Dear Shareholders:
The past six months brought mixed results in the fixed-income markets of the
countries in which the Trust invests. While returns were generally negative
for U.S. Treasuries, particularly during the first four months of 1996,
returns for government securities in many European countries were positive as
yields there generally declined. In the United States, for example, two-year
Treasury yields, which were at 5.52% on November 1, 1995, increased to 6.05%
by the end of April 1996, while yields on 10-year Treasuries rose from 5.98%
to 6.67%. Yields on 10-year government bonds in Italy, by comparison,
declined from 11.85% to 9.83% over the same period. The ability to allocate
up to 50% of its assets into international fixed-income markets greatly
benefited the Trust, diversifying the risk experienced in U.S. Treasuries as
interest rates increased.
The Trust's stock market price, which stood at $6.625 on November 1, 1995,
increased to $6.75 on April 30, 1996, while its net asset value decreased
from $7.84 to $7.70, representing a total return of 5.88% based on market
price and 2.33% based on net asset value. These returns are based on the
closing stock market prices in effect on those dates and assume the
reinvestment of all distributions paid during the period.
We believe the difference in the Trust's total returns based on its market
price versus the returns based on net asset value reflects investors'
positive response to a repurchase program announced by the Board of Trustees
on April 10, 1996. Under this program, up to 10% of the outstanding shares of
the Trust are to be repurchased annually when the shares are trading at a
discount to net asset value. In addition, the Trustees voted to pay to
shareholders special distributions on a monthly basis throughout each year,
based on the difference between the market price of any shares repurchased
under the program and the net asset value of such shares at the time of
repurchase. These special distributions of the captured economic value may
constitute a return of capital to shareholders for tax purposes. We believe
this plan to return the value of the discount to shareholders in the form of
higher monthly distributions should have a positive effect on the discount
and should not disrupt the portfolio management of the Trust. This plan
replaces the existing share repurchase plan previously implemented by the
Trustees in November 1994.
U.S. Government Sector
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to
quarter. Thus, while one quarter may experience an annualized rate of growth
in gross domestic product of less than 1%, another quarter may see annualized
growth in excess of 3% - but, for the year, we believe growth could stay
within our expected range of 2% to 2-1/2%. While some increase in consumer
spending took place in the early months of this year, consumers, who
represent two-thirds of the economy, remain in a somewhat weakened position,
due in part to an increase in consumer installment debt in excess of 30% over
the past two years. Meanwhile, growth is also being constrained by ongoing
economic doldrums in Europe and Japan, important markets for U.S. exports.
Here again, we are seeing a few tentative signs, particularly in Japan, of
modest recoveries that could lead to improved prospects for U.S. exporters.
Also, the "lag effect" of increases in short-term interest rates by the
Federal Reserve Board ("Fed") in 1994 and into 1995 is helping to keep growth
in check. This lag effect can last up to two years, and although the Fed did
reduce short-term rates late last year and earlier this year, we expect it to
continue its diligent anti-inflationary policies. At the same time, it
appears that inflation is likely to remain under control this year, due in
part to a continued moderation in wage pressures and the subdued level of
economic growth. Finally, we believe the current upward pressure on energy
prices bears close scrutiny, as energy is an important component of the
inflation outlook.
Our overall portfolio strategy in the past six months has been to reduce
exposure to U.S. securities in favor of the international markets. The
portion of the
1
<PAGE>
portfolio allocated to international securities was increased from
approximately 32% to about 45%. Our strategy has also been to shift the
emphasis within the funds allocated to the U.S. market away from Treasuries
in favor of agency and mortgage- backed securities, as we have been able to
add attractive incremental yield to the portfolio in these sectors (although
principal value and interest on Treasury securities are guaranteed by the
U.S. government if held to maturity).
Within the U.S. portion of the portfolio, the allocation to mortgage-backed
pass-through securities was increased from 29% to 40%. Mortgage-backed
securities enjoyed a substantial yield advantage over U.S. Treasuries and
favorable buying conditions moving into the beginning of 1996. Also,
mortgage- backed pass-through securities yield approximately 1.30% to 1.50%
more than Treasuries but have had substantially less price sensitivity. These
factors have allowed mortgage indices to outperform comparable Treasury
indices over the period. Issues held in the portfolio are mostly liquid
Government National Mortgage Association (GNMA) pass- through securities; 30%
of the U.S. portion is in GNMA 30-year, 7% and 7.5% coupons, and 5% is in
GNMA 15-year, 8.5% coupons. Another 5% is held in Federal Home Loan Mortgage
Corp. 30-year, 7.5% coupons. We do not believe these issues are likely to
face substantial prepayment risk given the range of interest rate scenarios
we are expecting over the next six months. Another positive element for this
sector is our continued expectation of limited issuance of new mortgage
securities. This technical factor should allow the yield spread to Treasuries
to be stable to narrower over the coming months.
Our ability to invest in both Treasuries and mortgage-backed securities
within a range of maturities has proven helpful in this rapidly changing
environment. The Trust will, however, continue to adhere to its policy of
avoiding any exposure to the more volatile mortgage-derivative securities.
International Sector
Foreign bond markets, especially European markets, outperformed the U.S. bond
market by a wide margin over the last six months, while the dollar
appreciated against every major currency except the Italian lira and the
Australian and New Zealand dollars. Virtually all yield curves steepened over
the period, reflecting cuts in official interest rates induced by slow growth
and benign inflation. Ten- year yields declined throughout continental
Europe, with the best performance coming in the highest- yielding markets --
Italy, Spain, and Sweden. Within the dollar-bloc, Canadian and Australian
yields tightened versus the United States, while New Zealand rates rose
sharply in response to concern over growth and inflation.
The Trust's allocation to foreign bond markets has been maintained near its
maximum weighting (50%) since late 1995, with an emphasis on the highest-
yielding European markets. The allocation to Europe as a whole was increased,
while exposure to the dollar-bloc was reduced. Throughout the period, most of
the portfolio's foreign assets have been hedged back into the U.S. dollar.
Roughly 80% of these assets are currently hedged, and we anticipate
maintaining a similar posture going forward. The portfolio retains some
exposure to dollar-bloc currencies, such as Canadian and Australian dollars,
as well as to intra-European currency movements, such as the Italian lira
versus the German mark.
Going forward, we anticipate that European markets will continue to offer the
best opportunities for capital appreciation. Efforts to meet the fiscal
austerity criteria of the proposed European Monetary Union are reinforcing
the tendency toward slower growth. Continental central banks are therefore
expected to continue the process of cutting official interest rates. In this
environment, the higher-yielding markets should continue to outperform, and
the dollar should remain firm versus European currencies. Markets will be
wary of any acceleration in European growth and/or inflation since this could
reverse
2
<PAGE>
the process of official rate cuts before the debt- ridden, high-yield
countries can reap the full fiscal benefit of reduced interest expense. This
is most likely to become an issue in the fall. Canada and Australia remain
attractive by virtue of their high real (inflation-adjusted) yields. Firmer
growth in the Japanese economy makes Japanese bonds unattractive, while the
yen should appreciate against European currencies.
We appreciate your support and welcome any questions or comments you may
have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ Steven E. Nothern
Steven E. Nothern
Portfolio Manager
/s/ Christopher D. Piros
Christopher D. Piros
Portfolio Manager
May 10, 1996
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.
3
<PAGE>
Investment Objective and Policies
The investment objective of MFS(R) Intermediate Income Trust is to preserve
capital and provide high current income.
The Trust will attempt to achieve this objective by investing 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. The Trust will maintain an average weighted portfolio
maturity of approximately seven years or less and will invest substantially
all of its assets in securities with remaining maturities less than or equal
to 10 years. Under normal market conditions, the Trust's average weighted
portfolio maturity will not be less than three years. The Trust may enter
into options and futures transactions and forward foreign currency exchange
contracts and purchase securities on a "when-issued" basis.
Number of Shareholders
As of April 30, 1996, our records indicate that there are 19,499 registered
shareholders and approximately 101,000 shareholders owning Trust shares in
"street" name, such as through brokers, banks and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our
reports, which contain important information about the Trust, please write or
call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
*****************************[boxed text]*************************************
Performance Summary
(For the period ended April 30, 1996)
Net Asset Value Per Share
October 31, 1995 $ 7.83
April 30, 1996 $ 7.70
New York Stock Exchange Price
October 31, 1995 $6.625
April 29, 1996 (high)* $6.875
April 9, 1996 (low)* $6.500
April 30, 1996 $6.750
*For the period November 1, 1995 through April 30, 1996.
******************************************************************************
Number of Employees
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,
non-diversified, management investment company and has no employees.
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MIN.
4
<PAGE>
Dividend Reinvestment and
Cash Purchase Plan
The Trust offers a Dividend Reinvestment and Cash Purchase Plan which allows
you to reinvest either all of the distributions or only the long-term capital
gains paid by the Trust. Unless the shares are trading at a premium
(exceeding net asset value), purchases are made at the market price.
Otherwise, purchases will be made at a discounted price of either the net
asset value or 95% of the market price, whichever is greater. You can also
buy shares of the Trust. Investments from $100 to $500 can be made in January
and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee,
you can ask the firm or nominee to participate in the Plan on your behalf. If
the nominee does not offer the Plan, you may wish to request that your shares
be re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75
is charged for each cash purchase as well as a pro rata share of the
brokerage commissions, if any. 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 to receive a brochure providing a
complete description of the Plan, please contact the Plan agent at the
address and telephone number located on the back cover of this report. 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. 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.
5
<PAGE>
Portfolio of Investments -- April 30, 1996
<TABLE>
Bonds -- 92.4%
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 54.6%
U.S. Federal Agencies -- 14.1%
Agency for International Development, 6.625s, 2004 $ 14,600 $ 14,306,394
Farm Credit Systems Financial Assistance Co., 9.375s, 2003 19,550 22,290,128
Federal Home Loan Mortgage Corp., 7.5s, 2007 - 2026 45,350 45,186,710
Federal National Mortgage Assn., 7.7s, 2004 25,000 25,269,500
Federal National Mortgage Assn., 7.8s, 2002 21,000 21,164,010
Federal National Mortgage Assn., 8.33s, 2005 20,000 20,525,000
Federal National Mortgage Assn., 9s, 2008 - 2017 73 76,137
Overseas Private Investment Corp., 6.08s, 2004 12,500 11,915,375
Private Export Funding Corp., 9.1s, 1998 9,000 9,568,620
------------
$170,301,874
------------
U.S. Government Guaranteed -- 40.5%
Government National Mortgage Association -- 18.5%
GNMA, 7s, 2023 - 2026 $ 91,217 $ 87,825,118
GNMA, 7.5s, 2022 - 2025 100,036 98,879,047
GNMA, 8s, 2017 - 2025 1 39
GNMA, 8.5s, 2001 - 2009 35,824 37,346,614
------------
$224,050,818
------------
U.S. Treasury Obligations -- 22.0%
U.S. Treasury Notes, 5.5s, 1998 $ 13,500 $ 13,293,315
U.S. Treasury Notes, 9.25s, 1998 24,000 25,578,720
U.S. Treasury Notes, 7s, 1999 35,000 35,710,850
U.S. Treasury Notes, 7.5s, 2005 31,800 33,474,588
U.S. Treasury Bonds, 12.375s, 2004 34,500 46,618,125
U.S. Treasury Bonds, 12s, 2013### 78,500 110,979,375
------------
$265,654,973
------------
Total U.S. Government Guaranteed $489,705,791
------------
Total U.S. Bonds $660,007,665
------------
Foreign Bonds -- 37.8%
Australia -- 2.7%
Commonwealth of Australia, 7s, 2000 AUD 12,500 $ 9,395,090
Commonwealth of Australia, 8.75s, 2001 27,300 21,742,283
Commonwealth of Australia, 9.5s, 2003 1,385 1,137,887
------------
$ 32,275,260
------------
Canada -- 5.7%
Government of Canada, 7.5s, 2003 CAD 44,400 $ 32,394,359
Government of Canada, 9s, 2004 34,500 27,324,851
Government of Canada, 8.75s, 2005 11,500 8,981,604
------------
$ 68,700,814
------------
Denmark -- 5.3%
Kingdom of Denmark, 9s, 2000 DKK 111,520 $ 21,107,053
Kingdom of Denmark, 8s, 2001 234,930 42,794,087
------------
$ 63,901,140
------------
France -- 1.6%
Government of France, 7s, 1999 FRF 66,530 $ 13,675,218
Government of France, 7s, 2000 26,910 5,539,146
------------
$ 19,214,364
------------
6
<PAGE>
Principal Amount
Issuer (000 Omitted) Value
Foreign Bonds -- continued
Germany -- 6.3%
Deutscheland Republic, 6.375s, 1999 DEM 52,679 $ 36,240,237
Deutscheland Republic, 8.5s, 2001 53,600 39,672,607
------------
$ 75,912,844
------------
Italy -- 2.6%
Republic of Italy, 8.5s, 1999 ITL 15,165,000 $ 9,661,134
Republic of Italy, 9.5s, 1999 12,585,000 8,206,032
Republic of Italy, 8.5s, 2004 22,955,000 13,880,280
------------
$ 31,747,446
------------
New Zealand -- 2.5%
Government of New Zealand, 9s, 1996 NZD 31,700 $ 21,701,317
Government of New Zealand, 8s, 2001 13,700 9,077,929
------------
$ 30,779,246
------------
Spain -- 6.2%
Government of Spain, 10.5s, 2003 ESP 3,511,800 $ 29,809,561
Government of Spain, 10.9s, 2003 2,775,000 24,002,714
Government of Spain, 10s, 2005 2,567,600 21,215,261
------------
$ 75,027,536
------------
Sweden -- 1.8%
Kingdom of Sweden, 10.25s, 2000 SEK 136,000 $ 22,045,552
------------
United Kingdom -- 3.1%
United Kingdom Treasury, 8s, 2000 GBP 24,600 $ 37,875,704
------------
Total Foreign Bonds $ 457,479,906
------------
Total Bonds (Identified Cost, $1,146,290,759) $1,117,487,571
------------
Short-Term Obligation -- 2.3%
Eurolira Time Deposit, due 10/21/96 (Identified Cost, $27,519,949) ITL 43,110,000 $ 27,599,232
------------
Repurchase Agreement -- 0.3%
Goldman Sachs, dated 4/30/96, due 5/01/96, total to be received $3,300,489
(secured by $734,418 FNMA, 7.58s, due 4/19/06, market value $734,139; $443,183
FNMA, 6.17s, due 12/30/03, market value $419,574; $327,625 FNMA, 5.3s, due
12/10/98, market value $319,023; $1,588,970 FHLMC, 0s, due 5/23/96, market value
$1,583,451; and $285,189 FHLB, 7.65s, due 3/25/97, market value $290,164),
at Cost $ 3,300 $ 3,300,000
------------
Total Investments (Identified Cost, $1,177,110,708) $1,148,386,803
------------
Put Option Written
Description/Expiration Month/Strike Price Principal Amount
of Contracts
(000 Omitted)
Canadian Dollars/June/1.385 (Premium Received, $59,889) CAD 26,757 $ (16,349)
------------
Other Assets, Less Liabilities -- 5.0% $ 60,123,275
------------
Net Assets--100.0% $1,208,493,729
============
</TABLE>
###Security segregated as collateral for open futures contract, written
option and interest rate swap.
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
below.
AUD = Australian Dollars
CAD = Canadian Dollars
CHF = Swiss Francs
DEM = Deutsche Marks
DKK = Danish Kroner
ESP = Spanish Pesetas
FRF = French Francs
GBP = British Pounds
ITL = Italian Lire
JPY= Japanese Yen
NZD = New Zealand Dollars
SEK = Swedish Kronor
See notes to financial statements
7
<PAGE>
Statement of Assets and Liabilities -- April 30, 1996
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $1,177,110,708) $1,148,386,803
Receivable for interest rate swaps 240,113
Net receivable for forward foreign currency exchange contracts sold 14,722,172
Receivable for daily variation margin on open futures contracts 1,625
Receivable for investments sold 65,563,485
Interest and dividends receivable 25,784,696
Other assets 18,223
------------
Total assets $1,254,717,117
------------
Liabilities:
Cash overdraft $319,160
Distributions payable 565,121
Payable for Trust shares reacquired 2,071,500
Payable for investments purchased 38,186,624
Written options outstanding, at value (premiums received, $59,889) 16,349
Net payable for forward foreign currency exchange contracts purchased 4,047,007
Net payable for forward foreign currency exchange contracts purchased 122,154
Payable to affiliates --
Management fee 74,590
Transfer and dividend disbursing agent fee 57,682
Accrued expenses and other liabilities 763,201
------------
Total liabilities $46,223,388
------------
Net assets $1,208,493,729
============
Net assets consist of:
Paid-in capital $1,237,004,885
Unrealized depreciation on investments and translation of assets and liabilities in foreign
currencies (18,278,500)
Accumulated undistributed net realized gain on investments and foreign currency transactions 2,292,773
Accumulated distributions in excess of net investment income (12,525,429)
------------
Total $1,208,493,729
============
Shares of beneficial interest outstanding 156,961,416
============
Net asset value per share (net assets / shares of beneficial interest outstanding) $7.70
============
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Operations -- Six Months Ended April 30, 1996
<TABLE>
<S> <C>
Net investment income:
Interest income $ 47,437,207
-------------
Expenses --
Management fee $ 4,647,221
Investor communication expense 458,804
Trustees' compensation 98,924
Transfer and dividend disbursing agent fee 172,999
Custodian fee 375,150
Auditing fees 40,615
Postage 35,586
Printing 16,262
Miscellaneous 94,811
-------------
Total expenses $ 5,940,372
Fees paid indirectly (17,034)
-------------
Net expenses $ 5,923,338
-------------
Net investment income $ 41,513,869
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) --
Investment transactions $ 19,776,539
Written option transactions 539,466
Foreign currency transactions 375,496
Futures contracts 67,215
-------------
Net realized gain on investments and foreign currency
transactions $ 20,758,716
-------------
Change in unrealized appreciation (depreciation) --
Investments $(56,773,355)
Written options (256,909)
Translation of assets and liabilities in foreign currencies 14,427,910
Futures contracts (79,431)
Interest rate swaps 240,113
-------------
Net unrealized loss on investments and foreign currency
transactions $(42,441,672)
-------------
Net realized and unrealized loss on investments and foreign
currency $(21,682,956)
-------------
Increase in net assets from operations $ 19,830,913
=============
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
April 30, October 31,
1996 1995
------------ --------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income $ 41,513,869 $ 92,280,420
Net realized gain (loss) on investments and foreign currency transactions 20,758,716 (4,977,753)
Net unrealized gain (loss) on investments and foreign currency translation (42,441,672) 62,090,546
------------ --------------
Increase in net assets from operations $ 19,830,913 $ 149,393,213
------------ --------------
Distributions declared to shareholders --
From net investment income $ (41,513,869) $ (91,816,226)
In excess of net investment income (398,216) --
------------ --------------
Total distributions declared to shareholders $ (41,912,085) $ (91,816,226)
------------ --------------
Trust share (principal) transactions --
Cost of shares reacquired $ (16,781,394) $ (221,493,668)
------------ --------------
Total decrease in net assets $ (38,862,566) $ (163,916,681)
Net assets:
At beginning of period 1,247,356,295 1,411,272,976
------------ --------------
At end of period (including accumulated distributions in excess of net investment
income of $12,525,429 and $12,127,213, respectively) $1,208,493,729 $1,247,356,295
============ ==============
</TABLE>
See notes to financial statements
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Per share data (for Six Months
a share outstanding Ended Year Ended October 31,
throughout each April 30, ---------------------------------------------------------------------------------
period: 1996 1995 1994 1993 1992 1991 1990 1989 1988*
---------------- -------- --------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- beginning
of period $ 7.83 $ 7.33 $ 8.18 $ 8.07 $ 8.24 $ 8.45 $ 8.87 $ 9.16 $ 9.30
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Income from investment
operations# --
Net investment income(sec) $ 0.26 $ 0.55 $ 0.51 $ 0.58 $ 0.66 $ 0.67 $ 0.75 $ 0.83 $ 0.48
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions (0.15) 0.32 (0.78) 0.21 (0.02) 0.17 (0.12) (0.07) (0.10)
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Total from investment
operations $ 0.11 $ 0.87 $ (0.27) $ 0.79 $ 0.64 $ 0.84 $ 0.63 $ 0.76 $ 0.38
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Less distributions declared
to shareholders --
From net investment income $(0.26)++++ $(0.53) $ (0.03) $(0.52) $(0.60) $(0.62) $(0.63) $(0.92) $(0.39)
From net realized gain on
investments and foreign
currency transactions -- -- -- (0.16) -- -- -- -- --
In excess of net investment
income 0.00 -- (0.13) -- -- -- -- -- --
From paid-in capital -- -- -- -- (0.21) (0.43) (0.42) (0.13) (0.13)
Tax return of capital -- -- (0.42) -- -- -- -- -- --
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Total distributions
declared to shareholders $(0.26) $(0.53) $ (0.58) $(0.68) $(0.81) $(1.05) $(1.05) $(1.05) $(0.52)
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Net increase from repurchase
of capital shares $ 0.02 $ 0.16 $ -- $ -- $ -- $ -- $ -- $ -- $ --
-------------- ------- -------- ------- ------- ------- ------- ------- --------
Net asset value -- end of
period $ 7.70 $ 7.83 $ 7.33 $ 8.18 $ 8.07 $ 8.24 $ 8.45 $ 8.87 $ 9.16
============== ======= ======== ======= ======= ======= ======= ======= ========
Per share market value --
end of period $6.750 $6.625 $ 6.125 $7.625 $8.000 $8.000 $7.625 $8.750 $9.375
============== ======= ======== ======= ======= ======= ======= ======= ========
Total return 5.88%+++ 17.08% (12.58)% 4.14% 10.35% 19.55% (0.94)% 4.94% (1.17)%+
Ratios (to average net assets)/
Supplemental data(sec):
Expenses## 0.95%+ 1.02% 0.91% 0.95% 1.01% 1.00% 1.01% 1.10% 0.99%+
Net investment income 6.66%+ 7.13% 6.61% 7.13% 7.96% 8.10% 8.74% 9.34% 8.39%+
Portfolio turnover 114% 242% 213% 270% 401% 1,004% 554% 546% 206%
Net assets at end of period
(000,000 omitted) $1,208 $1,247 $ 1,411 $1,597 $1,615 $1,644 $1,695 $1,791 $1,837
</TABLE>
* For the period from the commencement of investment operations, March 17,
1988 to October 31, 1988.
+ Annualized.
+++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993 is based on
average shares outstanding.
## For fiscal years ending after September 1, 1995, the Trust's expenses are
calculated without reduction for fees paid indirectly.
++++ Includes distributions in excess of net investment income of $0.0025 per
share.
(sec) The investment adviser did not impose a portion of its management fee
amounting to $0.0018 per share for the year ended October 31, 1990. If
this fee had been incurred by the Trust, the ratio of expenses and net
investment income to average net assets for the period would have been
1.03% and 8.72%, respectively.
See notes to financial statements
11
<PAGE>
Notes to Financial Statements
(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 non-diversified, closed-end management investment company.
(2) Significant Accounting Policies
General -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. 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 -- Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues and forward
contracts, are valued on the basis of valuations furnished by dealers or by a
pricing service with consideration to factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data,
without exclusive reliance upon exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar-denominated
short- term obligations are valued at amortized cost as calculated in the
base currency and translated into U.S. dollars at the closing daily exchange
rate. Futures contracts, options and options on futures contracts listed on
commodities exchanges are valued at closing settlement prices.
Over-the-counter options are valued by brokers through the use of a pricing
model which takes into account closing bond valuations, implied volatility
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith
by or at the direction of the Trustees.
Repurchase Agreements -- The Trust may enter into repurchase agreements with
institutions that the Trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Trust
requires that the securities purchased 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 securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to
the Trust under each such repurchase agreement.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
Written Options -- The Trust may write covered call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums
12
<PAGE>
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or are closed are
offset against the proceeds or amount paid on the transaction to determine
the realized gain or loss. If a put option is exercised, the premium reduces
the cost basis of the security purchased by the Trust. The Trust, as writer
of an option, may have no control over whether the underlying security may be
sold (call) or purchased (put) and, as a result, bears the market risk of an
unfavorable change in the price of the securities underlying the written
option. In general, written call options may serve as a partial hedge against
decreases in value in the underlying securities to the extent of the premium
received. Written options may also be used as part of an income producing
strategy reflecting the view of the Trust's management on the direction of
interest rates.
Futures Contracts -- The Trust may enter into futures contracts for the
delayed delivery of securities, 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 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 underlying security, 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 or exchange rates or securities prices. 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. Should interest or
exchange rates or securities prices 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 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 will enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Trust may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. It 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 for financial statement purposes as unrealized until
the contract settlement date.
Swap Agreements -- The Trust may enter into swap agreements. A swap is an
exchange of cash payments between the Trust and another party which is based
on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual
basis. The value of the swap is adjusted daily and the change in value is
recorded as unrealized appreciation or depreciation. Risks may arise upon
entering into these agreements from the potential inability of counterparties
to meet the terms of their contract and from unanticipated changes in the
value of the financial index on which the swap agreement is based. The Trust
uses swaps for both hedging and non-hedging purposes. For hedging purposes,
the Trust may use swaps to reduce its exposure to interest and foreign
exchange rate fluctuations. For non-hedging purposes, the Trust may use swaps
to take a position on anticipated changes in the underlying financial index.
13
<PAGE>
Notes to Financial Statements -- continued
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and original issue discount are amortized or accreted for financial statement
and tax reporting purposes as required by federal income tax regulations.
Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the value of the security on such
date.
Fees Paid Indirectly -- The Trust's custodian bank calculates its fee based
on the Trust's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian
by the Trust. This amount is shown as a reduction of 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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Trust files a tax
return annually using tax accounting methods required under provisions of the
Code which may differ from generally accepted accounting principles, the
basis on which these financial statements are prepared. Accordingly, the
amount of net investment income and net realized gain reported on these
financial statements may differ from that reported on the Trust's tax return
and, consequently, the character of distributions to shareholders reported in
the financial highlights may differ from that reported to shareholders on
Form 1099-DIV. Foreign taxes have been provided for on interest income earned
on foreign investments in accordance with the applicable country's tax rates
and to the extent unrecoverable are recorded as a reduction of investment
income. 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 requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return
of 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 accumulated net
realized gains.
At April 30, 1996, the Trust, for federal income tax purposes, had a capital
loss carryforward of $23,027,102, which may be applied against any net
taxable realized gains of each succeeding year until the earlier of its
utilization or expiration on October 31, 2003 ($6,526,983) and October 31,
2002 ($16,500,119).
(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 effective annual rate
of 0.32% of average daily net assets and 5.65% of investment income. The
Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain of the
officers and Trustees of the Trust are officers or directors of MFS and MFS
Service Center, Inc. (MFSC). The Trust has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $24,924 for the period
ended April 30, 1996.
14
<PAGE>
Transfer Agent -- MFSC acts as a registrar and dividend disbursing agent for
the Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee and a dividend service fee and will reimburse MFSC for
reasonable out-of-pocket expenses. The account maintenance fee is computed as
follows:
Total Number of Accounts Annual Account Fee
- ---------------------------- --------------------
Less than 75,000 $9.00
75,000 and over $8.00
The dividend service fee is $0.75 per dividend reinvestment and $0.75 per
cash infusion.
(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 $810,185,787 $837,090,686
============ ============
Investments (non-U.S. government securities) $608,561,582 $553,846,357
============ ============
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Trust, as computed on a federal income tax basis,
are as follows:
Aggregate cost $1,146,290,759
============
Gross unrealized appreciation $ 8,405,909
Gross unrealized depreciation (37,129,874)
------------
Net unrealized depreciation $ (28,723,965)
============
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
Period Ended Year Ended
April 30, October 31,
1996 1995
- --------------------------------------------- ------------- --------------
Treasury shares reacquired 2,435,200 33,096,200
============ ============
In accordance with the provisions of the Trust's prospectus, 2,435,200 shares
of beneficial interest were purchased by the Trust during the period ended
April 30, 1996 at an average price per share of $6.89 and a weighted average
discount of 12.2% per share. The Trust repurchased 33,096,200 shares of
beneficial interest during the year ended October 31, 1995 at an average
price per share of $6.68 and a weighted average discount of 11.40% per share.
Shares held in Treasury were repurchased in an attempt to return the market
value of the discount to shareholders in the form of higher monthly
distributions.
15
<PAGE>
Notes to Financial Statements -- continued
(6) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase (Decrease)
Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period Ended Investment Income Net Investment Income on Investments from Operations
- ---------------------- ----------------------- --------------------- ----------------------- -----------------------
Per Per Per Per
Fiscal 1996 Amount Share Amount Share Amount Share Amount Share
- ---------------------- -------------- ------- ------------ ------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31 $ 23,565,999 $0.15 $20,589,786 $0.13 $ 49,185,065 $ 0.31 $ 69,774,851 $ 0.44
April 30 23,871,208 0.15 20,924,083 0.13 (70,868,021) (0.44) (49,943,938) (0.31)
------------- ------ ----------- ------ ------------ ------- ------------ ------
$ 47,437,207 $0.30 $41,513,869 $0.26 $ (21,682,956) $(0.13) $ 19,830,913 $ 0.13
============= ====== =========== ====== ============ ======= ============ ======
Fiscal 1995
- ----------------------
January 31 $ 28,725,198 $0.16 $25,410,754 $0.14 $ (21,600,785) $(0.07) $ 3,809,969 $ 0.07
April 30 26,563,252 0.15 23,068,269 0.13 50,225,758 0.33 73,294,027 0.46
July 31 26,175,083 0.16 22,848,135 0.14 17,506,205 0.13 40,354,340 0.27
October 31 23,933,306 0.16 20,953,262 0.14 10,981,615 0.09 31,934,877 0.23
------------- ------ ----------- ------ ------------ ------- ------------ ------
$ 105,396,839 $0.63 $92,280,420 $0.55 $ 57,112,793 $ 0.48 $149,393,213 $ 1.03
============= ====== =========== ====== ============ ======= ============ ======
Fiscal 1994
- ----------------------
January 31 $ 24,425,057 $0.13 $21,043,965 $0.11 $ (5,223,558) $(0.03) $ 15,820,407 $ 0.08
April 30 28,481,160 0.15 25,180,774 0.13 (92,491,965) (0.46) (67,311,191) (0.33)
July 31 29,213,793 0.15 25,768,272 0.13 3,078,915 0.01 28,847,187 0.14
October 31 29,364,352 0.15 26,002,727 0.14 (57,979,308) (0.30) (31,976,581) (0.16)
------------- ------ ----------- ------ ------------ ------- ------------ ------
$111,484,362 $0.58 $97,995,738 $0.51 $(152,615,916) $(0.78) $(54,620,178) $(0.27)
============= ====== =========== ====== ============ ======= ============ ======
</TABLE>
(7) Line of Credit
The Trust entered into an agreement which enables it to participate with
other funds managed by MFS in an unsecured line of credit with a bank which
permits borrowings up to $350 million, collectively. Borrowings may be made
to temporarily finance the repurchase of Trust shares. Interest is charged to
each fund, based on its borrowings, at a rate equal to the bank's base rate.
In addition, a commitment fee, based on the average daily unused portion of
the line of credit, is allocated among the participating funds at the end of
each quarter. The commitment fee allocated to the Trust for the period ended
April 30, 1996 was $6,459.
(8) Financial Instruments
The Trust trades financial instruments with off-balance sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates.
These financial instruments include written options, forward foreign currency
exchange contracts, futures contracts and interest rate swaps. 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.
16
<PAGE>
Written Option Transactions
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
-------------------------------- ---------------------------------
Principal Amounts of Principal Amounts of
Contracts Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ------------------------------------------------ -------------------- ---------- -------------------- -----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars 32,454 $ 351,550 31,385 $ 371,861
Deutsche Marks -- -- 31,994 85,464
Deutsche Marks/British Pounds 38,419 233,060 -- --
Japanese Yen -- -- 774,000 84,506
Options written --
Australian Dollars 23,889 137,869 8,431 51,524
Canadian Dollars -- -- 26,757 59,889
Japanese Yen 1,259,000 174,170 948,000 116,645
Options terminated in closing transactions --
Australian Dollars (56,343) (489,419) (26,580) (253,720)
Deutsche Marks -- -- (31,994) (85,464)
Deutsche Marks/British Pounds (38,419) (233,060) -- --
Japanese Yen (1,259,000) (174,170) (1,722,000) (201,151)
Options expired --
Australian Dollars -- -- (13,236) (169,665)
------------------- --------- ------------------- ---------
Outstanding, end of period 0 $ 0 26,757 $ 59,889
=================== ========= =================== =========
Options outstanding at end of period consist of:
Canadian Dollars -- $ -- 26,757 $ 59,889
=================== ========= =================== =========
Outstanding, end of period 0 $ 0 26,757 $ 59,889
=================== ========= =================== =========
</TABLE>
At April 30, 1996, the Trust had sufficient securities at least equal to the
value of the written options.
17
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Net Unrealized
Contracts to In Exchange Contracts at Appreciation
Settlement Date Deliver/Receive for Value (Depreciation)
- ----------- ---------------------- -------------------- -------------- ------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 5/20/96 AUD 19,420,758 $ 15,001,780 $ 15,252,655 $ (250,875)
5/31/96 CAD 77,386,364 56,851,993 56,859,167 (7,174)
5/28/96 - 5/31/96 CHF 67,443,530 58,013,276 54,320,058 3,693,218
5/28/96 - 11/04/96 DEM 230,420,792 155,372,071 151,257,223 4,114,848
5/31/96 DKK 384,630,255 67,597,584 65,202,520 2,395,064
5/28/96 ESP 5,805,675,171 46,429,734 45,586,161 843,573
5/31/96 FRF 269,363,295 53,630,547 52,150,889 1,479,658
5/31/96 GBP 27,247,265 41,367,409 40,969,805 397,604
5/06/96 - 8/06/96 ITL 193,310,877,144 122,258,810 123,106,862 (848,052)
6/07/96 JPY 5,989,367,985 60,425,424 57,384,135 3,041,289
10/18/96 NZD 46,395,615 30,973,713 31,281,733 (308,020)
5/02/96 - 8/02/96 SEK 315,146,729 46,555,122 46,384,083 171,039
------------- ------------ -----------------------
$754,477,463 $739,755,291 $14,722,172
============= ============ =======================
Purchases 5/20/96 AUD 9,634,451 $ 7,597,342 $ 7,566,695 $ (30,647)
5/31/96 CHF 32,222,628 28,144,721 25,954,360 (2,190,361)
5/28/96 - 11/04/96 DEM 60,157,575 41,337,911 39,361,032 (1,976,879)
5/31/96 ESP 1,429,382,500 11,375,000 11,222,082 (152,918)
5/31/96 FRF 183,517,855 36,797,270 35,530,525 (1,266,745)
5/31/96 GBP 1,480,673 2,259,507 2,226,384 (33,123)
5/06/96 - 5/31/96 ITL 119,069,942,687 74,830,553 76,108,956 1,278,403
5/31/96 - 6/07/96 JPY 6,029,978,762 57,498,946 57,748,555 249,609
5/02/96 SEK 157,573,365 23,138,527 23,214,181 75,654
------------- ------------ -----------------------
$282,979,777 $278,932,770 $(4,047,007)
============= ============ =======================
</TABLE>
Forward foreign currency purchases and sales under master netting
arrangements and closed forward foreign currency exchange contracts excluded
above amounted to a net payable of $122,154 with Banker's Trust at April 30,
1996.
At April 30, 1996, the Trust had sufficient securities to cover any
commitments under these contracts.
Futures Contracts Unrealized
Appreciation
Expiration Contracts Position (Depreciation)
- ------------ ---------- --------- -------------
6/19/96 217 Long $(48,945)
6/19/96 106 Short 90,372
6/19/96 43 Short 38,004
------------
$ 79,431
============
At April 30, 1996, the Trust had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
Interest Rate Swaps
<TABLE>
<CAPTION>
Cash Flows Cash Flows
Notional Principal Paid by the Received by Unrealized
Expiration Amount of Contract Trust the Trust Appreciation
- ------------ --------------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
10/20/96 ITL 43,110,000,000 ITL-Libor-BBA 9.535% Fixed $240,113
============
</TABLE>
At April 30, 1996, the Trust has segregated sufficient securities to cover
margin requirements on open interest rate swaps.
18
<PAGE>
Independent Auditors' Report
To the Trustees and Shareholders of MFS Intermediate Income Trust:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Intermediate Income Trust as
of April 30, 1996, the related statement of operations for the six months
then ended, the statement of changes in net assets for the six months then
ended and the year ended October 31, 1995, and the financial highlights for
the six months ended April 30, 1996 and for each of the years in the
eight-year period ended October 31, 1995. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned at April 30, 1996 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Intermediate
Income Trust at April 30, 1996, the results of its operations, the changes in
its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 7, 1996
19
<PAGE>
[cover]
MFS(R) Intermediate Income Trust
Trustees
A. Keith Brodkin*
Chairman and President
Richard B. Bailey*(2)
Private Investor; Former Chairman and Director (until 1991), Massachusetts
Financial Services Company; Director, Cambridge Bancorp; Director, Cambridge
Trust Company
Marshall N. Cohan(1)
Private Investor
Lawrence H. Cohn, M.D.(2)
Chief of Cardiac Surgery, Brigham and Women's Hospital; Professor of Surgery,
Harvard Medical School
The Hon. Sir J. David Gibbons, KBE(2)
Chief Executive Officer, Edmund Gibbons Ltd.; Chairman, Bank of N.T. Butterfield
& Son Ltd.
Abby M. O'Neill(2)
Private Investor; Director, Rockefeller Financial Services, Inc. (investment
advisers)
Walter E. Robb, III(1)
President and Treasurer, Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting Group, Inc. (office services);
Trustee, Landmark Funds (mutual funds)
Arnold D. Scott*
Senior Executive Vice President, Director and Secretary, Massachusetts
Financial Services Company
Jeffrey L. Shames*
President and Director, Massachusetts Financial Services Company
J. Dale Sherratt(1)
President, Insight Resources, Inc. (acquisition planning specialists)
Ward Smith(1)
Former Chairman (until 1994), NACCO Industries; Director, Sundstrand Corporation
Portfolio Managers
Steven E. Nothern*
Christopher D. Piros*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent, Registrar and Dividend Disbursing Agent
MFS Service Center, Inc.
P.O. Box 9024
Boston, MA 02205-9824
1-800-637-2304
Custodian
State Street Bank and Trust Company
Independent Auditors
Deloitte & Touche LLP
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
*Affiliated with the Investment Adviser
(1)Member of Audit Committee
(2)Member of Portfolio Trading Committee MINCE-3 6/96 130M
[logo] MFS(R)
THE FIRST NAME IN MUTUAL FUNDS
MFS(R) Intermediate Income Trust
Semiannual Report
April 30, 1996
[graphic--two people in silhouette]
