[MFS LOGO] MFS[registration mark]
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND[registration mark]
MFS[registration mark] Intermediate Income Fund
Annual Report
for Year Ended
October 31, 1998
[Silhouette of man and woman in front of large window]
<PAGE>
Letter from the Chairman
Dear Shareholders,
In 1999, MFS celebrates its 75th anniversary. The nation's first mutual
fund -- our Massachusetts Investors Trust (MIT) -- was introduced to the public
on March 21, 1924. Since then, MFS Investment Management[RegTM], the company
that grew out of that original fund, has helped guide shareholders through many
economic and investment cycles, primarily by focusing on the long-term
opportunities created by an expanding global economy. As of October 31, 1998,
MFS manages nearly $87 billion, and the firm's 2,000 people serve 3.8 million
investors and their financial advisers worldwide, while MIT's assets have grown
to over $10 billion.
A major factor in our growth was the development of one of the industry's first
in-house research departments in 1932. Unlike many other companies that rely on
Wall Street research reports, which can be used by many investors at the same
time, MIT's managers built its long-term track record by visiting companies,
talking to managers and competitors, and "kicking the tires" so they could
judge the quality and potential of each company's products and services for
themselves. Today, MFS has more than 100 full-time portfolio managers, stock
analysts, and credit analysts who track the equity and bond markets. That
number includes nearly 40 equity analysts who specialize in industries such as
aviation, media, technology, automobiles, and utilities.
While MIT was the first mutual fund, it was not our only invention. We also
established the nation's first global bond fund, first high-yield municipal
bond fund, and first high-yield municipal closed-end bond fund.
We are proud of the record of MIT and of the funds offered by MFS, but we are
also proud of our long-standing relationship with financial advisers. Not only
do we believe investors can benefit from the advice of these experts but, as
was shown during the market volatility of 1998, people who work with financial
advisers are less likely to abandon their carefully designed, long-term
investment strategies.
Our ability to service your investment and information needs is also extremely
important to us. Today, the MFS Service Center handles millions of transactions
and phone calls every year. Supporting the work of financial advisers, promptly
sending out statements and confirmations, and answering hundreds of investors'
questions every day are crucial elements in maintaining long-term relationships
with our fund shareholders.
If there is a common thread running through these milestones, it is our
always-increasing commitment to providing you with the best possible investment
management and shareholder service, just as we have done for the past 75 years.
As we celebrate this anniversary, it is also a time for MFS to look ahead and
build on our 75 years of innovation and experience to help meet your investment
needs in the next century. We appreciate your confidence and welcome any
questions or comments you may have.
Respectfully,
[Signature of Jeffrey L. Shames]
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management[RegTM]
November 16, 1998
1
<PAGE>
Management Review and Outlook
Dear Shareholders,
The performance of the financial markets in 1998 can be characterized by
Charles Dickens's statement, "It was the best of times, it was the worst of
times." While equity markets around the world corrected sharply, yields on U.S.
Treasury bonds declined to record lows. In particular, one would be hard
pressed to pick another period that proved as volatile as the third quarter of
1998 for both the bond and the stock markets. The Federal Reserve Board (the
Fed) responded to the market tumult by lowering the federal funds rate for the
first time since 1996, to 5.25% from 5.50%. A second cut by the Fed brought
this rate to 5.00%. As a result of these Fed interventions, Treasury bond
yields fell to their lowest levels in 30 years. (Principal value and interest
on Treasury securities are guaranteed by the U.S. government if held to
maturity.)
By late September, extreme volatility existed in many financial markets,
primarily due to the partial liquidation of a large U.S. hedge fund and
continued worries over troubled economies in Japan and the emerging markets of
Asia, Latin America, and Russia. Slumping equities prompted a flight to quality
into the U.S. dollar and Treasuries. In August, the dollar reached a seven-year
high versus the Japanese yen. The yield on the 30-year Treasury bond closed the
third quarter at the record low of 4.97%. The safe haven that Treasuries
provided caused all other fixed-income securities to languish. Yield spreads on
high-quality bonds versus Treasuries widened dramatically, from 45 basis points
(0.45%) in July to 83 basis points (0.83%) in September. Spread widening was
more pronounced on lower-rated bonds. For example, yields on "BBB"-rated
securities versus Treasuries widened from 105 basis points (1.05%) to 189 basis
points (1.89%). The high-yield market was trounced, with spreads over
Treasuries reaching the widest levels in seven years, from 325 basis points
(3.25%) to nearly 600 basis points (6.00%). Interest-rate declines caused
mortgages to underperform also due to concerns of a potential increase in
refinancing volume. Mortgages moved from 96 basis points (0.96%) to 131 basis
points (1.31%) versus Treasuries during the quarter.
The Trust's stock market price, which stood at $7.00 on October 31, 1997,
decreased to $6.93 on October 30, 1998, while its net asset value (NAV) price
decreased from $7.76 to $7.75, representing a total return of 6.56% based on
market price and 7.38% based on NAV. For comparative purposes, the Salomon
Brothers Medium Term (1- to 10-year) Treasury Government Sponsored Index (the
Salomon Index), an unmanaged index of medium-term Treasuries and agency
securities, appreciated by 9.57% over this period, while the J.P. Morgan
Non-Dollar Government Bond Index, an unmanaged index of actively traded
government bonds issued by 12 countries (excluding the United States) with
remaining maturities of at least one year, appreciated by 13.37%.
The Trust slightly underperformed the Salomon Index during this period. The
Treasury market's rally at the expense of other fixed-income markets such as
government agencies and mortgage-backed securities hurt performance. However,
we continue to believe that the additional yield offered by these securities
will provide better total returns than Treasuries over the long term. When the
markets stabilize, which will probably not happen until the beginning of 1999,
we may become more cautious about the Treasury market and look to increase the
Trust's holdings of higher-yielding quality securities. Also, we will look to
increase investments in Government National Mortgage Association (Ginnie Mae)
securities when refinancing worries subside. We believe that interest rates
will head lower as the Fed responds to concerns over a possible economic
downturn and inflation fears prove unfounded. Accordingly, we have modestly
extended the interest-rate sensitivity of the Trust.
In the last quarter of the period, we shifted some assets from the most
recently issued Treasuries to older, slightly less liquid, but higher-yielding
Treasury securities. Unfortunately, the recent liquidity concerns gripping the
fixed-income market have
2
<PAGE>
caused the most actively traded, newer issues to dramatically outperform.
Therefore, the shift to higher-yielding, older Treasuries has been a near-term
detriment to performance, but we believe it should balance out in the long run.
International Sector
The crisis atmosphere that began in Asia in the summer of 1997 remained the
dominant theme of the past 12 months. Emerging markets stabilized in the first
half of the year only to be hit hard when Russia defaulted in August.
Top-quality government bonds benefited from the flight to quality as well as
from the accumulating evidence that the crisis will slow growth and dampen
inflation in the industrialized economies. As a result, every major European
bond market generated double-digit returns (in local currency terms) according
to the J.P. Morgan global government indices. A narrowing of yield spreads was
also in evidence as the higher-yielding markets -- the United Kingdom, Ireland,
Sweden, and Italy -- outperformed the rest of Europe in the run-up to European
monetary union in January 1999. Similarly, New Zealand bonds outperformed the
lower-yielding markets of the dollar bloc. Throughout the year, the Trust's
foreign assets were concentrated in these better-performing markets --
especially the United Kingdom and New Zealand. As we reported 12 months ago, we
cut the Trust's exposure to emerging markets to 5% in the early stages of the
Asian crisis. We have maintained this exposure throughout the year.
Six months ago, we suggested that the U.S. dollar's three-year trend of
appreciating versus major currencies might be ending. And so it did. Since the
end of April the dollar has depreciated by 7.8% against the German mark and by
12.7% against the Japanese yen. While the fundamental factors that had
supported the dollar were waning, the magnitude of the collapse owes more to
forced unwinding of leveraged positions and official intervention designed to
relieve pressure on dollar-dependent emerging markets. As the pressure
increased on the dollar we removed the currency hedges from the Trust's foreign
assets so that, at present, the Trust has roughly a 10% exposure to foreign
currencies.
Over the last month of the period, the global bond markets have taken comfort
from rate cuts by the Fed and European central banks, an increase in funding
for the International Monetary Fund, a bank support package in Japan, and a
fiscal package in Brazil. These developments have renewed hope that further
deterioration of the global economy can be averted. Hence, top-quality
government bond yields have risen while credit spreads have narrowed.
Nonetheless, we remain positive on top-quality government bonds. Global growth
remains dependent upon U.S. demand, which is likely to slow in the months
ahead. Given their wide yield spreads and economies that appear especially
vulnerable, the United Kingdom and New Zealand remain among our favorite places
in which to invest.
Respectfully,
[Signature of Steven E. Nothern]
Steven E. Nothern
Portfolio Manager
[Signature of Christopher D. Piros]
Christopher D. Piros
Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
3
<PAGE>
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
Trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
- -------------------------------------------------------------------------------
Performance Summary
(For the year ended October 31, 1998)
<TABLE>
<S> <C>
Net Asset Value Per Share
October 31, 1997 $7.76
October 31, 1998 $7.75
New York Stock Exchange Price
October 31, 1997 $7.000
February 4, 1998 (high)* $7.500
September 1, 1998 (low)* $6.688
October 30, 1998 $6.938
</TABLE>
*For the period November 1, 1997, through October 31, 1998.
- -------------------------------------------------------------------------------
Federal Tax Information
(for the year ended October 31, 1998)
In January 1999, shareholders will be mailed a Form 1099 reporting the federal
tax status of all distributions paid during the calendar year 1998.
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, nondiversified,
management investment company and has no employees.
Number of Shareholders
As of October 31, 1998, our records indicate that there are 14,099 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
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MIN.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS[RegTM] Intermediate Income Trust,
which was held on
October 31, 1998, the following actions were taken:
Item 1. The election of Richard B. Bailey, Lawrence H. Cohn, Abby M. O'Neill,
J. Dale Sherratt, and Ward Smith as Trustees of the Trust.
<TABLE>
<CAPTION>
Number of Shares
Withhold
Nominee For Authority
- ------------------- -------------------- ------------------
<S> <C> <C>
Richard B. Bailey 130,168,707.635 2,880,327.386
Lawrence H. Cohn 130,295,872.291 2,753,162.730
Abby M. O'Neill 130,247,105.908 2,801,929.113
J. Dale Sherratt 130,343,370.738 2,705,664.283
Ward Smith 130,328,823.939 2,720,211.082
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are Marshall N. Cohan, Sir J. David Gibbons KBE, Walter E. Robb, III,
Arnold D. Scott, and Jeffrey L. Shames.
Item 2. The ratification of the election of Deloitte & Touche LLP as the
independent public accountants to be employed by the Trust for
the fiscal year ending October 31, 1999.
<TABLE>
<CAPTION>
Number of Shares
<S> <C>
For 130,337,107.017
Against 913,758.087
Abstain 1,798,169.917
</TABLE>
4
<PAGE>
Investment Objective and Policies
The investment objective of the 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.
Dividend Reinvestment and
Cash Purchase Plan
MFS offers a Dividend Reinvestment and Cash Purchase Plan which allows you to
reinvest either all of the distributions paid by the Trust or only the long-term
capital gains. Purchases are made at the market price unless that price exceeds
the net asset value (the shares are trading at a premium). If the shares are
trading at a premium, purchases will be made at a discounted price of either
the net asset value or 95% of the market price, whichever is greater. Twice
each year you can also buy shares. Investments from $100 to $500 can be made in
January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank or other nominee, you
can ask the firm or nominee to participate in the Plan on your behalf. If the
nominee does not offer the Plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the commissions. A service fee of $0.75 is
charged for each cash purchase as well as a pro rata share of the brokerage
commissions. The automatic reinvestment of distributions does not relieve you
of any income tax that may be payable (or required to be withheld) on the
distributions.
To enroll in or withdraw from the Plan, call 1-800-637-2304 any business day
from 8 a.m. to 8 p.m. Eastern time. Please have available the name of the Trust
and your account and Social Security numbers. For certain types of
registrations, such as corporate accounts, instructions must be submitted in
writing. Please call for additional details. When you withdraw, you can receive
the value of the reinvested shares in one of two ways: a check for the value of
the full and fractional shares, or a certificate for the full shares and a
check for the fractional shares.
If you have any questions or would like a brochure providing a complete
description of the Plan, please call 1-800-637-2304 any business day from 8
a.m. to 8 p.m. Eastern time.
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- -------------------------------------------------------------------------------
5
<PAGE>
Portfolio of Investments - October 31, 1998
Bonds - 97.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 81.5%
U.S. Federal Agencies -- 10.4%
Agency for International
Development, 6.625s, 2004 .............. $14,600 $ 15,733,252
Federal Home Loan Bank, 5.125s,
2003 ................................... 10,000 10,104,700
Federal Home Loan Mortgage
Corp., 5.125s, 2008 .................... 6,000 5,965,080
Federal Home Loan Mortgage
Corp., 5.75s, 2003 ..................... 15,000 15,574,200
Federal National Mortgage Assn.,
6.5s, 2013 ............................. 22,804 23,138,345
Federal National Mortgage Assn.,
6.959s, 2007 ........................... 5,743 6,130,773
Federal National Mortgage Assn.,
8.33s, 2005 ............................ 20,000 20,887,400
Federal National Mortgage Assn.,
9s, 2008 TBA ........................... 18 19,225
State of Israel, 6.625s, 2003 ............ 15,000 16,151,250
------------
$113,704,225
------------
Government National Mortgage
Association -- 33.9%
GNMA, 6.5s, 2028 TBA ..................... $80,296 $ 81,173,951
GNMA, 7s, 2012 - 2024 TBA ................ 88,363 90,490,777
GNMA, 7s, 2023 - 2024 .................... 37,340 38,238,117
GNMA, 7.5s, 2022 - 2025 .................. 37,815 39,310,478
GNMA, 7.5s, 2027 TBA ..................... 59,855 61,631,993
GNMA, 8s, 2025 TBA ....................... 32,007 33,187,528
GNMA, 8.5s, 2006 TBA ..................... 4,254 4,484,402
GNMA, 8.5s, 2009 ......................... 14,592 15,238,267
GNMA, 9.25s, 2001 ........................ 5,285 5,622,679
------------
$369,378,192
------------
U.S. Treasury Obligations -- 37.2%
U.S. Treasury Notes, 8s, 2001 ............ $ 3,000 $ 3,259,680
U.S. Treasury Bonds, 14.25s,
2002 ................................... 5,000 6,492,200
U. S. Treasury Notes, 5.375s,
2003 ................................... 11,500 12,008,530
U. S. Treasury Bonds, 10.75s,
2003 ................................... 26,000 32,321,120
U.S. Treasury Bonds, 11.875s,
2003 ................................... 43,000 57,109,160
U.S. Treasury Bonds, 12.375s,
2004 ................................... 34,500 47,626,215
U.S. Treasury Notes, 5.625s, 2008 15,000 16,169,550
U.S. Treasury Bonds 10.375s,
2009 ................................... 18,350 23,783,251
U.S. Treasury Bonds, 13.875s,
2011 ................................... 25,500 40,018,935
U.S. Treasury Bonds, 10.375s,
2012 ................................... 84,600 118,122,750
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
U.S. Treasury Obligations -- continued
U.S. Treasury Bonds, 12s, 2013 ........... $ 31,500 $ 48,633,165
------------
$405,544,556
------------
Total U.S. Bonds ....................... $888,626,973
------------
Foreign Bonds -- 15.6%
Argentina -- 0.4%
Republic of Argentina,
9.015s, 2005 ........................... $ 4,400 $ 4,411,000
------------
Australia -- 0.4%
Commonwealth of
Australia, 9.5s, 2003 .............. AUD 5,865 $ 4,433,035
------------
Brazil -- 0.9%
Republic of Brazil, 5.5s,
2024 ................................... 2,647 1,614,670
Republic of Brazil, 6.125s,
2024 ................................... $ 10,793 $ 6,381,901
Republic of Brazil, 9.375s,
2008 ................................... 3,282 2,198,940
------------
$ 10,195,511
------------
Bulgaria -- 0.4%
National Republic of
Bulgaria, 6.688s, 2024 ................. $ 5,700 $ 3,990,000
------------
Colombia -- 0.5%
Republic of Colombia,
8.82s, 2005 ............................ $ 6,600 $ 5,610,000
------------
Denmark -- 0.5%
Kingdom of Denmark, 7s,
2007 ............................... DKK 28,905 $ 5,356,433
------------
Greece -- 0.4%
Hellenic Republic, 5.75s,
2008 ................................... $ 3,238 $ 3,956,301
------------
Italy -- 0.6%
Republic of Italy, 5.75s,
2002 ............................... ITL 10,860,000 $ 7,075,254
------------
Mexico -- 1.3%
United Mexican States,
9.875s, 2007 ........................... $ 11,460 $ 10,815,947
Petroleos Mexicanos,
11.157s, 2005## ........................ 2,120 1,865,600
United Mexican States,
6.25s, 2019 ............................ 2,750 2,052,325
------------
$ 14,733,872
------------
New Zealand -- 1.6%
Government of New
Zealand, 8s, 2001 .................. NZD 28,830 $ 16,931,320
------------
Panama -- 0.4%
Republic of Panama,
8.25s, 2008 ............................ $ 5,000 $ 4,500,000
------------
</TABLE>
6
<PAGE>
Bonds - continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Russia -- 0.1%
Ministry of Finance, 10s,
2007 ................... $ 805 $ 189,175
Russian Federation,
11.75s, 2003## ......... 4,300 1,053,500
--------------
$ 1,242,675
--------------
South Korea -- 1.0%
Republic of Korea, 8.875s,
2008 ................... $ 6,750 $ 6,175,035
Korea Development Bank,
8.875s, 2003## ......... 5,800 4,814,000
--------------
$ 10,989,035
--------------
United Kingdom -- 7.1%
United Kingdom Treasury,
6.5s, 2003 ............. GBP 13,966 $ 25,000,661
United Kingdom Treasury,
7.25s, 2007 ............ 12,455 24,212,828
United Kingdom Treasury,
8.5s, 2005 ............. 9,140 18,372,390
United Kingdom Treasury,
9s, 2008 ............... 4,480 9,781,021
--------------
$ 77,366,900
--------------
Total Foreign Bonds ....................... $ 170,791,336
--------------
Total Bonds (Identified Cost,
$1,043,515,443) ......................... $1,059,418,309
--------------
</TABLE>
<TABLE>
<CAPTION>
Number of
Issuer Shares
<S> <C> <C>
Warrants
Republic of Venezuela,*
(Identified Cost, $0) ......... 37,500 $0
--
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Repurchase Agreement -- 1.1%
Goldman Sachs, dated
10/30/98, due 11/2/98,
total to be received
$11,971,365 (secured by
various U.S. Treasury
and Federal Agency
obligations in a jointly
traded account), at cost ........... $11,966 $ 11,966,000
--------------
Total Investments (Identified Cost,
$1,055,481,443)............................................. $1,071,384,309
--------------
Other Assets,
Less Liabilities -- 1.8% ..................................... 19,250,088
--------------
Net Assets -- 100.0% ......................................... $1,090,634,397
--------------
</TABLE>
* Non-income producing security.
## SEC Rule 144A restriction.
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 GBP = British Pounds
CAD = Canadian Dollars ITL = Italian Lire
CHF = Swiss Francs JPY = Japanese Yen
DEM = Deutsche Marks NZD = New Zealand Dollars
DKK = Danish Kroner
See notes to financial statements
7
<PAGE>
Statement of Assets and Liabilities - October 31, 1998
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $1,055,481,443) ................................ $1,071,384,309
Foreign currency, at value (identified cost, $34) ...................................... 33
Net receivable for forward foreign currency exchange contracts to purchase ............. 8,224,919
Net receivable for forward foreign currency exchange contracts subject to master 1,989,718
netting agreements
Receivable for investments sold ........................................................ 3,593,354
Interest receivable .................................................................... 20,130,040
Other assets ........................................................................... 7,211
--------------
Total assets ....................................................................... $1,105,329,584
--------------
Liabilities:
Payable to dividend disbursing agent ................................................... $ 532,502
Payable for investments purchased ...................................................... 4,484,444
Net payable for forward foreign currency exchange contracts to sell .................... 9,138,985
Payable to affiliates -
Management fee ....................................................................... 35,006
Administrative fee ................................................................... 1,163
Transfer and dividend disbursing agent fee ........................................... 22,351
Accrued expenses and other liabilities ................................................. 480,736
--------------
Total liabilities .................................................................. $ 14,695,187
--------------
Net assets ............................................................................... $1,090,634,397
==============
Net assets consist of:
Paid-in capital ........................................................................ $1,116,121,158
Unrealized appreciation on investments and translation of assets and liabilities in 16,903,668
foreign currencies
Accumulated net realized loss on investments and foreign currency transactions ......... (37,662,418)
Accumulated distributions in excess of net investment income ........................... (4,728,011)
--------------
Total .............................................................................. $1,090,634,397
==============
Shares of beneficial interest outstanding (202,648,016 issued less 61,901,100 treasury
shares) 140,746,916
==============
Net asset value per share (net assets [divided by] shares of beneficial interest $ 7.75
outstanding) ==============
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Operations - Year Ended October 31, 1998
<TABLE>
<S> <C>
Net investment income:
Interest income ........................................................... $ 81,648,195
-------------
Expenses -
Management fee .......................................................... $ 8,105,882
Trustees' compensation .................................................. 171,443
Transfer and dividend disbursing agent fee .............................. 268,218
Custodian fee ........................................................... 353,655
Administrative fee ...................................................... 152,396
Postage ................................................................. 83,719
Auditing fees ........................................................... 71,241
Printing ................................................................ 42,069
Legal fees .............................................................. 12,781
Miscellaneous ........................................................... 658,153
-------------
Total expenses ........................................................ $ 9,919,557
Fees paid indirectly .................................................... (185,956)
-------------
Net expenses .......................................................... $ 9,733,601
-------------
Net investment income ............................................... $ 71,914,594
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions ................................................... $ (23,840,344)
Written option transactions ............................................... (799,295)
Foreign currency transactions ............................................. 7,043,764
Interest rate swaps ....................................................... 129,136
Futures contracts ......................................................... (186,058)
-------------
Net realized loss on investments and foreign currency transactions ...... $ (17,652,797)
-------------
Change in unrealized appreciation (depreciation) -
Investments ............................................................... $ 19,967,189
Written options ........................................................... 1,362,299
Translation of assets and liabilities in foreign currencies ............... (5,030,442)
Interest rate swaps ....................................................... (95,080)
-------------
Net unrealized gain on investments and foreign currency translation ..... $ 16,203,966
-------------
Net realized and unrealized loss on investments and foreign currency .. $ (1,448,831)
-------------
Increase in net assets from operations .............................. $ 70,465,763
=============
</TABLE>
See notes to financial statements
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in net assets:
From operations -
Net investment income ......................................................... $ 71,914,594 $ 77,333,786
Net realized gain (loss) on investments and foreign currency transactions ..... (17,652,797) 1,807,453
Net unrealized gain (loss) on investments and foreign currency translation .... 16,203,966 (9,214,847)
-------------- --------------
Increase in net assets from operations ...................................... $ 70,465,763 $ 69,926,392
-------------- --------------
Distributions declared to shareholders -
From net investment income .................................................... $ (65,821,545) $ (77,333,786)
In excess of net investment income ............................................ -- (5,944,231)
From paid-in capital .......................................................... (6,636,586) --
-------------- --------------
Total distributions declared to shareholders .............................. $ (72,458,131) $ (83,278,017)
-------------- --------------
Trust share (principal) transactions -
Cost of shares reacquired ..................................................... $ (5,740,891) $ (47,959,918)
-------------- --------------
Total decrease in net assets .............................................. $ (7,733,259) $ (61,311,543)
Net assets:
At beginning of year .......................................................... 1,098,367,656 1,159,679,199
-------------- --------------
At end of year (including accumulated distributions in excess of net investment
income of $4,728,011 and $7,200,417 respectively) ............................. $1,090,634,397 $1,098,367,656
============== ==============
</TABLE>
See notes to financial statements
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
Per share data (for a share outstanding ---------------------------------------------------------------------
1998 1997 1996 1995 1994
throughout each period): ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period .............. $ 7.76 $ 7.82 $ 7.83 $ 7.33 $ 8.18
------- ------- ------- -------- --------
Income from investment operations# -
Net investment income ............................ $ 0.51 $ 0.54 $ 0.53 $ 0.55 $ 0.51
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .................................... (0.01) (0.05) (0.03) 0.32 (0.78)
------- -------- -------- -------- --------
Total from investment operations ................. $ 0.50 $ 0.49 $ 0.50 $ 0.87 $ (0.27)
------- -------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income ......................... $ (0.46) $ (0.54) $ (0.53) $ (0.53) $ (0.03)
In excess of net investment income and foreign
currency transactions ............................. -- (0.04) (0.04) -- (0.13)
From paid-in capital ............................... (0.05) -- -- -- (0.42)
------- -------- -------- -------- --------
Total distributions declared to shareholders ..... $ (0.51) $ (0.58) $ (0.57) $ (0.53) $ (0.58)
------- -------- -------- -------- --------
Net increase from repurchase of capital shares ..... $ --+ $ 0.03 $ 0.06 $ 0.16 $ --
------- -------- -------- -------- --------
Net asset value - end of period .................... $ 7.75 $ 7.76 $ 7.82 $ 7.83 $ 7.33
------- -------- -------- -------- --------
Per share market value - end of period ............. $ 6.938 $ 7.000 $ 7.125 $ 6.625 $ 6.125
------- -------- -------- -------- --------
Total return ....................................... 6.56% 6.46% 17.40% 17.08% (12.58)%
Ratios (to average net assets)/Supplemental data:
Expenses## ....................................... 0.91% 0.91% 0.97% 1.02% 0.91%
Net investment income ............................ 6.59% 6.92% 6.75% 7.13% 6.61%
Portfolio turnover ................................. 184% 213% 257% 242% 213%
Net assets at end of period (000,000 omitted) ...... $ 1,091 $ 1,098 $ 1,160 $ 1,247 $ 1,411
</TABLE>
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund has an expense
offset arrangement which reduces the funds custodian fee based upon the
amount of cash maintained by the fund with its custodian and dividend
disbursing agent. The Fund's expenses are calculated without reduction for
this expense offset arrangement.
+ For the year ended October 31, 1998, the net increase from repurchase of
capital shares was less than $0.01 per share.
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, forward contracts,
and swap agreements, 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
foreign 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 reported at market value using closing settlement
prices. Over-the-counter options on securities are valued by brokers.
Over-the-counter currency options are valued through the use of a pricing model
which takes into account foreign currency exchange spot and forward rates,
implied volatility, and short-term repurchase rates. Securities for which there
are no such quotations or valuations are valued 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 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 -- 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.
12
<PAGE>
Written Options -- The Trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Trust realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Trust. The Trust, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options
may also be used as part of an income producing strategy reflecting the view of
the Trust's management on the direction of interest rates.
Futures Contracts -- The Trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at
a fixed price on a future date. In entering such contracts, the Trust is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Trust each day, depending on the daily fluctuations in
the value of the contract, and are recorded for financial statement purposes as
unrealized gains or losses by the Trust. The Trust's investment in futures
contracts is designed to hedge against anticipated future changes in interest
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. Investments in currency futures for
purposes other than hedging may be made to change the Trust's relative position
in one or more currencies without buying and selling portfolio assets.
Investments in equity index contracts or contracts on related options for
purposes other than hedging, may be made when the Trust has cash on hand and
wishes to participate in anticipated market appreciation while the cash is
being invested. Should interest 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 into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Trust 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. 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.
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
13
<PAGE>
Notes to Financial Statements - continued
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.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
discount is amortized 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. Some securities may be purchased on
a "when-issued" or "forward delivery" basis, which means that the securities
will be delivered to the Trust at a future date, usually beyond customary
settlement time.
Fees Paid Indirectly -- The Trust's custody fee is calculated as a percentage
of the Trust's average monthly net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
Trust. This amount is shown as a reduction of 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. 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 net realized gains.
During the year ended October 31, 1998, $3,620,643 was reclassified from
accumulated undistributed net investment income, to accumulated net realized
gain on investments and foreign currency transactions due to differences
between book and tax accounting for mortgage-backed securities and currency
transactions. In addition, $6,636,586 was redesignated as a Tax Return of
Capital distribution. This change had no effect on net assets or net asset
value per share.
At October 31, 1998, the Trust, for federal income tax purposes, had a capital
loss carryforward of ($37,081,141), 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, 2006, ($13,745,485), October 31, 2005,
($645,525), October 31, 2003, ($6,526,984) and October 31, 2002, ($16,163,147).
(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
14
<PAGE>
facilities. The management fee is computed daily and paid monthly at an annual
rate of 0.32% of average daily net assets and 5.65% of investment income.
Administrator -- The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
<TABLE>
<S> <C>
First $1 billion................ 0.0150%
Next $1 billion................. 0.0125%
Next $1 billion................. 0.0100%
In excess of $3 billion......... 0.0000%
</TABLE>
The Trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Trust, all of whom receive
remuneration for their services to the Trust from MFS. Certain officers and
Trustees of the Trust are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), 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 $54,301
for the year ended October 31, 1998.
Transfer Agent -- MFSC acts as registrar and dividend disbursing agent for the
Trust. The agreement provides that the Trust will pay MFSC an account
maintenance fee of no more than $9.00 per account and a dividend services fee
of $0.75 per reinvestment and will reimburse MFSC for reasonable out-of-pocket
expenses.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Purchases Sales
-------------- --------------
<S> <C> <C>
U.S. government securities ............................ $1,587,682,851 $1,612,184,243
============== ==============
Investments (non-U.S. government securities) .......... $ 387,014,655 $ 348,314,367
============== ==============
</TABLE>
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:
<TABLE>
<S> <C>
Aggregate cost ........................ $1,056,975,243
==============
Gross unrealized appreciation ......... 25,299,345
Gross unrealized depreciation ......... $ (10,890,279)
--------------
Net unrealized appreciation ........... $ 14,409,066
==============
</TABLE>
(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 (without par
value). Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1998 1997
------- ---------
<S> <C> <C>
Treasury shares reacquired 807,000 6,728,100
======= =========
</TABLE>
In accordance with the provisions of the Trust's prospectus, 807,000 shares of
beneficial interest were purchased by the Trust during the year ended October
31, 1998, at an average price per share of $7.11 and a weighted average
discount of 8.84% per share. The Trust repurchased 6,728,100 shares of
beneficial interest
15
<PAGE>
Notes to Financial Statements - continued
during the year ended October 31, 1997, at an average price per share of $7.13
and a weighted average discount of 8.43% 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.
(6) Line of Credit
The Trust and other affiliated trusts participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Trust shares. Interest is charged to each trust, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Trust for the year ended October 31, 1998, was $7,926.
(7) Financial Instruments
The Trust trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, and futures contracts. The notional or
contractual amounts of these instruments represent the investment the Trust has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered.
Written Option Transactions
<TABLE>
<CAPTION>
1998 Calls 1998 Puts
--------------------------------------------------------------------------------
Principal Amounts of Principal Amounts of
Contracts (000 Omitted) Premiums Contracts (000 Omitted) Premiums
------------------------------------------------------------------- ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period -
Swiss Francs/Deutsche Marks ................. 48,509 $ 338,285 -- $ --
Options written -
Canadian Dollars ............................ -- -- 10,983 41,090
Deutsche Marks .............................. 48,378 209,638 28,511 163,899
Japanese Yen ................................ 22,443,528 1,593,439 1,112,200 31,442
United Kingdom Treasury ..................... 4,480 60,677 -- --
Options terminated in closing transactions -
Canadian Dollars ............................ -- -- (10,983) (41,090)
Deutsche Marks .............................. (48,378) (209,638) (28,511) (163,899)
Japanese Yen ................................ (10,797,390) (1,450,881) (1,112,200) (31,442)
Swiss Francs/Deutsche Marks ................. (48,509) (338,285) -- --
United Kingdom Treasury ..................... (4,480) (60,677) -- --
Options terminated in expired transactions -
Japanese Yen ................................ (5,812,103) (70,181) -- --
Options terminated in exercised transactions -
Japanese Yen ................................ (5,834,035) (72,377) -- --
----------- ---------
Outstanding, end of period .................... $ -- $ --
----------- ---------
</TABLE>
16
<PAGE>
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts to Contracts at Net Unrealized
Settlement Date Deliver/Receive In Exchange for Value Appreciation (Depreciation)
------------------- ----------------- ----------------- -------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 12/15/98 .......... AUD 7,190,783 $ 4,263,919 $ 4,501,925 $ (238,006)
12/15/98 .......... CAD 44,233,484 29,225,956 28,696,333 529,623
12/15/98 .......... DEM 38,460,322 22,863,109 23,265,030 (401,921)
12/15/98 .......... DKK 72,100,339 11,239,331 11,459,903 (220,572)
12/15/98 .......... JPY 6,280,248,296 46,242,606 54,337,984 (8,095,378)
12/15/98 .......... NZD 35,887,327 18,297,683 19,010,414 (712,731)
---------- ---------- ----------
$132,132,604 $141,271,589 $ (9,138,985)
============ ============ ============
Purchases 12/15/98 .......... AUD 32,273,296 $ 19,196,157 $ 20,205,303 $ 1,009,146
12/15/98 .......... CAD 58,251,523 37,667,032 37,790,492 123,460
12/15/98 .......... CHF 31,571,508 22,863,109 23,428,603 565,494
12/15/98 .......... DEM 73,990,249 44,230,824 44,757,434 526,610
12/15/98 .......... DKK 32,720,422 5,258,996 5,200,709 (58,287)
12/15/98 .......... GBP 3,965,222 6,709,552 6,619,259 (90,293)
12/15/98 .......... ITL 2,197,870,395 1,379,445 1,342,410 (37,035)
12/15/98 .......... JPY 6,037,609,297 46,123,830 52,238,622 6,114,792
12/15/98 .......... NZD 10,039,691 5,247,245 5,318,277 71,032
------------ ------------ ------------
$188,676,190 $196,901,109 $ 8,224,919
============ ============ ============
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $2,190,049 with First Boston,
$795,488 with Merrill Lynch, and a net payable of $995,819 with Deutsche Bank
at October 31, 1998.
At October 31, 1998, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
17
<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 October
31, 1998, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended October 31, 1998 and
1997, and the financial highlights for each of the years in the five-year
period ended October 31, 1998. 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
October 31,1998 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 October 31, 1998, 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
December 11, 1998
18
<PAGE>
MFS[RegTM] Intermediate Income Trust
Trustees
Richard B. Bailey*(2)
Private Investor; Former Chairman and
Director (until 1991),
MFS Investment Management
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, Colonial Insurance Company, Ltd.
Abby M. O'Neill(2)
Private Investor
Walter E. Robb, III(1)
President and Treasurer,
Benchmark Advisors, Inc. (corporate financial consultants);
President, Benchmark Consulting Group, Inc. (office services)
Arnold D. Scott*
Senior Executive Vice President,
Director, and Secretary, MFS Investment Management
Jeffrey L. Shames*
Chairman, Chief Executive Officer,
and Director, MFS Investment Management
J. Dale Sherratt(1)
President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith(1)
Former Chairman (until 1994),
NACCO Industries (holding company)
Portfolio Managers
Steven E. Nothern*
Christopher D. Piros*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
Secretary
Stephen E. Cavan*
Assistant Secretary
James R. Bordewick, Jr.*
Transfer Agent,
Registrar, and Dividend
Disbursing Agent
State Street Bank and Trust Company
c/o 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.
[Recycle logo]This report is printed on recycled paper. MINCE-3 12/98 107M
