UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-5440
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MFS INTERMEDIATE INCOME TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: October 31, 2002
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Date of reporting period: April 30, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) INTERMEDIATE
INCOME TRUST
SEMIANNUAL REPORT o APRIL 30, 2003
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review ......................................................... 4
Performance Summary ....................................................... 6
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 14
Notes to Financial Statements ............................................. 18
Trustees and Officers ..................................................... 26
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Our firm was built on the philosophy that bottom- up fundamental research is the
best means of achieving superior long term investment performance. When you're
managing billions of dollars for investors, we think you have an obligation to
have in-depth, firsthand knowledge of every company you own whether it is in the
U.S. or anywhere across the globe.
We have structured our equity and fixed-income investment teams to capitalize on
the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
analysts, 27 based in the U.S. and 18 based abroad, and 26 credit research
analysts. Each analyst is assigned one or more specific industries and then
charged with identifying the most attractive investment ideas within these
industries. Our U.S. and non-U.S. equity research analysts are unified into one
team that emphasizes a collaborative process in analyzing securities across the
globe. Credit analysts also share their expertise in each segment of the
fixed-income market and work as part of the same team ensuring that every member
has access to information that may have a material effect on their investment
decisions. As MFS continues to grow and as markets become more complex, we
believe our structure will enable us to maintain a consistent investment process
with the goal of providing strong, long-term investment performance across
market capitalizations, investment disciplines, and country borders for our fund
shareholders.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers across the globe. The analysts know
the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry insights
and a wider perspective on companies and industries. Our goal is to make sure
those two sets of perspectives coordinate and work well together. As markets
across the globe become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of the
market. We do not believe that analysts and portfolio managers -- no matter how
talented they may be -- can succeed by working in a vacuum. Through the latest
technology available, our entire research team meets frequently via video and
telephone teleconferences, email, and PDAs (Personal Digital Assistants). When
we hire new analysts, we require them to spend an average of one year in Boston
to learn MFS' culture and to build relationships with their peers. We believe
the interaction among our analysts is the key to making our collaborative
process work towards delivering superior long term investment performance for
our fund shareholders. Our analysts work out of four research offices in Boston,
London, Singapore, and Tokyo, and are assigned to specific regions and
industries. They meet regularly with their colleagues to discuss the trends
around the world affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspective they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry
and its ability to grow its market share. Conversely, our fixed income analysts
will look at stability of a company's cash flow, the value of its assets, and
its capital structure to gauge whether the company can generate enough free cash
flow to pay off its debt. As a result of their collaboration, we believe we're
able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however we have
rigorous guidelines to assure that the level of risk is measured and monitored
and consistent with the investment philosophies of each of our portfolios. All
told, we believe our culture empowers the members of our investment team to
continue to do their best work and allows them to make better investment
decisions.
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
MFS Investment Management(R)
May 30, 2003
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
MANAGEMENT REVIEW
[Photo of James J. Calmas]
James J. Calmas
Dear Shareholders,
For the six months ended April 30, 2003, the trust provided a total return of
6.61% 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 3.04%. This return compares with
those of 2.87% and 11.71%, respectively, for the trust's benchmarks, the Salomon
Brothers Medium Term (1- to 10-year) Treasury Government Sponsored Index (the
Salomon Index), and the J.P. Morgan Non-Dollar Government Bond Index (the Morgan
Index). The Salomon Index measures the performance of medium-term government
bonds. The Morgan Index measures the performance of international government
bonds.
A DECLINING INTEREST RATE ENVIRONMENT
Declining interest rates around the globe were a major driver of fixed-income
performance over the six-month period. Just after the trust's reporting period
began, the U.S. Federal Reserve Board (the Fed) lowered short-term interest
rates on November 6, 2002. The European Central Bank followed with its own
interest rate cuts in early December and in March. Both central banks acted to
stimulate sagging economies. As a result of these rate cuts, yields on most
bonds began to decline. For the period, yields on European bonds, in general,
fell more than those of U.S. bonds. However, most European issues started the
period at higher yield levels than comparable U.S. issues.
POSITIVE RETURNS FROM MORTGAGE-BACKED AND NON-U.S. GOVERNMENT HOLDINGS
Throughout the period, we endeavored to position the trust to pick up as much
yield as possible from our investments in U.S. and foreign government
securities. As we entered the period, yields on U.S. Treasury securities had
already come down somewhat because of increased investor demand for the safety
offered by Treasuries. In seeking to enhance the trust's yield, we maintained a
significant position in mortgage-backed securities. In the first quarter of
2003, we also added to the trust's holdings in foreign government bonds. The
trust benefited from both moves not only through increased income (as compared
to Treasuries), but also through capital appreciation that occurred as yields
overall continued to slip. (The principal value and interest on Treasury
securities are guaranteed by the U.S. government if held to maturity.)
The trust outperformed the Salomon Index over the period because of the strong
returns generated by mortgages and by the international portion of the
portfolio.
The trust underperformed the Morgan Index, which is composed solely of non- U.S.
bonds, over the period largely because most of the trust's overseas holdings are
hedged back into U.S. dollars, while the Morgan Index is totally non-dollar. The
trust hedges most of its overseas holdings in an attempt to minimize the effects
of currency fluctuations and allow the trust's returns to be driven mainly by
bond performance. We believe this strategy has tended to dampen portfolio
volatility. However, a disadvantage of this strategy is that the trust could
underperform non-dollar indices such as the Morgan Index when the dollar
declines, as it has done recently.
Respectfully,
/s/ James J. Calmas
James J. Calmas
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
These 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.
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PORTFOLIO MANAGER'S PROFILE
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JAMES J. CALMAS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
(MFS(R)) AND PORTFOLIO MANAGER OF THE LIMITED MATURITY PORTFOLIOS OF OUR
MUTUAL FUNDS, VARIABLE ANNUITIES, AND OFFSHORE INVESTMENT PRODUCTS. HE
IS A MEMBER OF THE MFS FIXED INCOME STRATEGY GROUP.
JIM JOINED MFS IN 1988 AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1991, VICE
PRESIDENT IN 1993, PORTFOLIO MANAGER IN 1998, AND SENIOR VICE PRESIDENT IN
2002.
HE IS A GRADUATE OF DARTMOUTH COLLEGE AND HOLDS AN M.B.A. DEGREE FROM
THE AMOS TUCK SCHOOL OF BUSINESS ADMINISTRATION OF DARTMOUTH COLLEGE.
ALL PORTFOLIO MANAGERS AT MFS ARE SUPPORTED BY AN INVESTMENT STAFF OF OVER
160 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A GLOBAL,
ISSUER-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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OBJECTIVE: To preserve capital and provide high current income.
NEW YORK STOCK EXCHANGE SYMBOL: MIN
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PERFORMANCE SUMMARY
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(For the six months ended April 30, 2003)
NET ASSET VALUE PER SHARE
October 31, 2002 $7.57
April 30, 2003 $7.58
NEW YORK STOCK EXCHANGE PRICE
October 31, 2002 $6.91
March 6, 2003 (high)* $7.43
November 26, 2002 (low)* $6.84
April 30, 2003 $7.18
*For the period ended November 1, 2002, through April 30, 2003.
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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.
NOTES TO PERFORMANCE SUMMARY
ALL RESULTS ARE HISTORICAL. INVESTMENT RETURN AND PRINCIPAL VALUE WILL
FLUCTUATE, AND SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MORE RECENT RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks relating
to interest rates, currency exchange rates, economic, and political conditions.
The portfolio may invest in derivative securities, which may include futures and
options. These types of instruments can increase price fluctuation.
Because the portfolio invests in a limited number of companies a change in one
security's value may have a more significant effect on the portfolio's value.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the portfolio.
These risks may increase share price volatility. Please see the prospectus for
further information on these and other risk considerations.
NUMBER OF SHAREHOLDERS
As of April 30, 2003, our records indicate that there are 9,026 registered
shareholders and approximately 54,680 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
c/o MFS Service Center, Inc.
P.O. Box 55024
Boston, MA 02205-5024
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 in any amount over $100 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. 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.
PORTFOLIO OF INVESTMENTS (Unaudited) -- April 30, 2003
Bonds - 98.4%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 70.5%
Corporate Asset-Backed and Securitized - 2.7%
Commercial Mortgage Acceptance Corp., 7.206s, 2008 (interest only) $ 103,040 $ 4,891,463
Commercial Mortgage Acceptance Corp., 6.04s, 2030 6,000 6,660,119
DLJ Commercial Mortgage Corp., 7.641s, 2005 (interest only) 95,100 1,561,181
Falcon Auto Dealership LLC, 3.4s, 2023## (interest only) 16,998 2,578,884
First Union Lehman Brothers Bank, 6.56s, 2035 5,000 5,678,334
Vende Mortgage Trust, 6s, 2021 4,047 4,228,433
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$ 25,598,414
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Small Business Administration - 4.1%
SBA, 7.64s, 2010 $ 8,323 $ 9,541,692
SBA, 5.34s, 2021 9,612 9,935,179
SBA, 6.34s, 2021 4,040 4,455,409
SBA, 6.35s, 2021 6,206 6,846,702
SBA, 6.44s, 2021 3,755 4,158,774
SBA, 6.625s, 2021 4,209 4,697,887
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$39,635,643
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U.S. Government Agencies - 38.9%
FHLM, 5.5s, 2017 $ 12,411 $ 12,904,061
FHLM, 6s, 2017 9,703 10,137,763
FHLMC, 6.875s, 2010 22,900 27,444,734
FHLMC, 5.125s, 2012 18,600 19,972,438
FNMA, 7.125s, 2005 10,400 11,421,914
FNMA, 5.5s, 2006 - 2032 70,810 73,484,025
FNMA, 5.67s, 2006 6,855 7,376,410
FNMA, 7.085s, 2006 2,509 2,791,945
FNMA, 7.29s, 2006 2,791 3,102,040
FNMA, 6.956s, 2007 4,982 5,613,700
FNMA, 6s, 2008 - 2032 33,179 35,572,929
FNMA, 5.75s, 2010 3,650 4,551,640
FNMA, 6.5s, 2031 26,278 27,455,648
FNMA, 5s, 2032 TBA 10,000 10,050,000
GNMA, 8.5s, 2003 - 2009 3,871 4,272,637
GNMA, 7.5s, 2022 - 2032 12,580 13,365,297
GNMA, 7s, 2024 - 2031 41,007 43,351,178
GNMA, 8s, 2026 1,978 2,143,185
GNMA, 6.5s, 2028 - 2032 29,535 31,094,191
GNMA, 6s, 2032 TBA 7,500 7,839,840
HUD, 5.53s, 2008 11,000 12,258,125
HUD, 7.198s, 2009 6,000 7,251,438
--------------
$ 373,455,138
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U.S. Treasury Obligations - 24.8%
U.S. Treasury Bonds, 11.875s, 2003 $ 6,000 $ 6,342,888
U.S. Treasury Bonds, 12.375s, 2004 29,500 32,890,199
U.S. Treasury Bonds, 10.375s, 2009 26,050 29,587,095
U.S. Treasury Bonds, 13.875s, 2011 25,500 34,296,505
U.S. Treasury Bonds, 10.375s, 2012 55,600 73,670,000
U.S. Treasury Bonds, 12s, 2013 42,500 61,266,385
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$238,053,072
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Total U.S. Bonds $ 676,742,267
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Foreign Bonds - 27.9%
Australia - 0.4%
Government of Australia, 5.75s, 2011 AUD 2,553 $ 1,653,490
Government of Australia, 6.25s, 2015 3,022 2,015,628
--------------
$ 3,669,118
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Austria - 1.3%
Republic of Austria, 5.5s, 2007 EUR 7,804 $ 9,546,882
Republic of Austria, 5s, 2012 2,717 3,252,987
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$ 12,799,869
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Belgium - 0.7%
Kingdom of Belgium, 3.75s, 2009 EUR 3,272 $ 3,705,263
Kingdom of Belgium, 5s, 2012 2,283 2,731,839
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$ 6,437,102
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Bulgaria - 0.2%
Republic of Bulgaria, 8.25s, 2015## $ 1,634 $ 1,838,250
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Canada - 5.1%
Government of Canada, 5.75s, 2006 CAD 6,150 $ 4,520,454
Government of Canada, 5.25s, 2008 $ 20,942 23,294,520
Government of Canada, 5.5s, 2009 CAD 8,382 6,135,378
Government of Canada, 5.5s, 2010 8,855 6,465,293
Province of Ontario, 7s, 2005 $ 8,020 8,915,136
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$ 49,330,781
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Denmark - 1.9%
Kingdom of Denmark, 7s, 2007 DKK 29,604 $ 5,121,354
Kingdom of Denmark, 6s, 2009 31,468 5,320,970
Kingdom of Denmark, 6s, 2011 38,404 6,545,157
Unikredit Realkredit, 5s, 2035 10,189 1,477,320
--------------
$ 18,464,801
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Dominican Republic - 0.3%
Republic of Dominican, 9.5s, 2006## $ 1,163 $ 1,229,873
Republic of Dominican, 9.04s, 2013## 2,109 2,122,181
--------------
$ 3,352,054
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Finland - 1.6%
Republic of Finland, 2.75s, 2006 EUR 2,500 $ 2,789,902
Republic of Finland, 5.375s, 2013 9,960 12,262,193
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$ 15,052,095
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France - 1.2%
Republic of France, 3s, 2009 EUR 1,871 $ 2,224,886
Republic of France, 5s, 2011 7,081 8,480,388
Societe Generale Capital Trust I, 7.875s, 2049 (Banks &
Credit Cos.) 375 490,018
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$ 11,195,292
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Germany - 3.2%
KFW International Finance, Inc., 4.25s, 2005 (Banks) $ 10,000 $ 10,489,640
Landesbank Baden Wurttemberg, 5.125s, 2007 (Banks) 7,700 8,320,204
Republic of Germany, 4.5s, 2009 EUR 10,526 12,352,501
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$ 31,162,345
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Ireland - 1.7%
Republic of Ireland, 4.25s, 2007 EUR 5,244 $ 6,117,484
Republic of Ireland, 5s, 2013 8,162 9,757,531
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$ 15,875,015
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Italy - 0.8%
Republic of Italy, 4.5s, 2007 EUR 4,775 $ 5,620,882
Republic of Italy, 4.75s, 2013 1,712 2,000,734
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$ 7,621,616
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Kazakhstan
Kaztransoil Co., 8.5s, 2006 (Oil Services)## $ 137 $ 143,850
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Malaysia - 0.2%
Petroliam Nasional, 7.75s, 2015 (Oil Services) $ 1,681 $ 1,937,353
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Mexico - 1.3%
BBVA Bancomer, 10.5s, 2011 (Banks & Credit Cos.)## $ 3,544 $ 4,040,160
Pemex Project Funding Master Trust, 9.125s, 2010 (Oils) 51 61,200
Petroleos Mexicanos, 9.375s, 2008 (Oil Services) 2,318 2,781,600
United Mexican States, 11.375s, 2016 1,060 1,515,800
United Mexican States, 8.125s, 2019 2,205 2,488,342
United Mexican States, 11.5s, 2026 902 1,309,524
--------------
$ 12,196,626
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Netherlands - 1.4%
Kingdom of Netherlands, 5.75s, 2007 EUR 2,620 $ 3,213,078
Kingdom of Netherlands, 3.75s, 2009 1,751 1,977,392
Kingdom of Netherlands, 5s, 2012 7,304 8,757,935
--------------
$ 13,948,405
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New Zealand - 1.1%
Government of New Zealand, 7s, 2009 NZD 11,612 $ 6,933,419
Government of New Zealand, 6.5s, 2013 5,742 3,353,663
--------------
$ 10,287,082
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Norway - 0.3%
Kingdom of Norway, 5.5s, 2009 NOK 17,234 $ 2,521,625
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Panama - 0.2%
Republic of Panama, 9.375s, 2029 $ 1,783 $ 1,983,587
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Russia - 0.4%
Ministry of Finance, 12.75s, 2028 $ 827 $ 1,277,715
Mobile Telesystems Fin S.A., 9.75s, 2008 (Telecommunications
- Wireless)## 1,894 2,017,110
Russian Federation, 3s, 2008 262 230,560
--------------
$ 3,525,385
-------------------------------------------------------------------------------------------------------------
Spain - 3.0%
Kingdom of Spain, 7s, 2005 $ 7,800 $ 8,619,023
Kingdom of Spain, 5.35s, 2011 EUR 12,650 15,536,749
Kingdom of Spain, 5.5s, 2017 4,080 5,049,585
--------------
$ 29,205,357
-------------------------------------------------------------------------------------------------------------
Sweden - 0.6%
Kingdom of Sweden, 8s, 2007 SEK 17,260 $ 2,439,641
Kingdom of Sweden, 5.25s, 2011 22,890 2,929,221
--------------
$ 5,368,862
-------------------------------------------------------------------------------------------------------------
United Kingdom - 1.0%
United Kingdom Treasury, 7.25s, 2007 GBP 2,737 $ 4,976,969
United Kingdom Treasury, 5.75s, 2009 2,814 4,905,915
--------------
$ 9,882,884
-------------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 267,799,354
-------------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $880,258,494) $ 944,541,621
-------------------------------------------------------------------------------------------------------------
Rights
-------------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
-------------------------------------------------------------------------------------------------------------
United Mexican States (Identified Cost, $0)* 5,057,000 $ 22,251
-------------------------------------------------------------------------------------------------------------
Warrants
-------------------------------------------------------------------------------------------------------------
Republic of Venezuela 4/15/20 (Identified Cost, $0)* 37,500 0
-------------------------------------------------------------------------------------------------------------
Repurchase Agreements - 7.1%
-------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
-------------------------------------------------------------------------------------------------------------
Goldman Sachs, dated 4/30/03, due 5/01/03, total to be
received $43,574,598 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account) $ 43,573 $ 43,573,000
Merrill Lynch, dated 4/30/03, due 5/01/03, total to be
received $24,835,897 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account) 24,835 24,835,000
-------------------------------------------------------------------------------------------------------------
Total Repurchase Agreements, at Cost $ 68,408,000
-------------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $948,666,494) $1,012,971,872
Other Assets, Less Liabilities - (5.5)% (52,461,254)
-------------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 960,510,618
-------------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars NOK = Norwegian Krone
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro SEK = Swedish Kronor
See notes to financial statements.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
--------------------------------------------------------------------------------------------------
APRIL 30, 2003
--------------------------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $948,666,494) $1,012,971,872
Foreign currency, at value (identified cost, $16) 18
Cash 5,769
Receivable for forward foreign currency exchange contracts 119,367
Interest receivable 18,329,103
Other assets 29,621
--------------
Total assets $1,031,455,750
--------------
Liabilities:
Payable to dividend disbursing agent $ 312,217
Payable for investments purchased 66,981,811
Payable for forward foreign currency exchange contracts 2,939,846
Payable to affiliates -
Management fee 16,658
Transfer and dividend disbursing agent fee 13,370
Administrative fee 459
Accrued expenses and other liabilities 680,771
--------------
Total liabilities $ 70,945,132
--------------
Net assets $ 960,510,618
--------------
Net assets consist of:
Paid-in capital $ 986,108,412
Unrealized appreciation on investments and translation of assets and liabilities
in foreign currencies 61,715,915
Accumulated net realized loss on investments and foreign currency transactions (83,945,633)
Accumulated distributions in excess of net investment income (3,368,076)
--------------
Total $ 960,510,618
--------------
Shares of beneficial interest outstanding
(135,059,966 issued, less 8,404,650 treasury shares) 126,655,316
-----------
Net asset value
(net assets / shares of beneficial interest outstanding) $7.58
-----
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
STATEMENT OF OPERATIONS (UNAUDITED)
--------------------------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 2003
--------------------------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 24,627,346
Dividends 14,468
------------
Total investment income $ 24,641,814
------------
Expenses -
Management fee $ 3,208,391
Trustees' compensation 70,201
Transfer and dividend disbursing agent fee 80,158
Administrative fee 55,161
Stock exchange fee 108,053
Custodian fee 339,800
Auditing fees 21,975
Postage 27,266
Printing 31,270
Legal fees 4,454
Miscellaneous 252,702
------------
Total expenses $ 4,199,431
Fees paid indirectly (6,880)
------------
Net expenses $ 4,192,551
------------
Net investment income $ 20,449,263
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 11,316,945
Foreign currency transactions (15,502,229)
Futures contracts (66,298)
------------
Net realized loss on investments and foreign currency transactions $ (4,251,582)
------------
Change in unrealized appreciation (depreciation) -
Investments $ 12,928,247
Futures contracts 133,438
Translation of assets and liabilities in foreign currencies (1,194,569)
------------
Net unrealized gain on investments and foreign currency translation $ 11,867,116
------------
Net realized and unrealized gain on investments and foreign currency $ 7,615,534
------------
Increase in net assets from operations $ 28,064,797
------------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
STATEMENT OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2003 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2002
------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 20,449,263 $ 47,698,070
Net realized gain (loss) on investments and foreign
currency transactions (4,251,582) 3,465,610
Net unrealized gain on investments and foreign currency
translation 11,867,116 7,220,514
------------ ------------
Increase in net assets from operations $ 28,064,797 $ 58,384,194
------------ ------------
Distributions declared to shareholders -
From net investment income $(26,216,849) $(55,511,381)
------------ ------------
Trust share (principal) transactions -
Cost of shares reacquired $ -- $(3,205,280)
------------ ------------
Total increase (decrease) in net assets $ 1,847,948 $ (332,467)
Net assets:
At beginning of period 958,662,670 958,995,137
------------ ------------
At end of period (including accumulated distributions in excess
of net investment income and accumulated undistributed net
investment income of $3,368,076 and $2,399,510, respectively) $960,510,618 $958,662,670
------------ ------------
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
FINANCIAL HIGHLIGHTS
-------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -----------------------------------------------------------------
APRIL 30, 2003 2002 2001 2000 1999 1998
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.57 $ 7.54 $ 7.06 $ 7.25 $ 7.75 $ 7.76
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S)(S) $ 0.16 $ 0.38 $ 0.48 $ 0.49 $ 0.49 $ 0.51
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 0.06 0.09 0.48 (0.20) (0.53) (0.01)
------ ------ ------ ------ ------ ------
Total from investment operations $ 0.22 $ 0.47 $ 0.96 $ 0.29 $(0.04) $ 0.50
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.21) $(0.44) $(0.49) $(0.33) $(0.45) $(0.46)
From paid in capital -- -- -- (0.21) (0.05) (0.05)
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.21) $(0.44) $(0.49) $(0.54) $(0.50) $(0.51)
------ ------ ------ ------ ------ ------
Net increase from repurchase of capital
shares $ -- $ -- +++ $ 0.01 $ 0.06 $ 0.04 $ -- +++
------ ------ ------ ------ ------ ------
Net asset value - end of period $ 7.58 $ 7.57 $ 7.54 $ 7.06 $ 7.25 $ 7.75
------ ------ ------ ------ ------ ------
Per share market value - end of period $ 7.18 $ 6.91 $ 6.95 $ 6.38 $ 6.25 $ 6.94
------ ------ ------ ------ ------ ------
Total return at market value 6.61%++ 5.63% 16.93% 10.95% (2.92)% 6.56%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.88%+ 0.90% 0.93% 0.95% 0.93% 0.91%
Net investment income(S)(S) 4.31%+ 5.09% 6.62% 6.93% 6.57% 6.59%
Portfolio turnover 47% 115% 72% 93% 85% 184%
Net assets at end of period
(000,000 Omitted) $961 $959 $959 $906 $977 $1,091
# Per share data is based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
(S)(S) As required, effective November 1, 2001, the trust adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and
began amortizing premium on debt securities. The effect of this change
for the year ended October 31, 2002, was to decrease net investment
income per share by $0.06, and increase realized and unrealized gains and
losses per share by $0.06, and decrease the ratio of net investment
income to average net assets by 0.78%. Per share ratios and supplemental
data for periods prior to November 1, 2001 have not been restated to
reflect this change in presentation.
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Intermediate Income Trust the (trust) is a non-diversified series of MFS
Series Trust (the trust). 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 management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 - Bonds and other fixed income securities (other than
short-term obligations) of U.S. issuers in the trust's portfolio are valued at
an evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from pricing
services utilize both dealer-supplied valuations and electronic data processing
techniques which take into account appropriate 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 quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Forward Contracts will be valued using a
pricing model taking into consideration market data from an external pricing
source. Use of the pricing services has been approved by the Board of Trustees.
All other securities (other than short-term obligations), futures contracts and
options in the trust's portfolio for which the principal market is one or more
securities or commodities exchanges (whether domestic or foreign) will be valued
at the last reported sale price or at the settlement price prior to the
determination (or if there has been no current sale, at the closing bid price)
on the primary exchange on which such securities, futures contracts or options
are traded; but if a securities exchange is not the principal market for
securities, such securities will, if market quotations are readily available, be
valued at current bid prices. Short-term obligations in the trust's portfolio
are valued at amortized cost, which constitutes fair value as determined by the
Board of Trustees. Short-term obligations with a remaining maturity in excess of
60 days will be valued upon dealer supplied valuations. Portfolio investments
for which market quotations are not readily available, or where values have been
materially affected by events occurring after the close of their primary markets
are valued at fair value as determined in good faith by or at the direction of
the Board of 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 - 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 selected by
the Trustee. Deferred amounts represent an unsecured obligation of the trust
until distributed in accordance with the Plan. Included in other assets and
accrued expenses and other liabilities is $15,217 of Deferred Trustee
Compensation.
Futures Contracts - The trust may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the trust is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the trust each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the trust. The trust's, investment in futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Investments in currency futures for purposes other than
hedging may be made to change the trust's relative position in one or more
currencies without buying and selling portfolio assets. Investments in index
contracts or contracts on related options for purposes other than hedging, may
be made when the trust has cash on hand and wishes to participate in anticipated
market appreciation while the cash is being invested. Should interest or
exchange rates or securities prices move unexpectedly, the trust may not achieve
the anticipated benefits of the futures contracts and may realize a loss.
Security Loans - State Street Bank and Trust Company ("State Street") as lending
agent, 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 provides 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 April 30, 2003 there
were no securities on loan.
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 foreign currency exchange 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.
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 or accreted for financial statement purposes in accordance
with generally accepted accounting principles. All discount is accreted for 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.
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.
The trust may enter in "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date. Although the unit price has
been established, the principal value has not been finalized. However, the
principal amount of the commitments will not fluctuate more than 1.0%. The trust
holds, and maintains until settlement date, cash or high-grade debt obligations
in an amount sufficient to meet the purchase price, or the trust may enter into
offsetting contracts for the forward sale of other securities it owns. Income on
the securities will not be earned until settlement date. TBA purchase
commitments may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior to settlement
date, which is in addition to the risk of decline in the value of the trusts'
other assets. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, according to the procedures described
under "Investment Valuations" above.
The trust may enter into "TBA" (to be announced) sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not received until
the contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are held as
"cover" for the transaction.
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 net 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. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
real estate investment trusts, defaulted bonds, capital losses, and amortization
and accretion on debt securities.
The tax character of distributions declared for the years ended October 31, 2002
and October 31, 2001 was as follows:
OCTOBER 31, 2002 OCTOBER 31, 2001
-------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $55,511,381 $60,238,748
Return of capital -- 993,177
----------- -----------
$55,511,381 $61,231,925
Tax return of capital -- --
----------- -----------
Total distributions declared $55,511,381 $61,231,925
----------- -----------
As of October 31, 2002, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $ 3,974,205
Capital loss carryforward (45,073,920)
Unrealized appreciation 16,736,879
Other temporary differences (2,947,193)
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the earlier
of its utilization or expiration on:
EXPIRATION DATE
----------------------------------------------------
October 31, 2003 $ (6,526,984)
October 31, 2004 (645,525)
October 31, 2006 (13,874,621)
October 31, 2007 (11,376,973)
October 31, 2008 (11,439,294)
October 31, 2010 (1,210,523)
------------
Total $(45,073,920)
------------
(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 compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and 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). On January 1, 2002, the Trustees terminated
the Independent Trustee unfunded defined benefit plan for active Trustees and
converted it to an unfunded retirement benefit deferral plan for active
Trustees. Under the new plan, the unfunded pension liability was converted into
an equivalent value of notional shares of the trust that will fluctuate with the
performance of the trust. Included in Trustees' compensation is a net decrease
of $50,142 as a result of the change in the trust's pension liability under this
plan and a pension expense of $66,343 for inactive trustees for the six months
ended April 30, 2003.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder communications,
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:
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 $320,975,638 $371,165,794
------------ ------------
Investments (non-U.S. government securities) $125,810,894 $110,591,847
------------ ------------
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 $983,420,063
------------
Gross unrealized appreciation $ 43,433,390
Gross unrealized depreciation (13,881,581)
------------
Net unrealized appreciation $ 29,551,809
------------
(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. The Trustees have
authorized 135,059,966 full and fractional shares of beneficial interest and
have authorized the repurchase by the trust of up to 10% of its own shares of
beneficial interest. No shares of beneficial interest were purchased by the
trust during the period ended April 30, 2003. The trust repurchased 480,000
shares of beneficial interest during the year ended October 31, 2002, at an
average price per shares of $6.67 and a weighted average discount of 8.54% per
share. Transactions in trust shares were as follows:
SIX MONTHS ENDED APRIL YEAR ENDED OCTOBER 31,
30, 2003 2002
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------
Treasury shares reacquired -- $ -- 480,000 $3,205,280
------ --------- -------- ----------
(6) Line of Credit
The trust and other affiliated funds participate in an $800 million 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 fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. The commitment fee allocated to the trust for the six
months ended April 30, 2003, was $3,962. The trust had no borrowings during the
period.
(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 forward foreign currency exchange contracts, and
futures contracts. The notional or contractual amounts of these instruments
represent the investment the trust has in particular classes of financial
instruments and does not necessarily represent the amounts potentially subject
to risk. The measurement of the risks associated with these instruments is
meaningful only when all related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
--------------------------------------------------------------------------------------------------------
Sales 6/16/03 AUD 6,176,333 $ 3,801,010 $ 3,849,165 $ (48,155)
6/16/03 CAD 18,544,102 12,727,374 12,901,304 (173,930)
6/16/03 DKK 113,459,441 16,734,431 17,057,552 (323,121)
6/30/03 EUR 83,026,967 90,735,549 92,667,152 (1,931,603)
6/16/03 GBP 5,737,752 9,008,271 9,149,826 (141,555)
6/16/03 NOK 18,352,412 2,549,442 2,612,969 (63,527)
6/16/03 NZD 7,010,097 3,905,534 3,901,962 3,572
6/16/03 NZD 11,679,492 6,330,168 6,499,623 (169,455)
6/16/03 SEK 38,842,860 4,651,282 4,739,782 (88,500)
----------- ------------ -----------
$150,443,061 $153,379,335 $(2,936,274)
------------ ------------ -----------
Purchases 6/16/03 EUR 6,967,293 $ 7,668,785 $ 7,784,580 $ 115,795
------------ ------------ -----------
At April 30, 2003, the trust had sufficient cash and/or securities to cover any
commitments under these contracts.
(8) Change in Accounting Principle
As required, effective November 1, 2001, the trust adopted the provisions of the
AICPA Audit and Accounting Guide for Investment Companies and began amortizing
premium and accreting market discount on debt securities. Prior to November 1,
2001, the trust did not amortize premium nor accrete market discount on debt
securities. The cumulative effect of this accounting change had no impact on
total net assets of the trust, but resulted in a $27,387,322 reduction in cost
of securities and a corresponding $27,387,322 increase in net unrealized
appreciation, based on securities held by the trust on November 1, 2001.
MFS(R) INTERMEDIATE INCOME TRUST
The following tables present certain information regarding the Trustees and
officers of the Trust, including their principal occupations, which, unless
specific dates are shown, are of more than five years' duration, although the
titles may not have been the same throughout.
NAME, AGE, POSITION WITH THE TRUST,
PRINCIPAL OCCUPATION, AND OTHER DIRECTORSHIPS(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES* (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Private investor; Rockefeller
Company, Chairman Financial Services, Inc.
(investment advisers), Chairman
JOHN W. BALLEN* (born 09/12/59) and Chief Executive Officer
Trustee and President
Massachusetts Financial Services LAWRENCE T. PERERA (born 06/23/35)
Company, Chief Executive Officer and Trustee
Director Hemenway & Barnes (attorneys),
Partner
KEVIN R. PARKE* (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Trustee
Company, President, Chief Investment Private investor; Harvard
Officer, and Director University Graduate School of
Business Administration, Class
INDEPENDENT TRUSTEES of 1961 Adjunct Professor in
Entrepreneurship Emeritus; CBL
LAWRENCE H. COHN, M.D. (born 03/11/37) & Associates Properties, Inc.
Trustee (real estate investment trust),
Brigham and Women's Hospital, Chief of Director
Cardiac Surgery; Harvard Medical
School, Professor of Surgery J. DALE SHERRATT (born 09/23/38)
Trustee
WILLIAM R. GUTOW (born 09/27/41) Insight Resources, Inc.
Trustee (acquisition planning
Private investor and real estate specialists), President;
consultant; Capitol Entertainment Wellfleet Investments (investor
Management Company (video franchise), in health care companies),
Vice Chairman Managing General Partner (since
1993); Cambridge Nutraceuticals
J. ATWOOD IVES (born 05/01/36) (professional nutritional
Trustee products), Chief Executive
Private investor; KeySpan Corporation Officer (until May 2001)
(energy related services), Director;
Eastern Enterprises (diversified ELAINE R. SMITH (born 04/25/46)
services company), Chairman, Trustee Trustee
and Chief Executive Officer (until Independent health care
November 2000) industry consultant
WARD SMITH (born 09/13/30)
Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
* "Interested person" of MFS within the meaning of the Investment Company Act
of 1940 (referred to as the 1940 Act) which is the principal federal law
governing investment companies like the Trust. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
OFFICERS
JEFFREY L. SHAMES (born 06/02/55)
Massachusetts Financial Services ROBERT R. FLAHERTY (born 09/18/63)
Company, Assistant Treasurer
Chairman Massachusetts Financial Services
Company, Vice President (since August
JOHN W. BALLEN (born 09/12/59) 2000); UAM Fund Services, Senior Vice
Trustee and President President (prior to August 2000)
Massachusetts Financial Services
Company, Chief Executive Officer and RICHARD M. HISEY (born 08/29/58)
Director Treasurer
Massachusetts Financial Services
JAMES R. BORDEWICK, JR. (born 03/06/59) Company, Senior Vice President (since
Assistant Secretary and Assistant Clerk July 2002); The Bank of New York,
Massachusetts Financial Services Senior Vice President (September 2000
Company, Senior Vice President and to July 2002); Lexington Global Asset
Associate Managers, Inc., Executive Vice
General Counsel President and Chief Financial
Officer, General Manager, Mutual
STEPHEN E. CAVAN (born 11/06/53) Funds (prior to September 2000)
Secretary and Clerk
Massachusetts Financial Services ELLEN MOYNIHAN (born 11/13/57)
Company, Senior Vice President, General Assistant Treasurer
Counsel Massachusetts Financial Services
and Secretary Company, Vice President
STEPHANIE A. DESISTO (born 10/01/53) JAMES O. YOST (born 06/12/60)
Assistant Treasurer Assistant Treasurer
Massachusetts Financial Services Massachusetts Financial Services
Company, Vice President (since April Company, Senior Vice President
2003); Brown Brothers Harriman & Co.,
Senior Vice President (November 2002 to
April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice
President (prior to November 2002)
The Trust holds annual shareholder meetings for the purpose of electing
Trustees, and Trustees are elected for fixed terms. The Board of Trustees
currently is divided into three classes, each having a term of three years. Each
year the term of one class expires. Each Trustee's term of office expires on the
date of the third annual meeting following the election to office of the
Trustee's class. Each Trustee will serve until next elected or his or her
earlier death, resignation, retirement or removal.
Messrs. Shames, Cohn, Sherratt and Smith, and Ms. O'Neill have served in their
capacity as Trustee of the Trust continuously since originally elected or
appointed. Messrs. Ballen, Gutow, Ives, Perera and Poorvu, and Ms. Smith were
elected by shareholders and have served as Trustees of the Trust since January
1, 2002. Mr. Parke has served as Trustee of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with
certain other funds of which MFS or a subsidiary is the investment adviser or
distributor and, in the case of the officers, with certain affiliates of MFS.
Each Trustee serves as a board member of 112 funds within the MFS Family of
Funds.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request, by calling
1-800-225-2606.
INVESTMENT ADVISER TRANSFER AGENT, REGISTRAR, AND
DIVIDEND DISBURSING AGENT
Massachusetts Financial Services Company
500 Boylston Street State Street Bank and Trust
Boston, MA 02116-3741 Company
c/o MFS Service Center, Inc.
PORTFOLIO MANAGER P.O. Box 55024
Boston, MA 02205-5024
James J. Calmas+ 1-800-637-2304
CUSTODIAN
State Street Bank and Trust Company
+ MFS Investment Management
[MFS LOGO]
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116. MIN-SEM 6/03 100.4M
ITEM 2. CODE OF ETHICS.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time. Applicable for annual reports filed for fiscal
years ending on or after July 15, 2003.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
If applicable, not applicable at this time. Applicable for annual reports filed
on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing
date of this Form N-CSR, the registrant's principal financial
officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance
that the material information requir ed to be disclosed by the
registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the
registrant intends to satisfy the Item 2 requirements through
filing of an exhibit: Not applicable.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule
30a-2(a) under the Act (17 CFR 270.30a-2): Attached hereto.
[If the report is filed under Section 13(a) or 15(d) of the Exchange
Act, provide the certifications required by Rule 30a-2(b) under the Act
(17 CFR 270.30a-2(b)) and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. 1350) as an exhibit. A certification
furnished pursuant to this paragraph will not be deemed "filed" for the
purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or
otherwise subject to the liability of that section. Such certification
will not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933 or the Exchange Act, except to the
extent that the registrant specifically incorporates it by reference:
Attached hereto.][The submission of Section 906 certifications has been
proposed by the SEC, but has not yet been finalized. The SEC has
encouraged issuers to submit Section 906 certifications as an exhibit
to Form N-CSR until the final rule has been adopted. Please see
Proposed Rule: Certification of Disclosure in Certain Exchange Act
Reports, Release No. 33-8212 (March 21, 2003)].
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS INTERMEDIATE INCOME TRUST
--------------------------------------------------------------------
By (Signature and Title)* /s/ JOHN W. BALLEN
------------------------------------------------------
John W. Ballen, President
Date June 23, 2003
-------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President (Principal Executive
Officer)
Date: June 23, 2003
-------------
By (Signature and Title)* /s/ RICHARD M. HISEY
-----------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: June 23, 2003
* Print name and title of each signing officer under his or her signature.