted average discount of 10.17% per share. Transactions in
trust shares were as follows:
PERIOD ENDED YEAR ENDED
APRIL 30, 2006 OCTOBER 31, 2005
SHARES AMOUNT SHARES AMOUNT
Treasury shares
reacquired (1,991,200) $(12,401,235) (3,617,900) $(23,430,508)
------------------------------------------------------------------------------
(6) LINE OF CREDIT
The trust and other affiliated funds participate in a $1 billion unsecured
line of credit provided by a syndication of banks under a credit agreement.
Borrowings may be made for temporary financing needs. Interest is charged to
each fund, based on its borrowings, at a rate equal to the Federal Reserve
funds rate plus 0.35%. In addition, a commitment fee, based on the average
daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to the trust for the six months ended April 30, 2006 was $3,314, and
is included in miscellaneous expense on the Statement of Operations. The trust
had no significant borrowings during the six months ended April 30, 2006.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of MFS Intermediate Income Trust:
We have reviewed the accompanying statement of assets and liabilities of MFS
Intermediate Income Trust (the "Trust"), including the portfolio of
investments, as of April 30, 2006, and the related statement of operations,
changes in net assets, and financial highlights for the six-month period ended
April 30, 2006. These interim financial statements and financial highlights
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 the accompanying interim financial statements and financial
highlights referred to above 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 changes
in net assets for the year ended October 31, 2005, and financial highlights
for each of the five years in the period ended October 31, 2005, and in our
report dated December 22, 2005, we expressed an unqualified opinion on such
statement of changes in net assets and financial highlights.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 23, 2006
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available by clicking on the fund's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern
time
Write to: MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
NUMBER OF SHAREHOLDERS
As of April 30, 2006, our records indicate that there are 7,040 registered
shareholders and approximately 50,539 shareholders owning trust shares
in "street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the trust, please write or
call:
MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
1-800-637-2304
M F S(SM)
INVESTMENT MANAGEMENT(R)
MFS Investment Management(R)
500 Boylston Street, Boston, MA 02116.
MIN-SEM-6/06 67M
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph (b)
of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi-annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
GENERAL. Information regarding the portfolio managers of the MFS Intermediate
Income Trust (the "Fund") provided as of April 30, 2006 is set forth below.
TITLE AND FIVE YEAR
PORTFOLIO MANAGER PRIMARY ROLE SINCE HISTORY
----------------- ------------ ----- -------------------
James J. Calmas Lead 2002 Senior Vice President of
Portfolio Manager MFS; employed in the
investment management
area of MFS since 1988
Erik S. Weisman International Government 2004 Vice President of MFS;
Securities Portfolio employed in the
Manager investment management
area of MFS since 2002;
Assistant to the U.S.
Executive Director for
the International
Monetary Fund, where he
was employed from 2000
to 2002.
COMPENSATION. Portfolio manager total cash compensation as of April 30, 2006 is
a combination of base salary and performance bonus:
o Base Salary - Base salary represents a relatively smaller percentage of
portfolio manager total cash compensation (generally below 33%) than
incentive compensation.
o Performance Bonus - Generally, incentive compensation represents a majority
of portfolio manager total cash compensation. The performance bonus is
based on a combination of quantitative and qualitative factors, with more
weight given to the former (generally over 60%) and less weight given to
the latter.
>> The quantitative portion is based on pre-tax performance of all of the
accounts managed by the portfolio manager (which includes the Fund and
any other accounts managed by the portfolio manager) over a one-,
three- and five-year period relative to the appropriate Lipper peer
group universe and/or one or more benchmark indices with respect to
each account. The primary weight is given to portfolio performance
over a three-year time period with lesser consideration given to
portfolio performance over one- and five-year periods (adjusted as
appropriate if the portfolio manager has served for shorter periods).
>> The qualitative portion is based on the results of an annual internal
peer review process (conducted by other portfolio managers, analysts
and traders) and management's assessment of overall portfolio manager
contributions to the investment process (distinct from portfolio
performance).
Portfolio managers also typically benefit from the opportunity to participate in
the MFS Equity Plan. Equity interests in MFS or its parent company are awarded
by management, on a discretionary basis, taking into account tenure at MFS,
contribution to the investment process and other factors.
Finally, portfolio managers are provided with a benefits package including a
defined contribution plan, health coverage and other insurance, which are
available to other employees of MFS on substantially similar terms. The
percentage of compensation provided by these benefits depends upon the length of
the individual's tenure at MFS and salary level as well as other factors.
OWNERSHIP OF FUND SHARES. The following table shows the dollar range of equity
securities of the Fund beneficially owned by the Fund's portfolio manager as of
the Fund's semi-annual period ended April 30, 2006. The following dollar ranges
apply:
N. None
A. $1 - $10,000
B. $10,001 - $50,000
C. $50,001 - $100,000
D. $100,001 - $500,000
E. $500,001 - $1,000,000
F. Over $1,000,000
NAME OF PORTFOLIO MANAGER DOLLAR RANGE OF EQUITY SECURITIES IN FUND
------------------------- -----------------------------------------
James J. Calmas N
Erik S. Weisman N
OTHER ACCOUNTS. In addition to the Fund, the Fund's portfolio manager is
responsible (either individually or jointly) for the day-to-day management of
certain other accounts, the number and total assets of which as of the Fund's
semi-annual period ended April 30, 2006 were as follows:
REGISTERED INVESTMENT OTHER POOLED INVESTMENT
COMPANIES VEHICLES OTHER ACCOUNTS
--------------------- ----------------------- --------------
NUMBER OF NUMBER OF NUMBER OF
NAME ACCOUNTS* TOTAL ASSETS* ACCOUNTS TOTAL ASSETS ACCOUNTS TOTAL ASSETS
James J. Calmas 8 $3.1 billion 4 $635.1 million 2 $603.2
million
Erik S. Weisman 14 $2.1 billion 3 $1.1 billion 0 N/A
-----------------
* Includes the Fund.
Advisory fees are not based upon performance of any of the accounts identified
in the table above.
POTENTIAL CONFLICTS OF INTEREST. MFS seek to identify potential conflicts of
interest resulting from a portfolio manager's management of both the Fund and
other accounts and has adopted policies and procedures designed to address such
potential conflicts.
In certain instances there may be securities which are suitable for the Fund's
portfolio as well as for accounts with similar investment objectives of the
Adviser or subsidiary of the Adviser. Securities transactions for the Fund and
other accounts with similar investment objectives are generally executed on the
same day, or the next day. Nevertheless, it may develop that a particular
security is bought or sold for only one client even though it might be held by,
or bought or sold for, other clients. Likewise, a particular security may be
bought for one or more clients when one or more other clients are selling that
same security.
When two or more clients are simultaneously engaged in the purchase or sale of
the same security, the securities are allocated among clients in a manner
believed by MFS to be fair and equitable to each. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Fund is concerned. In most cases, however, MFS believes
that the Fund's ability to participate in volume transactions will produce
better executions for the Fund.
MFS does not receive a performance fee for its management of the Fund. MFS
and/or a portfolio manager may have an incentive to allocate favorable or
limited opportunity investments or structure the timing of investments to favor
accounts other than the Fund--for instance, those that pay a higher advisory fee
and/or have a performance fee.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
-------------------------------------------------------------------------------------------------------------
MFS INTERMEDIATE INCOME TRUST
-------------------------------------------------------------------------------------------------------------
(C) TOTAL (D) MAXIMUM NUMBER
NUMBER OF SHARES (OR APPROXIMATE
PURCHASED AS DOLLAR VALUE) OF
PART OF PUBLICLY SHARES THAT MAY
(A) TOTAL NUMBER (B) AVERAGE ANNOUNCED YET BE PURCHASED
OF SHARES PRICE PAID PLANS OR UNDER THE PLANS
PERIOD PURCHASED PER SHARE PROGRAMS OR PROGRAMS
-------------------------------------------------------------------------------------------------------------
11/1/05 - 11/30/05 312,700 $6.20 312,700 9,997,202
-------------------------------------------------------------------------------------------------------------
12/1/05 - 12/31/05 373,600 $6.21 373,600 9,623,602
-------------------------------------------------------------------------------------------------------------
1/1/06 - 1/31/06 527,400 $6.29 527,400 9,096,202
-------------------------------------------------------------------------------------------------------------
2/1/06 - 2/28/06 223,400 $6.27 223,400 8,872,802
-------------------------------------------------------------------------------------------------------------
3/1/06 - 3/31/06 354,800 $6.24 354,800 11,512,482
-------------------------------------------------------------------------------------------------------------
4/1/06 - 4/30/06 199,300 $6.09 199,300 11,313,182
-------------------------------------------------------------------------------------------------------------
TOTAL 1,991,200 $6.23 1,991,200
-------------------------------------------------------------------------------------------------------------
Note: The Board of Trustees approves procedures to repurchase Fund shares
annually. The notification to shareholders of the program is included in the
semi-annual and annual reports sent to shareholders. These annual programs begin
on March 1st of each year. The programs conform to the conditions of Rule 10b-18
of the Securities Exchange Act of 1934 and limit the aggregate number of Fund
shares that may be repurchased in each annual period (March 1 through the
following February 28) to 10% of the Registrant's outstanding shares as of the
first day of the plan year (March 1). The aggregate number of Fund shares
available for repurchase for the March 1, 2006 plan year are 11,867,282.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this Form N-CSR, the registrant's principal financial
officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant
intends to satisfy the Item 2 requirements through filing of an
exhibit.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title
18 of the United States Code (18 U.S.C. 1350) as an exhibit. A
certification furnished pursuant to this paragraph will not be deemed
"filed" for the purposes of Section 18 of the Exchange Act (15 U.S.C. 78r),
or otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing under
the Securities Act of 1933 or the Exchange Act, except to the extent that
the registrant specifically incorporates it by reference: Attached hereto.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and notice
is hereby given that this instrument is executed on behalf of the Registrant by
an officer of the Registrant as an officer and not individually and the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually, but are binding only upon the assets and
property of the respective constituent series of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS INTERMEDIATE INCOME TRUST
------------------------------------------------------------------
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: June 23, 2006
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: June 23, 2006
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal
Financial Officer and Accounting Officer)
Date: June 23, 2006
-------------
* Print name and title of each signing officer under his or her signature.