<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) INTERMEDIATE
INCOME TRUST
ANNUAL REPORT o OCTOBER 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 8
Results of Shareholder Meeting ............................................ 10
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 15
Notes to Financial Statements ............................................. 19
Independent Auditor's Report .............................................. 26
Trustees and Officers ..................................................... 28
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
--------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years in the investment management business, we've developed a number
of beliefs about the best ways to invest over a variety of market conditions.
First, we believe in bottom-up research, which means we use a
company-by-company, one-security-at-a-time approach to building a portfolio.
What we look for is the truth about the fundamentals of a company's business --
things such as the ability of management to execute its business plan, the
ability of that plan to be scaled up as the company grows, actual demand for the
company's products and services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed- income investments have
been early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline
workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 2000
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the 12 months ended October 31, 2000, the trust provided a total return of
10.95% based on its beginning and ending stock market prices and assuming the
reinvestment of any distributions paid during the period. The trust's total
return based on its net asset value (NAV) was 5.93%. During the same period, the
trust's benchmarks, the Salomon Brothers Medium Term (1- to 10-year) Treasury
Government Sponsored Index (the Salomon Index), an unmanaged index of
medium-term U.S. Treasury and government-agency securities, and the J.P. Morgan
Non-Dollar Government Bond Index (the Morgan 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, returned 6.93% and
-9.94%, respectively.
Turbulent market conditions characterized the period, as this year could truly
be described as a tale of two bond markets. The U.S. Treasury market in
particular, which was out of favor in 1999 and the early part of 2000, reversed
course to become the big winner over the past year. Through the first half of
the one-year period, a tight labor market, signs of rising inflation, and
persistently robust economic growth applied downward pressure on bond prices as
investors anticipated the Federal Reserve Board's (the Fed) next move. Investor
sentiment shifted dramatically over the past few months as most fixed-income
securities, especially U.S. Treasuries, posted strong gains amid increasing
evidence that the Fed has successfully orchestrated a "soft landing" -- a
gradual slowing of the economy, which would lead to noninflationary economic
growth.
Given this environment, in the first half of the period we underweighted the
portfolio in short- and long-term Treasuries and mortgage-backed securities
because they have tended to perform poorly in a rising interest rate
environment. At the same time, we overweighted intermediate-maturity Treasuries,
which have tended to be less affected when the Fed raises short-term interest
rates.
As the U.S. and global economies began to show signs of slowing, we increased
our holdings in mortgage-backed securities, government agency bonds, and
longer-term Treasuries as a way to potentially take advantage of attractively
wide spreads and possibly gain additional yield for the portfolio. In recent
months, these strategies helped the portfolio outperform both the Salomon and
Morgan Indices. Our positions in federal agency securities rallied amid a more
optimistic outlook on whether the implicit government guarantee on federal
agency issues would remain in place. Holdings in mortgage-backed securities
benefited from reduced supply and a more favorable prepayment environment.
On the international side, due to the persistent decline in the euro and the
potential for interest-rate hikes, we reduced our exposure to European bonds. We
maintained only limited exposure to international bonds as we generally found
more attractive opportunities in the United States. However, the international
markets we favored were all within the dollar-bloc countries, such as Australia,
New Zealand, and Canada. We added to positions in these countries because we
anticipated better return potential compared to European bonds of comparable
credit quality.
Looking forward, we're fairly confident that global economic growth, especially
in the United States, will continue to decelerate and dispel remaining fears of
inflation, which could continue to benefit the fixed-income market. As a result,
we believe above-average returns may be garnered through investing in
high-quality intermediate-term mortgage-backed, agency, and government
securities.
Respectfully,
/s/ Steven E. Nothern /s/ Stephen C. Bryant
Steven E. Nothern Stephen C. Bryant
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current 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.
It is not possible to invest directly in an index.
The portfolio is actively managed, and current holdings may be different.
<PAGE>
--------------------------------------------------------------------------------
PORTFOLIO MANAGERS' PROFILES
--------------------------------------------------------------------------------
STEPHEN C. BRYANT IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
PORTFOLIO MANAGER OF OUR GLOBAL FIXED-INCOME INSTITUTIONAL PRODUCTS AND THE
GLOBAL GOVERNMENTS PORTFOLIO OF OUR VARIABLE ANNUITY PRODUCTS. HE ALSO MANAGES
MFS(R) GOVERNMENT MARKETS INCOME TRUST AND MFS(R) INTERMEDIATE INCOME TRUST, TWO
CLOSED-END FUNDS. HE JOINED MFS IN 1987 AS ASSISTANT VICE PRESIDENT. HE WAS
NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN 1992, AND SENIOR VICE
PRESIDENT IN 1993. STEVE IS A GRADUATE OF WESLEYAN UNIVERSITY.
STEVEN E. NOTHERN, CFA, IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R). HE IS PORTFOLIO MANAGER OF THE GOVERNMENT SECURITIES PORTFOLIOS
OF OUR MUTUAL FUNDS, VARIABLE ANNUITIES, AND OFFSHORE FUNDS, AND ALSO MANAGES
TWO CLOSED-END FUNDS, MFS(R) INTERMEDIATE INCOME TRUST AND MFS(R) GOVERNMENT
MARKETS INCOME TRUST. STEVE JOINED MFS IN 1986 IN THE FIXED INCOME DEPARTMENT
AND WAS NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN 1991, AND SENIOR VICE
PRESIDENT IN 1993. HE IS A GRADUATE OF MIDDLEBURY COLLEGE AND HOLDS A MASTER OF
BUSINESS ADMINISTRATION DEGREE FROM BOSTON UNIVERSITY. HE IS A CHARTERED
FINANCIAL ANALYST AND A MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, SECURITY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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.
<PAGE>
OBJECTIVE: To preserve capital and provide high current income.
NEW YORK STOCK EXCHANGE SYMBOL: MIN
--------------------------------------------------------------------------------
PERFORMANCE SUMMARY
--------------------------------------------------------------------------------
(For the year ended October 31, 2000)
NET ASSET VALUE PER SHARE
October 31, 1999 $7.25
October 31, 2000 $7.06
NEW YORK STOCK EXCHANGE PRICE
October 29, 1999 $6.250
October 11, 2000 (high)* $6.4375
December 30, 2000 (low)* $5.9375
October 31, 2000 $6.375
*For the period November 1, 1999, through October 31, 2000.
NOTES TO PERFORMANCE SUMMARY
Government guarantees apply to individual securities only and not to prices and
yields of shares in a managed portfolio.
The trust may invest in derivative securities which may include futures and
options. These types of hedging instruments can increase price fluctuation. This
trust is nondiversified and has more risk than one that is diversified. The
trust invests in a limited number of companies and may have more risk because a
change in one security's value may have a more significant effect on the trust's
net asset value. An investment in the trust is not a complete investment
program.
Investments in foreign and emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes, as well as market,
economic, and political conditions of the countries where investments are made.
There may be greater returns but also greater risk than with U.S.
investments.
NUMBER OF SHAREHOLDERS
As of October 31, 2000, our records indicate that there are 11,050 registered
shareholders and approximately 61,000 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our reports,
which contain important information about the trust, please write or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-term
capital gains. Purchases are made at the market price unless that price exceeds
the net asset value (the shares are trading at a premium). If the shares are
trading at a premium, purchases will be made at a discounted price of either the
net asset value or 95% of the market price, whichever is greater. Twice each
year you can also buy shares. Investments 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, or if you have any questions call
1-800-637-2304 any business day from 8 a.m. to 8 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw, 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.
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
At the annual meeting of shareholders of MFS Intermediate Income Trust, which
was held on October 19, 2000, 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.
NOMINEE FOR WITHHOLD AUTHORITY
--------------------------------------------------------------------------------
Walter E. Robb, III 113,046,171.2090 1,524,633.5780
Arnold D. Scott 113,059,355.6080 1,511,449.1790
Jeffrey L. Shames 113,018,588.7870 1,552,216.0000
Trustees continuing in office who were not subject to re-election at this
meeting are Marshal N. Cohan, Lawrence H. Cohn, Sir J. David Gibbons, Abby M.
O'Neill,
J. Dale Sherratt, and Ward Smith.
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, 2001.
NUMBER OF SHARES
--------------------------------------------------------------------------------
For 113,027,477.9480
Against 436,139.5120
Abstain 1,107,187.3270
<PAGE>
PORTFOLIO OF INVESTMENTS -- October 31, 2000
<TABLE>
<CAPTION>
Bonds - 99.0%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Bonds - 85.9%
U.S. Government Guaranteed - 63.6%
Government National Mortgage Association - 16.8%
GNMA, 7s, 2025 TBA $ 29,852 $ 29,433,300
GNMA, 7s, 2023 - 2024 26,498 26,207,041
GNMA, 7.5s, 2022 - 2023 3,012 3,033,635
GNMA, 7.5s, 2026 TBA 37,190 37,338,407
GNMA, 8s, 2026 TBA 43,127 43,873,158
GNMA, 8.5s, 2008 TBA 1,664 1,717,171
GNMA, 8.5s, 2009 7,888 8,064,284
GNMA, 9.25s, 2001 2,403 2,436,659
------------
$152,103,655
--------------------------------------------------------------------------------------------------
Small Business Administration - 1.1%
SBA, 7.64s, 2010 $ 10,000 $ 10,105,000
--------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 45.7%
U.S. Treasury Bonds, 10.75s, 2003 $ 26,000 $ 28,563,340
U.S. Treasury Bonds, 11.875s, 2003 43,000 49,913,540
U.S. Treasury Bonds, 12.375s, 2004 34,500 41,475,555
U.S. Treasury Bonds, 10.375s, 2009 18,350 21,134,062
U.S. Treasury Bonds, 13.875s, 2011 25,500 34,811,580
U.S. Treasury Bonds, 10.375s, 2012 84,600 105,419,214
U.S. Treasury Bonds, 12s, 2013 31,500 43,051,680
U.S. Treasury Bonds, 6.125s, 2029 606 627,586
U.S. Treasury Notes, 5.875s, 2004 7,500 7,507,050
U.S. Treasury Notes, 4.25s, 2010 20,016 20,622,654
U.S. Treasury Notes, 5.75s, 2010 36,730 36,695,474
U.S. Treasury Notes, 6.5s, 2010 23,370 24,461,846
------------
$414,283,581
--------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $576,492,236
--------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 21.4%
AID, 6.625s, 2003 $ 15,000 $ 15,045,300
AID, 6.625s, 2004 14,600 14,609,052
FHLB, 5.125s, 2001 11,250 11,179,687
FHLM, 5.83s, 2013 1,150 1,149,696
FHLM, 6.625s, 2009 6,000 5,962,500
FHLM, 7s, 2005 26,978 27,483,837
FHLM, 7.375s, 2003 15,000 15,321,150
FNMA, 5.75s, 2010 3,650 3,093,576
FNMA, 6.956s, 2007 5,535 5,508,800
FNMA, 7s, 2029 - 2030 89,892 88,086,946
HUD, 7.198s, 2009 6,000 6,009,375
--------------------------------------------------------------------------------------------------
Total U.S. Federal Agencies $193,449,919
--------------------------------------------------------------------------------------------------
U.S. Bonds - 0.9%
Corporate Asset Backed - 0.9%
Commercial Mortgage Asset Trust, 0.64s, 2020
(interest only) $ 149,735 $ 5,041,591
DLJ Commercial Mortgage Corp., 0.91s, 2005 (interest
only) 95,100 3,139,688
------------
$ 8,181,279
--------------------------------------------------------------------------------------------------
Total U.S. Bonds $778,123,434
--------------------------------------------------------------------------------------------------
Foreign Bonds - 13.1%
Argentina - 0.6%
Republic of Argentina, 0s, 2001 $ 6,070 $ 5,682,330
--------------------------------------------------------------------------------------------------
Australia - 0.9%
Commonwealth of Australia, 7.5s, 2005 AUD 14,731 $ 8,055,578
--------------------------------------------------------------------------------------------------
Brazil - 0.7%
Banco Nacional de Desenvolvi, 12.554s, 2008 (Banks
and Credit Cos.)## $ 1,675 $ 1,553,563
Republic of Brazil, 7.688s, 2009 1,045 896,468
Republic of Brazil, 8s, 2014 1,992 1,487,862
Republic of Brazil, 6s, 2024 940 614,844
Republic of Brazil, 7.625s, 2024 650 495,322
Republic of Brazil, 12.25s, 2030 982 854,340
Republic of Brazil, 11s, 2040 1,037 789,801
------------
$ 6,692,200
--------------------------------------------------------------------------------------------------
Bulgaria - 0.5%
Republic of Bulgaria, 7.75s, 2024 $ 6,395 $ 4,796,250
--------------------------------------------------------------------------------------------------
Canada - 3.1%
Government of Canada, 5.25s, 2008 CAD 20,942 $ 19,082,602
Government of Canada, 5.5s, 2009 13,820 8,839,370
------------
$ 27,921,972
--------------------------------------------------------------------------------------------------
Denmark - 1.2%
Unikredit Realkredit, 7s, 2032 (Financial
Institutions) DKK 98,959 $ 11,046,612
--------------------------------------------------------------------------------------------------
Germany - 0.5%
Republic of Germany, 5.25s, 2010 EUR 2,470 $ 2,099,840
Depfa Pfandbriefbank, 5.5s, 2013 (Banks and Credit
Cos.) 2,700 2,209,643
------------
$ 4,309,483
--------------------------------------------------------------------------------------------------
Greece - 1.3%
Hellenic Republic, 6s, 2006 GRD4,350,000 $ 10,961,726
Hellenic Republic, 8.7s, 2005 124,500 346,041
------------
$ 11,307,767
--------------------------------------------------------------------------------------------------
Mexico - 0.9%
Grupo Iusacell SA DE CV, 14.25s, 2006 (Cellular
Telecom) $ 1,071 $ 1,079,033
United Mexican States, 10.375s, 2009 1,700 1,795,487
United Mexican States, 11.375s, 2016 1,200 1,353,420
United Mexican States, 6.25s, 2019 1,750 1,540,000
United Mexican States, 7.533s, 2019 2,150 2,182,250
------------
$ 7,950,190
--------------------------------------------------------------------------------------------------
Netherlands
Telefonica Europe BV, 6.125s, 2005
(Telecommunications) EUR 425 $ 360,742
--------------------------------------------------------------------------------------------------
New Zealand - 0.4%
Government of New Zealand, 8s, 2006 NZD 9,120 $ 3,856,157
--------------------------------------------------------------------------------------------------
Panama - 0.4%
Republic of Panama, 4.5s, 2014 $ 418 $ 331,265
Republic of Panama, 8.875s, 2027 987 829,080
Republic of Panama, 10.75s, 2020 2,841 2,764,293
------------
$ 3,924,638
--------------------------------------------------------------------------------------------------
Poland - 0.1%
Netia Holdings BV, 10.25s, 2007 (Telecommunications) $ 898 $ 673,500
--------------------------------------------------------------------------------------------------
Qatar - 0.2%
State of Qatar, 9.75s, 2030## $ 2,284 $ 2,224,045
--------------------------------------------------------------------------------------------------
South Korea - 0.2%
Cho Hung Bank, 11.5s, 2010 (Banks)## $ 212 $ 202,725
Hanvit Bank, 12.75s, 2010 (Banks)## 1,245 1,207,650
------------
$ 1,410,375
--------------------------------------------------------------------------------------------------
Spain - 0.9%
Kingdom of Spain, 7s, 2005 ESP 7,800 $ 7,886,798
--------------------------------------------------------------------------------------------------
United Kingdom - 1.2%
Halifax Building Society PLC, 6.444s, 2012 (Banks and
Credit Cos.) GBP 2,300 $ 3,277,567
Lloyds TSB Bank PLC, 7.375s, 2004 (Banks and Credit
Cos.) 2,580 3,851,683
Woolwich Building Society PLC, 6.586s, 2012 (Banks
and Credit Cos.) 2,280 3,254,544
------------
$ 10,383,794
--------------------------------------------------------------------------------------------------
Total Foreign Bonds $118,482,431
--------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $931,259,049) $896,605,865
--------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.5%
--------------------------------------------------------------------------------------------------
Goldman Sachs dated 10/31/00, due 11/01/00, total to
be received $4,884,893 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 4,884 $ 4,884,000
--------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $936,143,049) $901,489,865
--------------------------------------------------------------------------------------------------
Call Options Written - (0.1)%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
DESCRIPTION/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------
Australian Dollars/May/0.555 AUD 13,658 $ (1,014,590)
Australian Dollars/October/0.5 20,923 (415,798)
--------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $573,723) $ (1,430,388)
--------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.6% 5,749,223
--------------------------------------------------------------------------------------------------
Net Assets - 100.0% $905,808,700
--------------------------------------------------------------------------------------------------
## 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 EUR = Euro
CAD = Canadian Dollars GBP = British Pounds
CHF = Swiss Francs GRD = Greek Drachma
DKK = Danish Kroner JPY = Japanese Yen
ESP = Spanish Pesos NZD = New Zealand Dollars
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
OCTOBER 31, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $936,143,049) $ 901,489,865
Investments of cash collateral for securities loaned,
(at value and identified cost) 186,372,155
Foreign currency, at value (identified cost, $54,134) 54,107
Net receivable for forward foreign currency exchange
contracts to sell 1,089,495
Receivable for investments sold 2,618,281
Interest receivable 19,847,173
Other assets 14,405
--------------
Total assets $1,111,485,481
--------------
Liabilities:
Payable to custodian $ 1,456,932
Payable to dividend disbursing agent 403,604
Payable for investments purchased 9,513,060
Collateral for securities loaned, at value 186,372,155
Payable for Treasury shares reacquired 1,150,999
Net payable for forward foreign currency exchange
contracts to purchase 2,895,907
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 1,938,810
Written options outstanding, at value (premiums
received, $573,723) 1,430,388
Payable to affiliates -
Management fee 7,756
Administrative fee 736
Transfer and dividend disbursing agent fee 15,451
Accrued expenses and other liabilities 490,983
--------------
Total liabilities $ 205,676,781
--------------
Net assets $ 905,808,700
==============
Net assets consist of:
Paid-in capital $1,001,521,920
Unrealized depreciation on investments and translation
of assets and
liabilities in foreign currencies (39,331,599)
Accumulated net realized loss on investments and
foreign currency transactions (60,064,762)
Accumulated undistributed net investment income 3,683,141
--------------
Total $ 905,808,700
==============
Shares of beneficial interest outstanding (202,648,016
issued,
less 74,361,200 treasury shares) 128,286,816
===========
Net asset value (net assets / shares of beneficial
interest outstanding) $7.06
=====
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
-----------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000
-----------------------------------------------------------------------------
Net investment income:
Income -
Interest $73,224,386
Dividends 15,378
------------
Total investment income $73,239,764
------------
Expenses -
Management fee $ 7,095,954
Trustees' compensation 207,392
Transfer and dividend disbursing agent fee 220,650
Administrative fee 132,294
Investor communication expense 471,183
Custodian fee 369,340
Auditing fees 37,475
Postage 46,912
Printing 35,878
Legal fees 8,381
Miscellaneous 194,859
------------
Total expenses $ 8,820,318
Fees paid indirectly (116,946)
------------
Net expenses $ 8,703,372
------------
Net investment income $ 64,536,392
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(26,804,803)
Written option transactions 2,744,689
Foreign currency transactions (3,390,106)
Swap transactions 104,939
------------
Net realized loss on investments and foreign
currency transactions $(27,345,281)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 8,337,272
Written options (1,067,172)
Translation of assets and liabilities in foreign currencies (4,958,163)
Swap transactions 316,363
------------
Net unrealized gain on investments and foreign
currency translation $ 2,628,300
------------
Net realized and unrealized loss on investments and
foreign currency $(24,716,981)
------------
Increase in net assets from operations $ 39,819,411
============
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
---------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999
---------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
<S> <C> <C>
Net investment income $ 64,536,392 $ 68,180,520
Net realized loss on investments and foreign currency transactions (27,345,281) (14,761,370)
Net unrealized gain (loss) on investments and foreign
currency translation 2,628,300 (58,863,567)
--------------- ---------------
Increase (decrease) in net assets from operations $ 39,819,411 $ (5,444,417)
--------------- ---------------
Distributions declared to shareholders -
From net investment income $ (42,804,474) $ (61,667,843)
From paid-in capital (27,519,561) (7,405,223)
--------------- ---------------
Total distributions declared to shareholders $ (70,324,035) $ (69,073,066)
--------------- ---------------
Trust share (principal) transactions -
Cost of shares reacquired $ (40,697,949) $ (39,105,641)
--------------- ---------------
Total decrease in net assets $ (71,202,573) $ (113,623,124)
Net assets:
At beginning of year 977,011,273 1,090,634,397
--------------- ---------------
At end of year (including accumulated undistributed net investment
income and distributions in excess of net investment income of
$3,683,141 and $(2,178,375), respectively) $ 905,808,700 $ 977,011,273
=============== ===============
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Financial Highlights
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each year):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of year $ 7.25 $ 7.75 $ 7.76 $ 7.82 $ 7.83
------- ------- ------- ------- -------
Income from investment operations# -
Net investment income $ 0.49 $ 0.49 $ 0.51 $ 0.54 $ 0.53
Net realized and unrealized loss on
investments and foreign currency
transactions (0.20) (0.53) (0.01) (0.05) (0.03)
------- ------- ------- ------- -------
Total from investment operations $ 0.29 $(0.04) $ 0.50 $ 0.49 $ 0.50
------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income $ (0.33) $ (0.45) $ (0.46) $ (0.54) $ (0.53)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.04) (0.04)
From paid in capital (0.21) (0.05) (0.05) -- --
------- ------- ------- ------- -------
Total distributions declared to
shareholders $ (0.54) $ (0.50) $ (0.51) $ (0.58) $ (0.57)
------- ------- ------- ------- -------
Net increase from repurchase of capital shares $ 0.06 $ 0.04 $ -- + $ 0.03 $ 0.06
------- ------- ------- ------- -------
Net asset value - end of year $ 7.06 $ 7.25 $ 7.75 $ 7.76 $ 7.82
------- ------- ------- ------- -------
Per share market value - end of year $ 6.375 $ 6.250 $ 6.938 $ 7.000 $ 7.125
======= ======= ======= ======= =======
Total return at market value 10.95% (2.92)% 6.56% 6.46% 17.40%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.95% 0.93% 0.91% 0.91% 0.97%
Net investment income 6.93% 6.57% 6.59% 6.92% 6.75%
Portfolio turnover 93% 85% 184% 213% 257%
Net assets at end of period (000,000 omitted) $906 $977 $1,091 $1,098 $1,160
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
+ Per share amount was less than $0.01.
</TABLE>
See notes to financial statements.
<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. The trust
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - 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. Options 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 in good faith, at fair value, by 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.
Deferred Trustee Compensation - Effective July 24, 1999, under a Deferred
Compensation Plan (the Plan) independent Trustees may elect to defer receipt of
all or a portion of their annual compensation. Deferred amounts are treated as
though equivalent dollar amounts had been invested in shares of the trust or
other MFS trust's selected by the Trustee. Deferred amounts represent an
unsecured obligation of the trust until distributed in accordance with the Plan.
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 option contract. When a written option
expires, the fund 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 fund. 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
fund's management on the direction of interest rates.
Security Loans - State Street Bank and Trust Company ("State Street") and Chase
Manhattan Bank ("Chase"), as lending agents, may loan the securities of the
trust to certain qualified institutions (the "Borrowers") approved by the trust.
The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street provide the trust with indemnification against Borrower
default. The trust bears the risk of loss with respect to the investment of cash
collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the trust and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the trust and the lending agent. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At October 31, 2000, the value of securities loaned was $182,725,652. These
loans were collateralized by cash of $186,372,155 which was invested in the
following short-term obligations:
<TABLE>
<CAPTION>
ISSUER SHARES VALUE
----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Navigator Securities Lending Prime Portfolio 186,372,155 $186,372,155
</TABLE>
Forward Foreign Currency Exchange Contracts - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The trust may enter into
forward 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 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 discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. The trust uses the effective
interest method for reporting interest income on payment-in-kind (PIK) bonds.
Some securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the fund at a future date,
usually beyond customary settlement time.
Fees Paid Indirectly - The trust's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
trust. This amount is shown as a reduction of total expenses on the Statement of
Operations.
Tax Matters and Distributions - The trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The trust
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended October 31, 2000, $15,870,402 was reclassified to accumulated net
realized loss on investments and foreign currency transactions, from accumulated
distribution in excess on net investment income due to differences between book
and tax accounting for mortgage-backed securities and foreign currency
transactions. In addition, $27,519,561 was redesignated as a tax return of
capital distribution. This change had no effect on the net assets or net asset
value per share.
At October 31, 2000, the trust, for federal income tax purposes, had a capital
loss carryforward of $60,026,544 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, 2008, ($11,439,294), October 31, 2007, ($11,376,973),
October 31, 2006, ($13,874,621), October 31, 2004, ($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 facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.32% of
the trust's average daily net assets and 5.65% of 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. Included in Trustees' compensation is a net periodic
pension expense of $57,167 for the year ended October 31, 2000.
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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
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 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:
PURCHASES SALES
---------------------------------------------------------------------------
U.S. government securities $647,238,167 $619,414,653
------------ ------------
Investments (non-U.S. government securities) $195,949,206 $259,279,214
------------ ------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the trust, as computed on a federal income tax basis, are
as follows:
Aggregate cost $936,181,271
------------
Gross unrealized depreciation $(41,973,738)
Gross unrealized appreciation 7,282,332
------------
Net unrealized depreciation $(34,691,406)
============
(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. Transactions in
trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 2000 YEAR ENDED OCTOBER 31, 1999
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury shares acquired 6,476,000 $40,697,949 5,984,100 $39,105,641
--------- ----------- --------- -----------
</TABLE>
In accordance with the provisions of the trust's prospectus, 6,476,000 shares of
beneficial interest were purchased by the trust during the year ended October
31, 2000, at an average price per share of $6.28 and a weighted average discount
of 11.46% per share. The trust repurchased 5,984,100 shares of beneficial
interest during the year ended October 31, 1999, at an average price per share
of $6.53 and a weighted average discount of 11.69% per share.
(6) Line of Credit
The trust and other affiliated trusts participate in a $1.1 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each 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 trusts at
the end of each quarter. The commitment fee allocated to the trust for the year
ended October 31, 2000, was $7,202. The trust had no borrowings during the year.
(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 fund 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>
NUMBER OF
CONTRACTS PREMIUMS
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, beginning of year 2 $ 685,959
Options written 12 3,277,676
Options terminated in closing Transactions (3) (906,913)
Options expired (9) (2,482,999)
-----------
Outstanding, end of year 2 $ 573,723
===========
</TABLE>
At October 31, 2000, 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>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales
12/15/00 AUD 23,130,236 $ 12,025,655 $ 11,988,768 $ 36,887
12/15/00 CHF 17,413,872 9,884,698 9,729,160 155,538
12/15/00 DKK 97,856,545 11,593,660 11,178,746 414,914
12/15/00 GRD 4,504,785,452 11,590,855 11,256,840 334,015
12/15/00 JPY 2,290,411,183 21,300,900 21,152,759 148,141
------------ ------------ -----------
$ 66,395,768 $ 65,306,273 $ 1,089,495
============ ============ ===========
Purchases
12/15/00 AUD 38,884,555 $ 21,238,964 $ 20,154,482 $(1,084,482)
12/15/00 CAD 13,579,354 9,206,341 8,902,411 (303,930)
12/15/00 CHF 17,655,545 10,020,174 9,864,183 (155,991)
12/15/00 EUR 51,984,453 44,973,963 44,192,880 (781,083)
12/15/00 JPY 2,181,701,535 20,719,208 20,148,787 (570,421)
------------ ------------ -----------
$106,158,650 $103,262,743 $(2,895,907)
============ ============ ===========
</TABLE>
At October 31, 2000, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $78,485 with
Merrill Lynch Bank and a net payable of $1,887,829 with Deutsche Bank and
$129,466 with First Boston Bank.
At October 31, 2000, the trust had sufficient cash and/or securities to cover
any commitments under these contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of MFS Intermediate Income Trust:
We have audited the accompanying statement of assets and liabilities of MFS
Intermediate Income Trust (the "Trust"), including the portfolio of investments,
as of October 31, 2000, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. 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 auditing standards generally accepted
in the United States of America. 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
securities owned as of October 31, 2000, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Intermediate Income Trust as of October 31, 2000, the results of its operations,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 5, 2000
<PAGE>
--------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
--------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A TAX FORM SUMMARY OR FORM
1099-DIV, IF APPLICABLE, REPORTING THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS
PAID DURING THE CALENDAR YEAR 2000.
<PAGE>
MFS(R) INTERMEDIATE INCOME TRUST
TRUSTEES PORTFOLIO MANAGERS
Marshall N. Cohan+(1) - Private Stephen C. Bryant*
Investor Steven E. Nothern*
Lawrence H. Cohn, M.D.+(2) - Chief of TREASURER
Cardiac Surgery, Brigham and Women's James O. Yost*
Hospital; Professor of Surgery,
Harvard Medical School ASSISTANT TREASURERS
Mark E. Bradley*
The Hon. Sir J. David Gibbons, KBE+ Robert R. Flaherty*
(2) - Chief Executive Officer, Edmund Laura F. Healy*
Gibbons Ltd.; Chairman, Colonial Ellen Moynihan*
Insurance
Company, Ltd. SECRETARY
Stephen E. Cavan*
Abby M. O'Neill+(2) - Private
Investor ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Walter E. Robb, III+(1) - President
and Treasurer, Benchmark Advisors, TRANSFER AGENT, REGISTRAR, AND
Inc. (corporate financial DIVIDEND DISBURSING AGENT
consultants); President, Benchmark State Street Bank and Trust
Consulting Group, Inc. Company
(office services) c/o MFS Service Center, Inc.
P.O. Box 9024
Arnold D. Scott* - Senior Executive Boston, MA 02205-9824
Vice President, Director, and 1-800-637-2304
Secretary, MFS Investment Management
CUSTODIAN
Jeffrey L. Shames* - Chairman and State Street Bank and Trust
Chief Executive Officer, MFS Company
Investment Management
AUDITORS
J. Dale Sherratt+(1) - President, Deloitte & Touche LLP
Insight Resources, Inc. (acquisition
planning specialists)
Ward Smith+(1) - Former Chairman
(until 1994), NACCO Industries
(holding company)
INVESTMENT ADVISER
Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116-3741
+ Independent Trustee
* MFS Investment Management
(1) Member of Audit Committee
(2) Member of Portfolio Trading Committee
<PAGE>
MFS(R) INTERMEDIATE INCOME TRUST ------------
PRSRT STD
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
500 Boylston Street, Boston, MA 02116. MINCE-2 12/00 80M
