Dear Shareholders,
The current investment and economic environment bears little resemblance to last
year's. One year ago, global economies were floundering, and the crisis in Asia
threatened an already weak U.S. economy. Corporate earnings were flat, and
economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low. Many
corporations are focused on improving their profitability, and investors have
been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999 will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis has
passed. In fact, Japan's economic woes seem to have reached bottom. Although the
process is in its infancy, some Japanese corporations not only are talking about
restructuring and cost cutting, they also are beginning to take action, looking
within to become more competitive and improve returns on equity. While still
lagging the United States, Europe is beginning to restructure and consolidate.
These signs of international growth have contributed to concerns that the U.S.
economy now may be too strong. In June, and again in August, the Fed raised
rates by one-quarter of a percentage point to help ward off the specter of
inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current market
many investors are taking on additional risk--whether through day trading or
investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago. We
believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top 25
stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged index
of common stock total return performance, are still the most overvalued. Such
extreme overvaluation makes the stock market sensitive to interest-rate news and
any negative earnings surprises. The Year 2000 (Y2K) computer problem is another
factor causing investor concern. While we believe corporate America is well
prepared to address any Y2K situations that may arise at year-end, no one can
predict investor behavior. In our opinion, it is investor behavior that has the
greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is through our
continuing commitment to MFS Original Research[RegTM] and our fundamental
investment tenet of long-term investing. Whether markets are up or down, MFS
analysts focus on analyzing industries and visiting companies to determine the
long-term winners and the prices that will make them attractive opportunities.
Because all companies will not benefit equally from the improving international
environment, bottom-up research remains critical to identifying those that we
believe are successfully restructuring, consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at attractive
prices. For this reason, we are continuing to expand our domestic and
international capabilities to ensure that MFS has primary, in-house research on
companies worldwide. We believe that we have built the right investment team,
backed by MFS Original Research, to take advantage of those opportunities for
our shareholders.
1
<PAGE>
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
[Graphic: Signature of Jeffrey L. Shames]
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management[RegTM]
November 15, 1999
Management Review and Outlook
Dear Shareholders,
The Trust's stock market price, which stood at $6.94 on October 31, 1998,
decreased to $6.25 as of October 31, 1999, while its net asset value (NAV) price
declined from $7.75 to $7.25, representing a total return of -2.92% based on
market price and 0.80% based on NAV.
During the same period, 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 agency securities, returned 1.06%. 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 -3.55% over the
same period.
The past 12 months have been marked by a rebound in global growth after the
uncertainties experienced during the summer of 1998. It has also been an
environment characterized by generally rising bond yields as the uncertainties
that had driven yields lower during 1998 receded. In this environment, we have
favored government-agency securities because their yield has been attractive
relative to U.S. Treasuries. We took advantage of this opportunity by buying
high-quality agency paper at what we believe to be particularly appealing
prices. During the first several months of 1999, spreads narrowed when the
perceived risks of holding non-Treasuries receded, and U.S. government-agency
securities solidly outperformed comparable Treasuries. (Principal value and
interest on Treasury Securities are guaranteed by the U.S. government if held to
maturity.) We believe that over the long term, government-agency securities
offer more attractive returns than those of U.S. Treasuries with very high
quality and slightly higher yields.
The Trust's Treasury position remained underweighted compared to the Salomon
Index because of our focus on government-agency securities. Generally, we use
our Treasury investments to help balance the portfolio's duration, an indicator
of a portfolio's sensitivity to interest-rate changes. During the period, we
emphasized Treasuries with eight- to 10-year maturities and those with one-year
and under maturities, avoiding one- to four-year Treasury securities because
they have been most affected by the Fed's interest rate increases.
For most of the period, we underweighted the Fund's investments in
mortgage-backed securities relative to the Salomon Index. That proved to be a
helpful strategy. Although mortgages performed well during the first few months
of the year, performance worsened as interest rates started to rise. One of the
characteristics of mortgage-backed securities is that their interest-rate
sensitivity increases as interest rates rise, precisely the scenario an investor
wants to avoid.
More recently, we have added to the Fund's mortgage-backed weighting - largely
through purchases of Government National Mortgage Association (Ginnie Mae) and
Federal National Mortgage Association (Fannie Mae) securities - because their
yields have widened to attractive levels. This has brought the Fund's mortgage
allocation back in line with the Salomon Index.
2
<PAGE>
The portfolio's sensitivity to changes in interest rates is about the same as
that of the Salomon Index. We want to avoid holding too many longer-maturity
bonds because their prices would decline if interest rates went up. By the same
token, we don't want to hold too many short-maturity bonds because they tend to
produce relatively low yields. However, if the economy shows signs of weakness
over the next few months, we will consider slightly increasing our long-term
bonds as a way to gain additional yield.
Over the course of the year, we have opportunistically added to our
international bond positions. By the end of October 1999, our weighting in this
sector has almost doubled to represent roughly 20% of the portfolio.
Within Europe, we have concentrated our positions primarily in German, English,
and Greek government bonds. Relative to the United States, the bond fundamentals
in Germany are quite positive with slower economic growth, a more positive yield
curve, and inflation running at approximately half the rate in the United
States. Meanwhile, the United Kingdom and especially Greece offer yield
convergence possibilities (spread tightening) versus other European countries
already in the European Monetary Union.
Elsewhere internationally, we added to our Australian holdings while decreasing
our New Zealand weighting due to the uncertainty surrounding federal elections
in November. The Australian positions were added at what we believe were
attractive yield spreads relative to the U.S. government-bond market. With
respect to the overall duration of the international holdings, the maturities
have been shorter than those of the Salomon Brothers World Government Bond
Index, an unmanaged index consisting of complete universes of government bonds
with remaining maturities of at least five years. This was done in anticipation
of the Central Bank raising rates in order to moderate global economic demand.
We believe that this trend will continue in the near future, and we expect to
maintain a defensive posture.
Respectfully,
[Graphic: Signature of Stephen C. Bryant]
Stephen C. Bryant
Portfolio Manager
[Graphic: Signature of Stephen E. Nothern]
Stephen E. Nothern
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.
U.S. Treasury bills and U.S. government bonds fluctuate in value, but they are
guaranteed as to the timely payment of interest and, if held to maturity,
provide a guaranteed return of principal. Government guarantees apply to
individual securities only and not to prices and yields of shares in a managed
portfolio. Nondiversified Trusts have more risk than diversified Trusts.
An investment in shares of the Trust should not be considered to constitute a
complete investment program. The Trust may invest in foreign, emerging market,
and derivative securities. Investing in foreign, emerging market securities also
involves special risks. The Trust has the flexibility to invest in derivative
securities when its manager believes such securities can provide better value
relative to direct investments in bonds. The portfolio is actively managed, and
current holdings may be different.
- --------------------------------------------------------------------------------
In accordance with Section 23(c) of the Investment Company Act of 1940, the
Trust hereby gives notice that it may from time to time repurchase shares of the
Trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
3
<PAGE>
- --------------------------------------------------------------------------------
Performance Summary
(For the year ended October 31, 1999)
<TABLE>
<S> <C>
Net Asset Value Per Share
October 31, 1998 $ 7.75
October 31, 1999 $ 7.25
New York Stock Exchange Price
October 30, 1998 $6.938
December 4, 1999 (high)* $7.063
October 26, 1999 (low)* $6.125
October 29, 1999 $6.250
</TABLE>
*For the period November 1, 1998, through October 31, 1999.
- --------------------------------------------------------------------------------
Federal Tax Information
(for the year ended October 31, 1999)
In January 2000, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 1999.
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, 1999, our records indicate that there are 12,473 registered
shareholders and approximately 66,073 shareholders owning Trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our reports,
which contain important information about the Trust, please write or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
New York Stock Exchange Symbol
The New York Stock Exchange symbol is MIN.
Results of Shareholder Meeting
At the annual meeting of shareholders of MFS[RegTM] Intermediate Income Trust,
which was held on October 31, 1999, the following actions were taken:
Item 1. The election of Marshall N. Cohan and Sir J. David Gibbons as Trustees
of the Trust.
Number of Shares
<TABLE>
<CAPTION>
Withhold
Nominee For Authority
- ------- --- ---------
<S> <C> <C>
Marshall N. Cohan 122,648,767.443 3,002,926.981
Sir J. David Gibbons 122,627,473.304 3,024,221.120
</TABLE>
Trustees continuing in office who were not subject to re-election at this
meeting are Richard B. Bailey, Lawrence H. Cohn, Abby M. O'Neill, Walter E.
Robb, III, Arnold D. Scott, Jeffrey L. Shames, 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, 2000.
<TABLE>
<CAPTION>
Number of Shares
<S> <C>
For 123,312,205.092
Against 564,246.458
Abstain 1,775,242.874
</TABLE>
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.
4
<PAGE>
Dividend Reinvestment and Cash Purchase Plan
MFS offers a Dividend Reinvestment and Cash Purchase Plan which allows you to
reinvest either all of the distributions paid by the Trust or only the long-term
capital gains. Purchases are made at the market price unless that price exceeds
the net asset value (the shares are trading at a premium). If the shares are
trading at a premium, purchases will be made at a discounted price of either the
net asset value or 95% of the market price, whichever is greater. Twice each
year you can also buy shares. Investments from $100 to $500 can be made in
January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the Plan on your behalf. If the
nominee does not offer the Plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the Trust. However, when shares are bought
on the New York Stock Exchange or otherwise on the open market, each participant
pays a pro rata share of the commissions. A service fee of $0.75 is charged for
each cash purchase as well as a pro rata share of the brokerage commissions. The
automatic reinvestment of distributions does not relieve you of any income tax
that may be payable (or required to be withheld) on the distributions.
To enroll in or withdraw from the Plan, call 1-800-637-2304 any business day
from 8 a.m. to 8 p.m. Eastern time. Please have available the name of the Trust
and your account and Social Security numbers. For certain types of
registrations, such as corporate accounts, instructions must be submitted in
writing. Please call for additional details. When you withdraw, you can receive
the value of the reinvested shares in one of two ways: a check for the value of
the full and fractional shares, or a certificate for the full shares and a check
for the fractional shares.
If you have any questions or would like a brochure providing a complete
description of the Plan, please call 1-800-637-2304 any business day from 8 a.m.
to 8 p.m. Eastern time.
- --------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- --------------------------------------------------------------------------------
5
<PAGE>
Portfolio of Investments -- October 31, 1999
Bonds - 97.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds - 74.2%
U.S. Federal Agencies - 37.3%
AID, 6.625s, 2003 ....................... $15,000 $ 15,027,150
AID, 6.625s, 2004 ....................... 14,600 14,575,910
FHLB, 5.125s, 2001 ...................... 11,250 11,084,737
FHLM, 5.83s, 2013 ....................... 3,912 3,887,351
FNMA, 5.625s, 2004 ...................... 25,000 24,199,250
FNMA, 6.375s, 2009 ...................... 6,000 5,852,820
FNMA, 6.956s, 2007 ...................... 5,596 5,511,987
FNMA, 7s, 2029 .......................... 15,318 15,040,718
FNMA, 8.33s, 2005 ....................... 20,000 20,078,200
GNMA, 6.5s, 2028 TBA .................... 79,346 75,824,692
GNMA, 7s, 2009 - 2025 TBA ............... 71,779 71,260,506
GNMA, 7s, 2023 - 2024 ................... 30,063 29,676,400
GNMA, 7.5s, 2022 - 2023 ................. 3,465 3,487,924
GNMA, 7.5s, 2026 TBA .................... 42,453 42,559,511
GNMA, 8s, 2026 TBA ...................... 9,280 9,480,012
GNMA, 8.5s, 2008 TBA .................... 2,557 2,674,460
GNMA, 8.5s, 2009 ........................ 10,153 10,535,545
GNMA, 9.25s, 2001 ....................... 3,797 3,921,494
------------
$364,678,667
------------
U.S. Treasury Obligations - 36.9%
U.S. Treasury Bonds, 14.25s,
2002 .................................. $ 5,000 $ 5,881,250
U.S. Treasury Bonds, 10.75s,
2003 .................................. 26,000 29,599,440
U.S. Treasury Bonds, 11.875s,
2003 .................................. 43,000 51,673,960
U.S. Treasury Bonds, 12.375s,
2004 .................................. 34,500 42,866,250
U.S. Treasury Bonds, 10.375s,
2009 .................................. 18,350 21,555,561
U.S. Treasury Bonds, 13.875s,
2011 .................................. 25,500 35,636,250
U.S. Treasury Bonds, 10.375s,
2012 .................................. 84,600 105,446,286
U.S. Treasury Bonds, 12s, 2013 .......... 31,500 43,184,610
U.S. Treasury Bonds, 3.875s, 2029 ....... 25,351 24,273,343
------------
$360,116,950
------------
Total U.S. Bonds .......................................... $724,795,617
------------
Foreign Bonds - 22.9%
Argentina - 0.7%
Republic of Argentina, 0s, 2001 ......... $ 3,050 $ 2,577,250
Republic of Argentina, 6.813s, 2005 1,078 955,431
Republic of Argentina, 11.786s,
2005 .................................. 2,200 1,982,750
Republic of Argentina, 6s, 2023 ......... 1,300 984,750
------------
$ 6,500,181
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
Foreign Bonds - continued
Australia - 3.3%
Commonwealth of Australia,
7.5s, 2005 ...................... AUD 47,829 $ 32,015,709
------------
Brazil - 0.3%
Republic of Brazil, 11.625s,
2004 ............................ $ 1,345 $ 1,291,200
Republic of Brazil, 14.5s,
2009 ............................ 244 252,857
Republic of Brazil, 5s, 2014 ...... 1,447 966,113
------------
$ 2,510,170
------------
Bulgaria - 0.3%
Republic of Bulgaria, 6.5s,
2024 ............................ $ 4,010 $ 2,972,613
------------
Canada - 2.5%
Government of Canada, 5s,
2004 ............................ CAD 37,481 $ 24,459,193
------------
Denmark - 0.5%
Kingdom of Denmark, 7s,
2007 ............................ DKK 28,905 $ 4,485,668
------------
Germany - 4.9%
Republic of Germany, 4.5s,
2009 ............................ EUR 39,687 $ 39,790,409
Allgemeine Hypothekenbank
AG, 5s, 2009 (Banks &
Credit Cos.) .................... 5,000 5,023,543
Depfa Pfandbriefbank, 5.5s,
2013 (Banks and Credit
Cos.) ........................... 2,700 2,785,109
------------
$ 47,599,061
------------
Greece - 3.8%
Hellenic Republic, 8.9s, 2003 GRD 5,650,000 $ 18,686,840
Hellenic Republic, 8.7s, 2005 1,130,000 3,822,022
Hellenic Republic, 6s, 2006 ....... 4,350,000 13,035,162
Hellenic Republic, 5.75s,
2008 ............................ EUR 1,566 1,644,180
------------
$ 37,188,204
------------
Mexico - 1.1%
United Mexican States,
10.375s, 2009 ................... $ 2,900 $ 2,958,000
United Mexican States,
5.874s, 2019 .................... 1,350 1,181,250
United Mexican States, 6.25s,
2019 ............................ 1,750 1,308,125
United Mexican States,
6.933s, 2019 .................... 2,150 1,881,250
Petroleos Mexicanos, 9.5s,
2027 (Oil Services)## ........... 4,275 3,719,250
------------
$ 11,047,875
------------
</TABLE>
6
<PAGE>
Portfolio of Investments -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
Foreign Bonds - continued
Netherlands - 0.1%
Netia Holdings B V, 10.25s,
2007 (Special Purpose) .................................... $ 1,600 $ 1,360,000
------------
New Zealand - 1.6%
Government of New Zealand,
8s, 2006 .................................................. NZD 29,650 $ 15,810,539
------------
Panama - 0.3%
Republic of Panama, 8.25s,
2008 ...................................................... $ 580 $ 498,800
Republic of Panama, 4.25s,
2014 ...................................................... 2,000 1,490,000
Republic of Panama, 8.875s,
2027 ...................................................... 1,250 1,020,312
------------
$ 3,009,112
------------
Peru - 0.2%
Republic of Peru, 4.5s, 2017 ................................ $ 3,440 $ 2,132,800
------------
Philippines - 0.4%
Republic of Philippines,
9.875s, 2019 .............................................. $ 2,755 $ 2,665,463
Republic of Phillippines, 9.5s,
2024 ...................................................... 735 745,106
------------
$ 3,410,569
------------
Poland - 0.1%
Telkomunikacja Polska SA
Finance BV, 7.75s, 2008
(Finance)## ............................................... $ 1,500 $ 1,417,050
------------
United Kingdom - 2.8%
Halifax Building Society Plc,
5.474s, 2012 (Mortgage
Banks) .................................................... GBP 2,300 $ 3,693,200
Lloyds Bank Plc, 7.375s,
2004 (Bank) ............................................... 2,580 4,267,832
United Kingdom Treasury,
6.5s, 2003 ................................................ 8,158 13,575,359
United Kingdom Treasury,
6.75s, 2004 ............................................... 1,520 2,569,313
Woolwich Building Society
Plc, 5.656s, 2012
(Mortgage Banks) .......................................... 2,280 3,595,541
------------
$ 27,701,245
------------
Total Foreign Bonds ............................................................... $223,619,989
------------
Total Bonds (Identified Cost,
$991,406,062) ................................................................... $948,415,606
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C> <C>
Repurchase Agreement - 0.8%
Goldman Sachs, dated
10/29/99, due 11/01/99,
total to be received
$8,351,604 (secured by
various U. S. Treasury and
Federal Agency obligations
in a jointly traded account),
at cost .................................... $ 8,348 $ 8,348,000
------------
Total Investments
(Identified Cost,
$999,754,062) ...................................................... $956,763,606
------------
Call Options Written
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C> <C>
Australian Dollars/
November/0.64 ........................... AUD 23,580
(Premiums Received,
$211,850) ................................................ $ (286,259)
------------
Put Options Written
Euro Dollars/January/1.1 .................. EUR 30,768
(Premiums Received,
$474,109) ................................................ $ (189,193)
Other Assets,
Less Liabilities - 2.1% ................. 20,723,119
------------
Net Assets - 100.0% .......................................... $977,011,273
------------
</TABLE>
##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 GRD = Greek Drachma
CAD = Canadian Dollars JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro SEK = Swedish Kronor
GBP = British Pounds
See notes to financial statements.
7
<PAGE>
Statement of Assets and Liabilities -- October 31, 1999
<TABLE>
<S> <C>
Assets:
Investments, at value (identified cost, $999,754,062) .................................. $ 956,763,606
Foreign currency, at value (identified cost, $52,281) .................................. 52,132
Net receivable for forward foreign currency exchange contracts to sell ................. 652,088
Net receivable for forward foreign currency exchange contracts to purchase ............. 901,497
Receivable for investments sold ........................................................ 984,299
Interest receivable .................................................................... 21,372,350
Other assets ........................................................................... 13,354
--------------
Total assets ....................................................................... $ 980,739,326
--------------
Liabilities:
Cash overdraft ......................................................................... $ 633,845
Payable to dividend disbursing agent ................................................... 471,096
Payable for Treasury shares reacquired ................................................. 942,020
Payable for swap agreements ............................................................ 316,363
Net payable for forward foreign currency exchange contracts subject to master netting
agreements 351,072
Written options outstanding, at value (premiums received $685,959) ..................... 475,452
Payable to affiliates -
Management fee ....................................................................... 32,895
Administrative fee ................................................................... 1,458
Transfer and dividend disbursing agent fee ........................................... 20,000
Accrued expenses and other liabilities ................................................. 483,852
--------------
Total liabilities .................................................................. $ 3,728,053
--------------
Net assets ............................................................................... $ 977,011,273
==============
Net assets consist of:
Paid-in capital ........................................................................ $1,069,739,430
Unrealized depreciation on investments and translation of assets and liabilities in (41,959,899)
foreign currencies
Accumulated net realized loss on investments and foreign currency transactions ......... (48,589,883)
Accumulated distributions in excess of net investment income ........................... (2,178,375)
--------------
Total .............................................................................. $ 977,011,273
==============
Shares of beneficial interest outstanding (202,648,016 issued less 67,885,200 treasury
shares) 134,762,816
===========
Net asset value (net assets [divided by] shares of beneficial interest outstanding) ...... $7.25
=====
</TABLE>
See notes to financial statements.
8
<PAGE>
Statement of Operations -- Year Ended October 31, 1999
<TABLE>
<S> <C>
Net investment income:
Interest income ................................................................ $ 77,665,439
------------
Expenses -
Management fee ............................................................... $ 7,700,383
Trustees' compensation ....................................................... 191,209
Transfer and dividend disbursing agent fee ................................... 243,985
Administrative fee ........................................................... 128,747
Investor communication expense ............................................... 503,276
Custodian fee ................................................................ 501,483
Auditing fees ................................................................ 39,595
Postage ...................................................................... 49,380
Printing ..................................................................... 28,608
Legal fees ................................................................... 2,778
Miscellaneous ................................................................ 221,496
------------
Total expenses ............................................................ $ 9,610,940
Fees paid indirectly ......................................................... (126,021)
------------
Net expenses .............................................................. $ 9,484,919
------------
Net investment income ................................................... $ 68,180,520
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions ...................................................... $(11,889,285)
Written option transactions .................................................. 1,756,615
Foreign currency transactions ................................................ (4,628,700)
------------
Net realized loss on investments and foreign currency transactions ........ $(14,761,370)
------------
Change in unrealized appreciation (depreciation) -
Investments .................................................................. $(58,893,322)
Written options .............................................................. 210,507
Translation of assets and liabilities in foreign currencies .................. 135,611
Swap transactions ............................................................ (316,363)
------------
Net unrealized loss on investments and foreign currency translation ....... $(58,863,567)
------------
Net realized and unrealized loss on investments and foreign currency .... $(73,624,937)
------------
Decrease in net assets from operations ................................ $ (5,444,417)
============
</TABLE>
See notes to financial statements.
9
<PAGE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income ......................................................... $ 68,180,520 $ 71,914,594
Net realized loss on investments and foreign currency transactions ............ (14,761,370) (17,652,797)
Net unrealized gain (loss) on investments and foreign currency translation .... (58,863,567) 16,203,966
-------------- --------------
Increase (decrease) in net assets from operations ........................... $ (5,444,417) $ 70,465,763
-------------- --------------
Distributions declared to shareholders -
From net investment income .................................................... $ (61,667,843) $ (65,821,545)
From paid-in capital .......................................................... (7,405,223) (6,636,586)
-------------- --------------
Total distributions declared to shareholders ................................ $ (69,073,066) $ (72,458,131)
-------------- --------------
Trust share (principal) transactions -
Cost of shares reacquired ..................................................... $ (39,105,641) $ (5,740,891)
-------------- --------------
Total decrease in net assets .............................................. $ (113,623,124) $ (7,733,259)
Net assets:
At beginning of year .......................................................... 1,090,634,397 1,098,367,656
-------------- --------------
At end of year (including accumulated distributions in excess of net investment
income of $2,178,375 and $4,728,011 respectively) ............................. $ 977,011,273 $1,090,634,397
============== ==============
</TABLE>
See notes to financial statements.
10
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------------------------
Per share data (for a share outstanding 1999 1998 1997 1996 1995
throughout each year): -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of year .................... $ 7.75 $ 7.76 $ 7.82 $ 7.83 $ 7.33
-------- ------- ------- ------- -------
Income from investment operations# -
Net investment income ................................ $ 0.49 $ 0.51 $ 0.54 $ 0.53 $ 0.55
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ (0.53) (0.01) (0.05) (0.03) 0.32
-------- ------- ------- ------- -------
Total from investment operations .................... $ (0.04) $ 0.50 $ 0.49 $ 0.50 $ 0.87
-------- ------- ------- ------- -------
Less distributions declared to shareholders -
From net investment income ........................... $ (0.45) $ (0.46) $ (0.54) $ (0.53) $ (0.53)
In excess of net investment income and foreign
currency transactions ............................... - - (0.04) (0.04) -
From paid in capital ................................. (0.05) (0.05) - - -
-------- ------- ------- ------- -------
Total distributions declared to shareholders ........ $ (0.50) $ (0.51) $ (0.58) $ (0.57) $ (0.53)
-------- ------- ------- ------- -------
Net increase from repurchase of capital shares ......... $ 0.04 $ - + $ 0.03 $ 0.06 $ 0.16
-------- ------- ------- ------- -------
Net asset value - end of year .......................... $ 7.25 $ 7.75 $ 7.76 $ 7.82 $ 7.83
======== ======= ======= ======= =======
Per share market value - end of year ................... $ 6.250 $ 6.938 $ 7.000 $ 7.125 $ 6.625
======== ======= ======= ======= =======
Total return at market value ........................... (2.92)% 6.56% 6.46% 17.40% 17.08%
Ratios (to average net assets)/Supplemental data:
Expenses## ........................................... 0.93% 0.91% 0.91% 0.97% 1.02%
Net investment income ................................ 6.57% 6.59% 6.92% 6.75% 7.13%
Portfolio turnover ..................................... 85% 184% 213% 257% 242%
Net assets at end of year (000,000 omitted) ............ $ 977 $ 1,091 $ 1,098 $ 1,160 $ 1,247
</TABLE>
#Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
+For the year ended October 31, 1998, the net increase from repurchase of
capital shares was less than $0.01 per share.
See notes to financial statements.
11
<PAGE>
Notes to Financial Statements
(1) Business and Organization
MFS Intermediate Income Trust (the Trust) is organized as a Massachusetts
business trust and is registered under the Investment Company Act of 1940, as
amended, as a non-diversified closed-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 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.
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 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.
Written Options - The Trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Trust realizes a gain equal to the amount of the premium received.
When a written call option is
12
<PAGE>
exercised or closed, the premium received is offset against the proceeds to
determine the realized gain or loss. When a written put option is exercised, the
premium reduces the cost basis of the security purchased by the Trust. The
Trust, as writer of an option, may have no control over whether the underlying
securities may be sold (call) or purchased (put) and, as a result, bears the
market risk of an unfavorable change in the price of the securities underlying
the written option. In general, written call options may serve as a partial
hedge against decreases in value in the underlying securities to the extent of
the premium received. Written options may also be used as part of an income
producing strategy reflecting the view of the Trust's management on the
direction of interest rates.
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 premium and
discount is amortized for financial statement and tax reporting purposes as
required by federal income tax regulations. Interest payments received in
additional securities are recorded on the ex-interest date in an amount equal to
the value of the security on such date. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities will
be delivered to the Trust at a future date, usually beyond customary settlement
time.
Fees Paid Indirectly - The Trust's custody fee is calculated as a percentage of
the Trust's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Trust. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Trust's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its
13
<PAGE>
Notes to Financial Statements -- continued
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 requires that only distributions in excess of tax basis earnings and
profits be 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, 1999, $3,833,905 and $129,136 were reclassified to
accumulated net realized loss on investments and foreign currency transaction
and paid-in capital, respectively, from accumulated distribution in excess of
net investment income due to differences between book and tax accounting for
mortgage-backed securities and currency transactions. In addition, $7,405,223
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, 1999, the Trust, for federal income tax purposes, had a capital
loss carryforward of $48,587,250, 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, 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 and Mr. Bailey. Included in Trustees' compensation is a net
periodic pension expense of $53,762 for the year ended October 31, 1999.
Administrator - The Trust has an administrative services agreement with MFS to
provide the Trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Trust pays MFS an administrative fee
at the following annual percentages of the Trust's average daily net assets:
<TABLE>
<S> <C>
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
</TABLE>
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.
14
<PAGE>
(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 ............................ $507,272,587 $610,866,040
============ ============
Investments (non-U.S. government securities) .......... $345,849,097 $282,314,739
============ ============
</TABLE>
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:
<TABLE>
<S> <C>
Aggregate cost ........................ $999,754,062
============
Gross unrealized depreciation ......... $(45,049,785)
Gross unrealized appreciation ......... 2,059,329
------------
Net unrealized depreciation ........... $(42,990,456)
============
</TABLE>
(5) Shares of Beneficial Interest
The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Trust shares were as follows:
<TABLE>
<CAPTION>
Year Ended October 31, 1999 Year Ended October 31, 1998
--------------------------- ---------------------------
Shares Amount Shares Amount
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Treasury shares acquired ......... 5,984,100 $39,105,641 807,000 $5,740,891
========= =========== ======= ==========
</TABLE>
In accordance with the provisions of the Trust's prospectus, 5,984,100 shares of
beneficial interest were purchased by the Trust 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. The Trust repurchased 807,000 shares of beneficial interest
during the year ended October 31, 1998, at an average price per share of $7.11
and a weighted average discount of 8.84% per share.
(6) Line of Credit
The Trust and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Trust
shares. Interest is charged to each trust, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Trust for the year ended October 31, 1999, was $5,468. 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, and swap agreements. The notional or contractual amounts of these
instruments represent the investment the Trust has in particular classes of
financial instruments and does not necessarily represent the amounts potentially
subject to risk. The measurement of the risks associated with these instruments
is meaningful only when all related and offsetting transactions are considered.
15
<PAGE>
Notes to Financial Statements -- continued
Written Option Transactions
- ---------------------------
<TABLE>
<CAPTION>
Number of Contracts Premiums
------------------- --------
<S> <C> <C>
Outstanding, beginning of year - $ -
Options written .................................... 16 4,228,404
Options terminated in closing transactions ......... (7) (1,564,731)
Options exercised .................................. (1) (254,759)
Options expired .................................... (6) (1,722,955)
-----------
Outstanding, end of year ............................ 2 $ 685,959
-----------
</TABLE>
At October 31, 1999, the Fund 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 12/01/99 .......... AUD 27,674,861 $17,919,485 $17,640,307 $ 279,178
12/01/99 .......... DKK 33,817,014 4,760,010 4,795,953 (35,943)
12/01/99 .......... JPY 4,906,931,619 46,664,382 47,221,815 (557,433)
12/01/99 .......... NZD 35,873,608 19,143,951 18,177,665 966,286
---------- ---------- ----------
$88,487,828 $87,835,740 $ 652,088
----------- ----------- ----------
Purchases 12/01/99 .......... AUD 5,644,689 $ 3,678,249 $ 3,597,996 $ (80,253)
12/01/99 .......... EUR 7,368,695 7,773,826 7,763,854 (9,972)
12/01/99 .......... JPY 7,326,679,006 69,484,294 70,539,639 1,055,345
12/01/99 .......... NZD 5,713,384 2,958,676 2,895,053 (63,623)
----------- ----------- ----------
$83,895,045 $84,796,542 $ 901,497
----------- ----------- ----------
</TABLE>
At October 31, 1999, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $194,851 with
Merrill Lynch, and a net payable of $106,405 with Deutsche Bank and $439,518
with First Boston Bank.
At October 31, 1999, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
Interest Rate Swaps
- -------------------
<TABLE>
<CAPTION>
Cash Flows Unrealized
Notional Principal Cash Flows Paid Received by the Appreciation
Expiration Amount of Contract by the Fund Fund (Depreciation)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/22/2003 SEK 167,900,000 Fixed--4.38% Floating--3M STIBOR $(787,020)
3/22/2003 EUR 18,180,000 Floating--6M EURIBOR Fixed--3.76% 470,657
---------
$(316,363)
---------
</TABLE>
At October 31, 1999, the Trust had sufficient cash and/or securities to cover
any commitments under these contracts.
16
<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, 1999, 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 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 securities owned as of
October 31, 1999, 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, 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, 1999, the results of its operations
for the year then ended, 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 generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 9, 1999
17
<PAGE>
MFS' Year 2000 Readiness Disclosure
[MFS - Year 2000 Y2K Symbol]
MFS Investment Management[RegTM], as an investment adviser and on behalf of the
MFS funds, is committed to the effective use of technology in managing our
portfolio investments, delivering high-quality service to MFS fund shareholders,
retirement plan participants, and MFS' institutional clients, and supporting the
financial consultants who sell our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original
Research[RegTM] process of evaluating portfolio investments, one of the many
relevant factors that MFS' portfolio managers and research analysts may consider
is a company's Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
18
<PAGE>
[Back cover]
MFS[RegTM] Intermediate Income Trust
Trustees
Richard B. Bailey (2)
Private Investor; Former Chairman and
Director (until 1991), MFS Investment Management
Marshall N. Cohan+(1)
Private Investor
Lawrence H. Cohn, M.D.+(2)
Chief of Cardiac Surgery,
Brigham and Women's Hospital;
Professor of Surgery, Harvard
Medical School
The Hon. Sir J. David
Gibbons, KBE+(2)
Chief Executive Officer,
Edmund Gibbons Ltd.;
Chairman, Colonial Insurance
Company, Ltd.
Abby M. O'Neill+(2)
Private Investor
Walter E. Robb, III+(1)
President and Treasurer,
Benchmark Advisors, Inc.
(corporate financial consultants);
President, Benchmark Consulting
Group, Inc. (office services)
Arnold D. Scott *
Senior Executive Vice President,
Director, and Secretary,
MFS Investment Management
Jeffrey L. Shames*
Chairman and Chief Executive Officer,
MFS Investment Management
J. Dale Sherratt+(1)
President, Insight Resources, Inc.
(acquisition planning specialists)
Ward Smith+(1)
Former Chairman (until 1994),
NACCO Industries (holding company)
Portfolio Managers
Stephen C. Bryant*
Steven E. Nothern*
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
+ Independent Trustee.
* MFS Investment Management.
(1) Member of Audit Committee.
(2) Member of Portfolio Trading Committee.
[Recycle logo] This report is printed on recycled paper. MINCE-2 12/99 108M
[Front cover]
[Graphic: Background; the word BOND repeated horizontally and vertically]
[Graphic: MFS[RegTM] Logo]
INVESTMENT MANAGEMENT
We invented the mutual fund[RegTM]
MFS[RegTM] Intermediate
Income Trust
Annual Report o October 31, 1999
