[Front Cover]
[MFS logo]
MFS(SM)
INVESTMENT MANAGEMENT
MFS(R) Intermediate Income Trust
Annual Report
for Year Ended
October 31, 1997
<PAGE>
Dear Shareholders:
U.S. economic momentum remains firm, with almost all recent data still
suggesting a healthy combination of robust growth and low inflation. However, as
the upheavals in Southeast Asia have broadened to the entire region, at the very
least the data suggest a moderation of both global growth and inflation
expectations. In the very near term, we believe weaker Asian currencies will
help keep a lid on U.S. inflation and will slow export growth. Just how much of
an impact these events will have longer term on U.S. growth and earnings,
however, remains uncertain. They do, though, suggest that the Federal Reserve
Board (the Fed) will stay its hand, at least through the remainder of 1997, as
officials evaluate the impact of these events on the U.S. real
(inflation-adjusted) economy.
Clearly, the United States stands out as attractive given recent market turmoil
around the globe. Domestic fundamentals are strong, inflation remains subdued
and, on a relative basis, U.S. yields stand out. For this reason, we have
increased the Trust's U.S. allocation to approximately 80% of the portfolio.
Yield levels on 10-year maturity U.S. Treasuries, which had climbed to as high
as 7.00% in April 1997, have more recently declined to approximately 5.80%, near
their low for the year. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.) An investment in 10-year
Treasuries would have produced a total return of 9.78% over the past 12 months.
Similarly, yields on two-year Treasury securities, which peaked at 6.50% during
April, declined to 5.60% more recently and would have produced a total return of
6.50%. Although many global trends continue to provide a very positive backdrop
for our market, we believe caution is still warranted as our economy approaches
full capacity.
The Trust's stock market price, which stood at $7.125 on October 31, 1996,
decreased to $7.00 on October 31, 1997, while the net asset value (NAV) price
decreased from $7.82 to $7.76, representing a total return of 6.46% based on
market price and 7.53% based on NAV. For comparative purposes, the Salomon
Brothers Medium Term (1- to 10-year) Treasury Government Sponsored Index, an
unmanaged index of medium-term Treasury and agency securities, appreciated by
7.31% over this period, while the J.P. Morgan Nondollar 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 0.12% in local currency terms.
U.S. Government Sector
Earlier in 1997, strong economic momentum led the Fed to raise short-term
interest rates slightly in order to forestall inflationary pressures. In
anticipation of the March tightening of monetary policy, our strategy has been
to de-emphasize intermediate-maturity Treasuries and increase our allocation to
very short-maturity Treasuries, offset by a slightly greater emphasis on
longer-maturity 10-year Treasuries. Although the extent of additional Fed action
over the next several months remains uncertain, we believe the Fed may
eventually see a need for further modest tightening. Should it choose to raise
interest rates, short- and intermediate-maturity securities will be the most
adversely affected. By repositioning our Treasury exposure between cash and
longer maturities, while reducing exposure to intermediate maturities, we
believe we can reduce the portfolio's overall interest-rate sensitivity.
In this environment, the mortgage-backed pass-through sector posted strong
relative performance, and we anticipate a continuation of this trend in the
months ahead. An index, or average, allocation to this sector would be about
36%. Over the course of the year our weighting of this sector was neutral, but
we will add to it as opportunities present themselves.
International Sector
Over the past year, we have gradually reduced the Trust's exposure to foreign
markets from the 50% allowable maximum to roughly 15% as U.S. interest rates
have become increasingly attractive from a global perspective. Throughout this
process, we
1
<PAGE>
continued to emphasize the higher-yielding European and dollar-bloc markets.
According to the J.P. Morgan indices, these markets, such as Italy, Spain, the
United Kingdom, and Australia, provided the best local currency performance
among the major sovereign bond markets. Core Europe and Japan lagged the U.S.
market. The Trust also benefited from our decision to hedge most of its foreign
assets back into the U.S. dollar, which appreciated sharply against all major
currencies except the British pound. The Trust's 10% allocation to emerging
market instruments was a mixed blessing. For most of the year, the Trust
benefited from tightening spreads and high current income from this sector.
However, the Trust's holdings in Thailand suffered a sharp loss in value at the
beginning of the currency crisis that has spread throughout Southeast Asia in
the past three months.
The Asian crisis has created concern that global growth will slow sharply in
1998 and has reinforced the market's confidence that inflation will remain low,
if not decline. We believe there is little doubt that the recovery process in
Asia will be slow and painful, but the magnitude of its impact on the rest of
the world remains to be seen. Overall, the turmoil has changed our outlook for
the developed bond markets very little. In our view, slower global growth and
lower inflation will support core markets such as Germany and the United States
and provide the potential for a further rally if the downturn is more severe
than the market currently believes. We still believe European monetary union
will proceed on schedule with a broad group of participants, and that our
investments in Italy and Sweden should therefore benefit from a resumption of
spread tightening once the crisis atmosphere subsides. Since Australia and New
Zealand are particularly vulnerable to a recession in Asia, we remain quite
positive on these markets. In response to the turmoil in the emerging markets,
we recently cut our exposure to them to roughly 5%. As the crisis unfolds, we
will be looking for opportunities to acquire assets at attractive valuations.
Although the dollar has been strong over the past year, recently it has weakened
against European currencies such as the German mark. This reflects, in part,
concern over the impact of the Asian crisis on the already large U.S.
current-account deficit. At present, the Trust remains fully hedged back into
dollars, but we will be watching this situation closely.
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
November 14, 1997
----------------------
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.
2
<PAGE>
Performance Summary
(For the year ended October 31, 1997)
Net Asset Value Per Share
October 31, 1996 $7.82
October 31, 1997 $7.76
New York Stock Exchange Price
October 31, 1996 $7.125
July 28, 1997 (high)* $7.500
December 17, 1996 (low)* $6.630
October 31, 1997 $7.000
*For the period November 1, 1996, through October 31, 1997.
Federal Income Tax Information
on Distributions
(For the year ended October 31, 1997)
Tax Form Summary
In January 1998, shareholders will be mailed a Tax Form Summary reporting the
federal tax status of all distributions paid during the calendar year 1997.
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, 1997, our records indicate that there are 16,139 registered
shareholders and approximately 101,000 shareholders owning Trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
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(R) Intermediate Income Trust,
which was held on October 31, 1997, the following actions were taken:
Item 1. The election of Walter E. Robb, III, Arnold D. Scott, and Jeffrey L.
Shames as Trustees of the Trust.
Numbers of Shares
Withhold
Nominee For Authority
- --------------------- ------------- ----------
Walter E. Robb, III 126,893,824 1,853,159
Arnold D. Scott 126,938,878 1,808,105
Jeffrey L. Shames 126,801,718 1,945,265
Trustees continuing in office who were not subject to re-election at this
meeting are A. Keith Brodkin, Richard B. Bailey, Marshall N. Cohan, The Hon.
Sir J. David Gibbons, Lawrence H. Cohn, Abby M. O'Neill, J. Dale Sherratt, and
Ward Smith.
Item 2. The ratification of the selection of Deloitte & Touche LLP as
the independent public accountants to be employed by the Trust for the
fiscal year ending October 31, 1998.
Number of Shares
-----------------
For 126,555,679
Against 607,806
Abstain 1,583,498
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.
3
<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.
4
<PAGE>
Portfolio of Investments - October 31, 1997
Bonds - 95.5%
Principal Amount
Issuer (000 Omitted) Value
U.S. Bonds - 79.3%
U.S. Federal Agencies - 25.5%
Agency for International
Development, 6.625s, 2004 ...... $ 14,600 $ 15,082,092
Federal National Mortgage Assn.,
6.65s, 2002 .................. 8,000 8,000,000
Federal National Mortgage Assn.,
7.5s, 2003 ..................... 20,984 21,473,026
Federal National Mortgage Assn.,
8.33s, 2005 .................. 20,000 20,990,600
Federal National Mortgage Assn.,
7.55s, 2007 .................. 18,000 18,464,040
Federal National Mortgage Assn.,
9s, 2008 ..................... 42 44,446
Federal National Mortgage Assn.,
7s, 2027 ..................... 100,368 100,681,615
Federal Home Loan Mortgage
Corp., 7.5s, 2027 ............ 24,476 25,019,118
Government Trust Certificates,
9.25s, 2001 .................. 6,773 7,194,645
Guaranteed Trade Trust, 7.39s,
2006 ........................... 36,000 37,914,840
Private Export Funding Corp.,
9.1s, 1998 ..................... 9,000 9,285,480
State of Israel, 6.625s, 2003 ... 15,000 15,485,400
------------
$279,635,302
------------
U.S. Government Guaranteed - 53.8%
Government National Mortgage
Association - 16.8%
GNMA, 7s, 2023 - 2024 ............ $ 43,013 $ 43,366,468
GNMA, 7.5s, 2022 - 2027 ......... 79,107 80,906,636
GNMA, 8s, 2025 - 2026 ............ 32,030 33,241,163
GNMA, 8.5s, 2001 - 2009 ......... 25,534 26,834,597
------------
$184,348,864
------------
U.S. Treasury Obligations - 37.0%
U.S. Treasury Notes, 9.25s,
1998 ........................... $131,250 $134,900,063
U.S. Treasury Notes, 9.125s,
1999 ........................... 26,600 27,942,502
U.S. Treasury Notes, 5.875s,
2002 ........................... 22,500 22,616,100
U.S. Treasury Notes, 6.25s,
2002 ........................... 10,000 10,195,300
U.S. Treasury Bonds, 14.25s,
2002 ........................... 5,000 6,589,850
U.S. Treasury Bonds, 11.875s,
2003 ........................... 23,000 29,964,630
U.S. Treasury Bonds, 12.375s,
2004### ........................ 34,500 46,558,785
Principal Amount
of Contracts
Issuer (000 Omitted) Value
U.S. Bonds - continued
U.S. Treasury Obligations - continued
U.S. Treasury Notes, 6.125s,
2007 ........................ $ 20,000 $ 20,434,400
U.S. Treasury Bonds, 10.375s,
2009 ........................ 18,350 22,920,251
U.S. Treasury Bonds, 13.875s,
2011 ........................ 25,500 38,771,985
U.S. Treasury Bonds, 12s, 2013 31,500 46,157,265
------------
$407,051,131
------------
Total U.S. Government Guaranteed ......... $591,399,995
------------
Total U.S. Bonds ........................ $871,035,297
------------
Foreign Bonds - 16.2%
Australia - 2.1%
Commonwealth of
Australia, 7.5s, 2005 ... AUD 3,945 $ 3,035,160
Commonwealth of
Australia, 9.5s, 2003 ... 24,265 20,105,443
------------
$ 23,140,603
------------
Italy - 2.1%
Republic of Italy, 9.5s,
1999 .................. ITL 16,475,000 $ 10,155,076
Republic of Italy, 8.5s,
2004 .................. 8,765,000 5,834,362
Republic of Italy, 9.5s,
2006 .................. 10,450,000 7,499,019
------------
$ 23,488,457
------------
New Zealand - 2.1%
Government of New
Zealand, 8s, 2004 ...... NZD 17,550 $ 11,671,184
Government of New
Zealand, 8s, 2001 ...... 18,330 11,790,796
------------
$ 23,461,980
------------
Poland - 2.9%
Government of Poland,
6.688s, 2024 ............ $ 33,750 $ 31,471,875
------------
Russia - 1.1%
Russia Ministry Finance,
9.25s, 2001 ............ 12,000 $ 11,766,000
------------
Sweden - 1.0%
Kingdom of Sweden, 6s,
2005 .................. SEK 800 $ 105,324
Kingdom of Sweden,
10.25s, 2000 ............ 62,900 9,290,396
Kingdom of Sweden, 13s,
2001 .................. 11,200 1,839,651
------------
$ 11,235,371
------------
5
<PAGE>
Portfolio of Investments - continued
Bonds - continued
Principal
Amount
of Contracts
Issuer (000 Omitted) Value
Thailand - 0.8%
Total Access Communication,
10.4s, 2004
(Telecommunications) ... THB 450,000 $ 8,161,875
--------------
United Kingdom - 2.3%
United Kingdom Treasury,
8s, 2003 ............... GBP 14,180 $ 25,257,076
--------------
Venezuela - 1.8%
Republic of
Venezuela - DCB,
6.75s, 2007 ............ VEB 23,000 $ 19,866,250
--------------
Total Foreign Bonds .................. $ 177,849,487
--------------
Total Bonds (Identified Cost,
$1,052,949,107) ..................... $1,048,884,784
--------------
Number of
Issuer Shares
Warrants
Republic of Venezuela,
Expiration date 4/18/20
(Identified Cost, $0) ... 37,500 $ 0
--------------
Principal Amount
(000 Omitted)
Repurchase Agreement - 2.4%
Goldman Sachs, dated 10/31/97,
due 11/3/97, total to be
received $26,802,725 (secured
by various U.S. Treasury and
Federal Agency obligations
in a jointly traded account),
at cost ...................... $26,790 $ 26,790,000
--------------
Total Investments (Identified Cost,
$1,079,739,107) .............. $1,075,674,784
--------------
Principal Amount
Issuer (000 Omitted) Value
Call Option Written - (0.2)%
Issuer/Expiration Month/
Strike Price - Swiss
Francs/Deutsche
Marks/March/0.847
(Premiums received
$338,285) ............ CHF/DEM $48,509 $ (1,700,584)
--------------
Other Assets,
Less Liabilities - 2.3% ........................ 24,393,456
--------------
Net Assets - 100.0% .............................. $1,098,367,656
--------------
###Security segregated as collateral for 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 ITL = Italian Lire
CHF = Swiss Francs NZD = New Zealand Dollar
DEM = Deutsche Marks SEK = Swedish Kronor
DKK = Danish Kroner THB = Thai Baht
ESP = Spanish Pesetas VEB = Bolivar
GBP = British Pounds
See notes to financial statements
6
<PAGE>
Statement of Assets and Liabilities - October 31, 1997
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $1,079,739,107) ........................... $1,075,674,784
Cash .............................................................................. 40,957
Foreign currency, at value (identified cost, $458,258) ........................... 442,339
Receivable for interest rate swaps ................................................ 95,080
Net receivable for forward foreign currency exchange contracts sold ............... 530,739
Net receivable for forward foreign currency exchange contracts purchased ......... 1,216,300
Net receivable for foreign currency exchange contracts closed or subject to master
netting agreements ............................................................... 4,307,794
Interest receivable ............................................................... 18,850,239
Other assets ..................................................................... 10,053
--------------
Total assets .................................................................. $1,101,168,285
--------------
Liabilities:
Payable to dividend disbursing agent ............................................. $ 594,459
Written options outstanding, at value (premiums received, $338,285) ............... 1,700,584
Payable to affiliates -
Management fee .................................................................. 23,982
Administrative fee ............................................................... 446
Transfer and dividend disbursing agent fee ....................................... 22,340
Accrued expenses and other liabilities ............................................. 458,818
--------------
Total liabilities ............................................................ $ 2,800,629
--------------
Net assets ........................................................................... $1,098,367,656
==============
Net assets consist of:
Paid-in capital .................................................................. $1,128,498,635
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ............................................................... 699,702
Accumulated net realized loss on investments and foreign currency transactions ... (23,630,264)
Accumulated distributions in excess of net investment income ..................... (7,200,417)
--------------
Total ........................................................................ $1,098,367,656
==============
Shares of beneficial interest outstanding .......................................... 141,553,916
===============
Net asset value (net assets/shares of beneficial interest outstanding) ............... $7.76
===============
</TABLE>
See notes to financial statements
7
<PAGE>
Statement of Operations - Year Ended October 31, 1997
<TABLE>
<S> <C>
Net investment income:
Interest income ......................................................... $ 87,371,542
-------------
Expenses -
Management fee ...................................................... $ 8,514,050
Trustees' compensation ................................................ 206,880
Transfer and dividend disbursing agent fee ........................... 304,188
Administrative fee ................................................... 109,860
Custodian fee ......................................................... 485,557
Postage ............................................................... 82,611
Printing ............................................................ 80,829
Auditing fees ......................................................... 76,653
Legal fees ............................................................ 9,810
Miscellaneous ......................................................... 287,883
-------------
Total expenses ...................................................... $ 10,158,321
Fees paid indirectly ................................................ (120,565)
-------------
Net expenses ...................................................... $ 10,037,756
-------------
Net investment income ............................................. $ 77,333,786
-------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions ................................................ $ (10,645,294)
Written option transactions ............................................. (168,172)
Foreign currency transactions .......................................... 10,004,839
Interest rate swaps ................................................... 2,621,835
Futures contracts ...................................................... (5,755)
-------------
Net realized gain on investments and foreign currency transactions ... $ 1,807,453
-------------
Change in unrealized appreciation (depreciation) -
Investments ............................................................ $ (17,999,655)
Written options ......................................................... (1,362,299)
Translation of assets and liabilities in foreign currencies ............ 11,141,391
Interest rate swaps ................................................... (994,284)
-------------
Net unrealized loss on investments and foreign currency translation ... $ (9,214,847)
-------------
Net realized and unrealized loss on investments and foreign currency $ (7,407,394)
-------------
Increase in net assets from operations ........................... $ 69,926,392
=============
</TABLE>
See notes to financial statements
8
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
------------------------------------
1997 1996
----------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income ............................................................ $ 77,333,786 $ 81,775,251
Net realized gain on investments and foreign currency transactions ............... 1,807,453 10,348,422
Net unrealized loss on investments and foreign currency translation ............ (9,214,847) (14,248,623)
-------------- --------------
Increase in net assets from operations ....................................... $ 69,926,392 $ 77,875,050
-------------- --------------
Distributions declared to shareholders -
From net investment income ...................................................... $ (77,333,786) $ (81,775,251)
In excess of net investment income ............................................. (5,944,231) (6,449,169)
-------------- --------------
Total distributions declared to shareholders .............................. $ (83,278,017) $ (88,224,420)
-------------- --------------
Trust share (principal) transactions -
Cost of shares reacquired ...................................................... $ (47,959,918) $ (77,327,726)
-------------- --------------
Total decrease in net assets ................................................ $ (61,311,543) $ (87,677,096)
Net assets:
At beginning of year ............................................................ 1,159,679,199 1,247,356,295
-------------- --------------
At end of period (including accumulated distributions in excess of net investment
income of ($7,200,417) and $4,003,657, respectively) ........................... $1,098,367,656 $1,159,679,199
============== ==============
</TABLE>
See notes to financial statements
9
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
Per share data (for a share outstanding -------------------------------------------------------------------
1997 1996 1995 1994 1993
throughout each period): ---------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period ............... $ 7.82 $ 7.83 $ 7.33 $ 8.18 $ 8.07
------- ------- -------- -------- --------
Income from investment operations # -
Net investment income ........................... $ 0.54 $ 0.53 $ 0.55 $ 0.51 $ 0.58
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .................................... ( 0.05) ( 0.03) 0.32 ( 0.78) 0.21
------- ------- -------- -------- --------
Total from investment operations .................. $ 0.49 $ 0.50 $ 0.87 $ (0.27) $ 0.79
------- ------- -------- -------- --------
Less distributions declared to shareholders -
From net investment income ........................... $ (0.54) $ (0.53) $ (0.53) $ (0.03) $ (0.52)
From net realized gain on investments and foreign
currency transactions .............................. -- -- -- -- ( 0.16)
In excess of net investment income and foreign
currency transactions .............................. ( 0.04) ( 0.04) -- ( 0.13) --
From tax return of capital ........................... -- -- -- ( 0.42) --
------- ------- -------- -------- --------
Total distributions declared to shareholders . $ (0.58) $ (0.57) $ (0.53) $ (0.58) $ (0.68)
------- ------- -------- -------- --------
Net increase from repurchase of capital shares ...... $ 0.03 $ 0.06 $ 0.16 $ -- $ --
------- ------- -------- -------- --------
Net asset value - end of period ..................... $ 7.76 $ 7.82 $ 7.83 $ 7.33 $ 8.18
------- ------- -------- -------- --------
Per share market value - end of period ............... $ 7.00 $ 7.13 $ 6.63 $ 6.13 $ 7.63
------- ------- -------- -------- --------
Total return ....................................... 6.46% 17.40% 17.08% (12.58)% 4.14%
Ratios (to average net assets)/Supplemental data:
Expenses## ....................................... 0.91% 0.97% 1.02% 0.91% 0.95%
Net investment income .............................. 6.92% 6.75% 7.13% 6.61% 7.13%
Portfolio turnover ................................. 213% 257% 242% 213% 270%
Net assets at end of period (000,000 omitted) ...... $ 1,098 $ 1,160 $ 1,247 $ 1,411 $ 1,597
</TABLE>
#Per share data for the periods subsequent to October 31, 1993, are 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.
See notes to financial statements
10
<PAGE>
Financial Highlights - continued
<TABLE>
<CAPTION>
Year Ended October 31,
Per share data (for a share outstanding -----------------------------------------------------------------------
1992 1991 1990 1989 1988***
throughout each period): ---------- ----------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period ............... $ 8.24 $ 8.45 $ 8.87 $ 9.16 $ 9.30
------- -------- -------- ------- ---------
Income from investment operations -
Net investment income[sec] ........................ $ 0.66 $ 0.67 $ 0.75 $ 0.83 $ 0.48
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .................................... ( 0.02) 0.17 ( 0.12) ( 0.07) ( 0.10)
------- -------- -------- ------- ---------
Total from investment operations .................. $ 0.64 $ 0.84 $ 0.63 $ 0.76 $ 0.38
------- -------- -------- ------- ---------
Less distributions declared to shareholders -
From net investment income ........................ $ (0.60) $ (0.62) $ (0.63) $ (0.92) $ (0.39)
From paid in capital .............................. ( 0.21) ( 0.43) ( 0.42) ( 0.13) ( 0.13)
------- -------- -------- ------- ---------
Total distributions declared to shareholders . $ (0.81) $ (1.05) $ (1.05) $ (1.05) $ (0.52)
Net asset value - end of period ..................... $ 8.07 $ 8.24 $ 8.45 $ 8.87 $ 9.16
------- -------- -------- ------- ---------
Per share market value - end of period ............ $ 8.00 $ 8.00 $ 7.63 $ 8.75 $ 9.38
------- -------- -------- ------- ---------
Total return ....................................... 10.35% 19.55% ( 0.94)% 4.94% ( 1.17)%*
Ratios (to average net assets)/Supplemental data:
Expenses .......................................... 1.01% 1.00% 1.01% 1.10% 0.99%*
Net investment income ........................... 7.96% 8.10% 8.74% 9.34% 8.39%*
Portfolio turnover ................................. 401% 1004% 554% 546% 206%
Net assets at end of period (000,000 omitted) ...... $ 1,615 $ 1,644 $ 1,695 $ 1,791 $ 1,837
</TABLE>
*Annualized.
***For the period from the commencement of the Trust's investment operations,
March 17, 1988, through October 31, 1988. [sec]The investment adviser
voluntarily waived a portion of their management fee amounting to $.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 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
and interest rate swaps, 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.
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. 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 result from fluctuations in foreign currency exchange rates is not
separately disclosed.
12
<PAGE>
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 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 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, 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. 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 for financial statement purposes 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
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 and dividend 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. During the year ended October 31, 1997, $2,747,471 was reclassified from
accumulated net realized loss to accumulated distributions in excess of net
investment income due to differences between book and tax accounting for
mortgage-backed securities and currency transactions. This change had no effect
on the net assets or net asset value per share.
At October 31, 1997, the Trust, for federal income tax purposes, had a capital
loss carryforward of $23,200,041 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, 2005, ($509,910), October 31, 2003, ($6,526,984), and
October 31, 2002, ($16,163,147).
14
<PAGE>
(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 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 $55,613 for the year ended October 31, 1997.
Transfer Agent -- MFS Service Center, Inc. (MFSC) acts as registrar and dividend
disbursing agent for the Trust. The agreement provides that the Trust will pay
MFSC an account maintenance fee and a dividend services 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 services 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:
<TABLE>
<CAPTION>
Purchases Sales
------------------------------------------------------------------------------------
<S> <C> <C>
U.S. government securities ........................ $1,453,327,811 $1,146,855,162
============== ==============
Investments (non-U.S. government securities) ...... $ 770,615,080 $1,047,719,401
============== ==============
</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:
Aggregate cost ..................... $1,080,169,331
==============
Gross unrealized depreciation ...... $ (20,619,847)
Gross unrealized appreciation ...... 16,125,300
--------------
Net unrealized depreciation ......... $ (4,494,547)
==============
15
<PAGE>
Notes to Financial Statements - continued
(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:
Year Ended October 31,
-------------------------
1997 1996
--------------------------------------------------------
Treasury shares reacquired 6,728,100 11,114,600
========= ==========
In accordance with the provisions of the Trust's prospectus, 6,728,100 shares of
beneficial interest were purchased by the Trust 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. The Trust repurchased 11,114,600 shares of beneficial
interest during the year ended October 31, 1996, at an average price per share
of $6.96 and a weighted average discount of 11.05% 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) Quarterly Financial Information (Unaudited)
<TABLE>
<CAPTION>
Net Realized and Net Increase (Decrease)
Net Unrealized Gain (Loss) in Net Assets Resulting
Quarterly Period Ended Investment Income Investment Income on Investments from Operations
- ------------------------ ------------------------------------------------------------------------------------------------------
Per Per Per Per
Fiscal 1997 Amount Share Amount Share Amount Share Amount Share
- ----------- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January 31 ............ $22,146,150 $ 0.15 $19,379,465 $ 0.13 $ (1,399,378) $ (0.01) $ 17,980,087 $ 0.12
April 30 ............... 21,808,338 0.15 19,679,284 0.14 (15,568,174) ( 0.11) 4,111,110 0.03
July 31 ............... 22,056,972 0.16 19,342,831 0.14 15,863,901 0.11 35,206,732 0.25
October 31 ............ 21,360,082 0.15 18,932,206 0.13 (6,303,743) ( 0.04) 12,628,463 0.09
----------- ------ ----------- ------ ------------- -------- ------------- -------
$87,371,542 $ 0.61 $77,333,786 $ 0.54 $ (7,407,394) $ (0.05) $ 69,926,392 $ 0.49
=========== ====== =========== ====== ============= ======== ============= =======
Fiscal 1996
- -----------
January 31 ............ $23,565,999 $ 0.15 $20,589,786 $ 0.13 $ 25,021,893 $ 0.15 $ 45,611,679 $ 0.28
April 30 ............... 23,871,208 0.16 20,924,083 0.14 (46,704,849) ( 0.28) (25,780,766) (0.14)
July 31 ............... 23,418,189 0.15 20,480,501 0.13 (4,874,279) ( 0.05) 15,606,222 0.08
October 31 ............ 22,646,733 0.15 19,780,881 0.13 22,657,034 0.15 42,437,915 0.28
----------- ------ ----------- ------ ------------- -------- ------------- -------
$93,502,129 $ 0.61 $81,775,251 $ 0.53 $ (3,900,201) $ (0.03) $ 77,875,050 $ 0.50
=========== ====== =========== ====== ============= ======== ============= =======
</TABLE>
(7) Line of Credit
The Trust and other affiliated funds participate in a $400 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 fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Trust for the year ended October 31, 1997, was $9,194.
(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, 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
16
<PAGE>
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered. For
the year ended October 31, 1997, the Trust did not hold any of these financial
instruments.
Written Option Transactions
- ---------------------------
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
-----------------------------------------------------------------------------
Principal Amounts of Principal Amounts of
Contracts (000 Omitted) Premiums Contracts (000 Omitted) Premiums
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period ............ -- $ -- -- $ --
Options written -
Australian Dollars ........................ 17,779 92,629 -- --
Deutsche Marks/British Pounds ............ -- -- 19,528 41,081
Swiss Francs/Deutsche Marks ............... 68,752 462,006 -- --
Options terminated in closing transactions -
Australian Dollars ........................ (17,779) (92,629) -- --
Deutsche Marks/British Pounds ............ -- -- (19,528) (41,081)
Swiss Francs/Deutsche Marks ............... (20,243) (123,721) -- --
------- --------- ------- ---------
Outstanding, end of period .................. 48,509 $ 338,285 -- $ --
------- --------- ------- ---------
Outstanding, end of period consist of:
Swiss Francs/Deutsche Marks ............... 48,509 $ 338,285 -- $ --
------- --------- ------- ---------
</TABLE>
At October 31, 1997, the Trust had sufficient cash and/or securities at least
equal to the value of the written options.
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 01/07/98 ...... AUD 7,357,874 $ 5,400,274 $ 5,239,262 $ 161,012
01/07/98 ...... DEM 50,127,100 29,517,783 29,148,056 369,727
------------ -------------- ------------
$ 34,918,057 $ 34,387,318 $ 530,739
============ ============ ==========
Purchases 01/07/98 ...... CHF 44,629,319 $ 31,769,162 $ 32,071,744 $ 302,582
01/07/98 ...... DKK 97,638,295 14,992,704 14,918,741 (73,963)
01/07/98 ...... ESP 3,564,032,863 23,823,749 24,481,342 657,593
01/01/98 ...... GBP 9,457,184 15,815,722 15,811,618 (4,104)
01/07/98 ...... ITL 26,471,109,557 15,283,763 15,617,955 334,192
------------ ------------ ----------
$101,685,100 $102,901,400 $1,216,300
============ ============ ==========
</TABLE>
Forward foreign currency purchases and sales under master netting arrangements
excluded above amounted to a net receivable of $3,916,542 with Banker's Trust,
and $2,055,626 with Merrill Lynch, a net payable of $1,136,807 with Deutsche
Bank, $343,571 with CS First Boston, and $266,209 with Swiss Bank at October 31,
1997. Closed forward foreign currency exchange contracts excluded above amount
to a net receivable of $82,213 with Goldman Sachs at October 31, 1997. At
October 31, 1997, the Trust had sufficient cash and/or securities to cover any
commitments under these contracts.
17
<PAGE>
Notes to Financial Statements - continued
Interest Rate Swaps
<TABLE>
<CAPTION>
Notional Cash Flows Cash Flows Unrealized
Principal Amount Paid by Received by Appreciation
Expiration of Contract the Trust the Trust (Depreciation)
- ------------ ------------------ --------------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
9/18/00 DEM 30,720,295 Floating - 6M LIBOR Fixed - 4.565% $121,824
9/18/00 ITL 29,940,000,000 Floating - 6M LIBOR Fixed - 5.685% (26,744)
-----------
$ 95,080
===========
</TABLE>
At October 31, 1997, the Trust had segregated sufficient cash and/or 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 October
31,1997, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended October 31, 1997, and
1996, and the financial highlights for each of the years in the ten-year period
ended October 31, 1997. 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, 1997, by correspondence with the custodian. 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 31,1997, 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 5, 1997
19
<PAGE>
[Back 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 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.
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