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)
Susan S. Newton
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
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Date of reporting period: April 30, 2007
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) INTERMEDIATE INCOME TRUST
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
SEMIANNUAL REPORT
4/30/07
MIN-SEM
MFS(R) INTERMEDIATE INCOME TRUST
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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PORTFOLIO MANAGERS' PROFILES 3
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PERFORMANCE SUMMARY 4
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DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN 6
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PORTFOLIO OF INVESTMENTS 7
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STATEMENT OF ASSETS AND LIABILITIES 12
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STATEMENT OF OPERATIONS 13
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STATEMENTS OF CHANGES IN NET ASSETS 14
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FINANCIAL HIGHLIGHTS 15
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NOTES TO FINANCIAL STATEMENTS 16
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 25
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 26
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PROXY VOTING POLICIES AND INFORMATION 26
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QUARTERLY PORTFOLIO DISCLOSURE 26
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CONTACT INFORMATION BACK COVER
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TRUST OBJECTIVE: The Trust seeks to preserve capital and provide high
current income.
New York Stock Exchange Symbol: MIN
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
The past year has been a great example of why investors should keep their eyes
on the long term.
In 2006 the Dow Jones Industrial Average returned 19%. As of mid-May 2007, it
had returned another 8% and continued to reach new highs. But the Dow's upward
rise has not been without hiccups. After hitting new records in February, the
Dow lost 5.8% between February 20 and March 5, as stocks were sold off around
the globe. As we have said before, markets are volatile, and investors should
make sure they have an investment plan that can carry them through the peaks
and troughs.
If you are focused on a long-term investment strategy, the short-term ups and
downs of the markets should not necessarily dictate portfolio action on your
part. Both the bond and stock markets are cyclical. In our view, investors who
remain committed to a long-term plan are more likely to achieve their financial
goals. We believe you should not let the headlines guide you in your investment
decisions and should be cautious about overreacting to short-term volatility.
In any market environment, we believe individual investors are best served by
following a three-pronged investment strategy of allocating their holdings
across the major asset classes, diversifying within each class, and regularly
rebalancing their portfolios to maintain their desired allocations. Of course,
these strategies cannot guarantee a profit or protect against a loss. Investing
and planning for the long term require diligence and patience, two traits that
in our experience are essential to capitalizing on the many opportunities the
financial markets can offer -- through both up and down economic cycles.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
June 15, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Bonds 97.5%
Cash & Other Net Assets 2.5%
FIXED INCOME SECTORS (i)
Non-U.S. Government Bonds 30.7%
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U.S. Treasury Securities 22.4%
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Mortgage-Backed Securities 20.9%
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U.S. Government Agencies 18.7%
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Emerging Market Bonds 3.5%
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Commercial Mortgage-Backed
Securities 0.9%
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Residential Mortgage-Backed
Securities 0.3%
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High Grade Corporates 0.1%
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CREDIT QUALITY OF BONDS (r)
AAA 90.6%
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AA 5.7%
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A 1.4%
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BBB 2.0%
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BB 0.3%
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PORTFOLIO FACTS
Average Duration (d)(i) 3.8
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Average Life (i)(m) 5.1 yrs
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Average Maturity (i)(m) 7.6 yrs
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Average Credit Quality of Rated
Securities (long-term) (a) AAA
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Average Credit Quality of Rated
Securities (short-term) (a) A-1
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COUNTRY WEIGHTINGS (i)
United States 66.1%
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Japan 6.7%
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Germany 5.0%
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France 3.3%
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Netherlands 3.3%
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United Kingdom 2.9%
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Canada 2.8%
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Ireland 2.4%
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Spain 1.4%
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Other Countries 6.1%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5-year duration is likely to lose about 5.00% of its value.
(i) For purposes of this presentation, the bond component includes both accrued
interest amounts and the equivalent exposure from any derivative holdings,
if applicable.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre- refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 04/30/07.
Percentages are based on net assets as of 04/30/07, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO MANAGERS' PROFILES
James J. Calmas is Senior Vice President of MFS(R) Investment Management(R)
(MFS(R)) and team leader of the firm's strategic income and limited maturity
portfolios, and portfolio manager of variable annuities, and offshore
investment products. Jim joined MFS in 1988 and was named portfolio manager in
1998, and Senior Vice President in 2002. He has been a portfolio manager of the
trust since September 2004. Jim is a graduate of Dartmouth College and holds an
M.B.A. degree from the Amos Tuck School of Business Administration of Dartmouth
College.
Erik S. Weisman, Ph.D., is a member of the Fixed Income Team at MFS(R)
Investment Management (MFS(R)) and a portfolio manager of our inflation-
adjusted bond, strategic income, global total return, and global government
portfolios. He joined the firm in 2002 as a global sovereign fixed-income
research analyst. He has been a portfolio manager of the trust since May 2004.
Erik earned a bachelor's degree from the University of Michigan and a master's
and Ph.D. degree from Duke University.
PERFORMANCE SUMMARY THROUGH 4/30/07
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.
PRICE SUMMARY
Six months ended 4/30/07
Date Price
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Net Asset Value 4/30/07 $6.94
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10/31/06 $6.97
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New York Stock Exchange Price 4/30/07 $6.18
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3/30/07 (high) (t) $6.24
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11/09/06 (low) (t) $6.11
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10/31/06 $6.12
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TOTAL RETURNS VS BENCHMARKS
Six months ended
4/30/07
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New York Stock Exchange Price (r) 3.55%
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Net Asset Value (r) 2.10%
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Citigroup Medium-Term (1 to 10 years) Treasury Government Sponsored
Index (f) 2.38%
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Citigroup World Government Bond Non-Dollar Hedged Index (f) 1.32%
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(f) Source: FactSet Research Systems Inc.
(r) Includes reinvestment of dividends and capital gain distributions.
(t) For the period November 1, 2006 through April 30, 2007.
INDEX DEFINITIONS
Citigroup Medium-Term (1 to 10 years) Treasury Government Sponsored Index - a
capitalization-weighted index of U.S. Treasury and U.S. Government agency
securities with fixed-rate coupons and weighted average lives between one and
ten years.
Citigroup World Government Bond Non-Dollar Hedged Index - a market
capitalization-weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the United States. Country
eligibility is determined based upon market capitalization and investability
criteria.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
The trust's shares may trade at a discount or premium to net asset value.
Shareholders do not have the right to cause the trust to repurchase their
shares at net asset value.
When trust shares trade at a premium, buyers pay more than the net asset value
underlying trust shares, and shares purchased at a premium would receive less
than the amount paid for them in the event of the trust's liquidation. As a
result, the total return that is calculated based on the net asset value and
New York Stock Exchange price can be different.
The trust's monthly distributions may include a return of capital to
shareholders. Distributions that are treated for federal income tax purposes as
a return of capital will reduce each shareholder's basis in his or her shares
and, to the extent the return of capital exceeds such basis, will be treated as
gain to the shareholder from a sale of shares. Returns of shareholder capital
have the effect of reducing the trust's assets and increasing the trust's
expense ratio.
From time to time the trust may receive proceeds from litigation settlements,
without which performance would be lower.
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.
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
The trust 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 may be made in any amount
over $100 in January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are
bought on the New York Stock Exchange or otherwise on the open market, each
participant pays a pro rata share of the transaction expenses, including
commissions. The automatic reinvestment of distributions does not relieve you
of any income tax that may be payable (or required to be withheld) on the
distributions.
To enroll in or withdraw from the plan, or if you have any questions, call
1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time. Please have
available the name of the trust and your account and Social Security numbers.
For certain types of registrations, such as corporate accounts, instructions
must be submitted in writing. Please call for additional details. When you
withdraw from the plan, you can receive the value of the reinvested shares in
one of two ways: a check for the value of the full and fractional shares, or a
certificate for the full shares and a check for the fractional shares.
Effective May 1, 2007, Computershare Trust Company, N.A. (the Transfer Agent
for the trust) became the agent for the plan.
PORTFOLIO OF INVESTMENTS
4/30/07 (unaudited)
The Portfolio of Investments is a complete list of all securities owned by your trust. It is categorized by
broad-based asset classes.
Bonds - 94.9%
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ISSUER SHARES/PAR VALUE ($)
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Agency - Other - 0.1%
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Small Business Administration, 7.64%, 2010 $ 630,721 $ 657,744
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Asset Backed & Securitized - 1.1%
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Commercial Mortgage Acceptance Corp., FRN, 1.1119%, 2030 (i) $ 68,211,952 $ 1,551,078
Falcon Franchise Loan LLC, FRN, 3.426%, 2023 (i)(n) 12,590,028 1,300,928
JPMorgan Chase Commercial Mortgage Securities Corp., FRN, 5.5421%, 2043 4,380,726 4,364,511
Multi-Family Capital Access One, Inc., 6.65%, 2024 2,060,986 2,083,399
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$ 9,299,916
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Emerging Market Quasi-Sovereign - 0.5%
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Pemex Project Funding Master Trust, 9.375%, 2008 $ 2,318,000 $ 2,457,080
Petronas Capital Ltd., 7.875%, 2022 1,158,000 1,428,906
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$ 3,885,986
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Emerging Market Sovereign - 2.2%
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Federative Republic of Brazil, 8%, 2018 $ 183,000 $ 207,705
Republic of Chile, FRN, 5.755%, 2008 2,321,000 2,324,482
Republic of Panama, 9.375%, 2029 1,486,000 2,024,675
Republic of South Africa, 9.125%, 2009 1,935,000 2,077,706
Russian Federation, 3%, 2008 3,277,000 3,193,764
State of Israel, 5.125%, 2014 5,000,000 4,937,100
United Mexican States, 8.3%, 2031 279,000 366,048
United Mexican States, 6.75%, 2034 2,469,000 2,752,935
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$ 17,884,415
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International Market Quasi-Sovereign - 13.4%
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Canada Housing Trust, 4.6%, 2011 CAD 3,148,000 $ 2,881,103
Development Bank of Japan, 1.75%, 2010 JPY 549,000,000 4,696,525
Development Bank of Japan, 1.4%, 2012 JPY 1,471,000,000 12,473,374
Development Bank of Japan, 1.6%, 2014 JPY 730,000,000 6,182,838
Eksportfinans A.S.A, 5.125%, 2011 $ 3,780,000 3,812,894
Japan Finance Corp. for Municipal Enterprises, 1.55%, 2012 JPY 1,523,000,000 12,935,901
Japan Finance Corp. for Municipal Enterprises, 2%, 2016 JPY 2,020,000,000 17,577,844
KfW Bankengruppe, 3.25%, 2007 $ 4,200,000 4,181,444
KfW Bankengruppe, 4.625%, 2008 3,525,000 3,502,736
KfW Bankengruppe, 5.25%, 2009 7,470,000 7,524,128
KfW Bankengruppe, 4.875%, 2009 2,800,000 2,804,505
KfW Bankengruppe, 1.35%, 2014 JPY 1,292,000,000 10,778,104
Landesbank Baden-Wurttemberg, 5.125%, 2007 $ 7,700,000 7,697,005
Province of Ontario, 5%, 2011 5,000,000 5,030,430
Province of Ontario, 4.75%, 2016 6,000,000 5,894,682
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$107,973,513
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International Market Sovereign - 16.9%
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Commonwealth of Australia, 6%, 2017 AUD 1,012,000 $ 847,859
Federal Republic of Germany, 3.75%, 2015 EUR 2,328,000 3,095,466
Government of Canada, 5.5%, 2009 CAD 2,328,000 2,154,927
Government of Canada, 4.5%, 2015 CAD 7,252,000 6,693,571
Kingdom of Denmark, 4%, 2015 DKK 35,576,000 6,447,073
Kingdom of Netherlands, 3.75%, 2009 EUR 5,910,000 8,000,614
Kingdom of Netherlands, 3.75%, 2014 EUR 3,250,000 4,325,413
Kingdom of Netherlands, 4%, 2016 EUR 9,915,000 13,340,791
Kingdom of Spain, 5.35%, 2011 EUR 7,994,000 11,434,466
Republic of Austria, 4.65%, 2018 EUR 5,862,000 8,291,752
Republic of Finland, 5.375%, 2013 EUR 2,894,000 4,207,431
Republic of France, 4.75%, 2012 EUR 5,214,000 7,321,567
Republic of France, 5%, 2016 EUR 12,548,000 18,194,218
Republic of Ireland, 3.25%, 2009 EUR 1,570,000 2,107,895
Republic of Ireland, 4.6%, 2016 EUR 12,003,000 16,891,144
United Kingdom Treasury, 5.75%, 2009 GBP 1,052,000 2,117,356
United Kingdom Treasury, 5%, 2012 GBP 7,867,000 15,545,258
United Kingdom Treasury, 8%, 2015 GBP 2,398,000 5,747,275
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$136,764,076
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Major Banks - 0.1%
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SG Capital Trust I, 7.875% to 2010, FRN to 2049 EUR 375,000 $ 555,200
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Mortgage Backed - 20.8%
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Fannie Mae, 7.056%, 2007 $ 919,618 $ 919,942
Fannie Mae, 3.92%, 2008 6,580,000 6,534,716
Fannie Mae, 5.78%, 2008 2,806,348 2,811,746
Fannie Mae, 6.022%, 2010 6,800,000 7,029,809
Fannie Mae, 4.506%, 2011 6,867,432 6,766,570
Fannie Mae, 4.845%, 2013 2,075,016 2,050,729
Fannie Mae, 4.666%, 2014 4,567,748 4,480,641
Fannie Mae, 4.847%, 2014 3,973,226 3,931,694
Fannie Mae, 5.412%, 2014 1,988,487 2,037,610
Fannie Mae, 4.62%, 2015 968,233 945,761
Fannie Mae, 4.925%, 2015 2,158,493 2,143,782
Fannie Mae, 4%, 2016 4,593,941 4,502,378
Fannie Mae, 5.423%, 2016 2,468,546 2,527,132
Fannie Mae, 6%, 2016 - 2034 13,499,812 13,669,268
Fannie Mae, 5.5%, 2017 - 2035 25,531,874 25,427,156
Fannie Mae, 5%, 2018 - 2025 8,625,792 8,542,947
Fannie Mae, 4.5%, 2019 9,404,217 9,120,316
Fannie Mae, 6.5%, 2031 6,323,148 6,520,080
Freddie Mac, 5.5%, 2017 - 2020 12,664,201 12,701,179
Freddie Mac, 6%, 2017 - 2034 2,908,876 2,958,557
Freddie Mac, 5%, 2019 - 2025 36,255,270 36,050,377
Freddie Mac, 3%, 2021 2,278,027 2,257,645
Freddie Mac, 4%, 2024 1,979,001 1,945,379
Ginnie Mae, 6%, 2033 2,433,072 2,471,671
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$168,347,085
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Supranational - 0.4%
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Central American Bank, 4.875%, 2012 (n) $ 3,000,000 $ 2,924,721
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U.S. Government Agencies - 18.3%
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Aid-Egypt, 4.45%, 2015 $ 3,963,000 $ 3,833,648
Fannie Mae, 6.625%, 2007 5,000,000 5,030,630
Fannie Mae, 6%, 2008 10,000,000 10,092,080
Fannie Mae, 4.25%, 2009 5,000,000 4,946,305
Farmer Mac, 5.5%, 2011 (n) 6,070,000 6,201,318
Federal Home Loan Bank, 5%, 2008 17,000,000 16,996,787
Freddie Mac, 4.25%, 2009 7,000,000 6,914,516
Freddie Mac, 4.125%, 2010 18,994,000 18,621,452
Freddie Mac, 6.875%, 2010 6,337,000 6,744,513
Freddie Mac, 5.125%, 2012 27,600,000 27,983,474
Small Business Administration, 5.34%, 2021 5,891,076 5,964,070
Small Business Administration, 6.34%, 2021 2,348,180 2,428,728
Small Business Administration, 6.35%, 2021 3,025,681 3,130,715
Small Business Administration, 6.44%, 2021 2,172,884 2,251,328
Small Business Administration, 6.625%, 2021 2,666,083 2,778,923
Small Business Administration, 4.93%, 2024 2,377,769 2,361,043
Small Business Administration, 5.36%, 2025 2,646,249 2,673,852
Small Business Administration, 5.39%, 2025 1,927,493 1,949,797
U.S. Department of Housing & Urban Development, 5.53%, 2008 11,000,000 11,067,144
U.S. Department of Housing & Urban Development, 7.198%, 2009 6,000,000 6,298,260
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$148,268,583
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U.S. Treasury Obligations - 20.7%
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U.S. Treasury Notes, 6.125%, 2007 (f) $ 5,000,000 $ 5,015,625
U.S. Treasury Notes, 6.5%, 2010 4,500,000 4,727,637
U.S. Treasury Notes, 4.25%, 2010 20,400,000 20,243,022
U.S. Treasury Notes, 10.375%, 2012 29,100,000 29,917,303
U.S. Treasury Notes, 12%, 2013 30,000,000 32,687,100
U.S. Treasury Notes, 4.25%, 2013 39,000,000 38,352,522
U.S. Treasury Notes, 4%, 2014 9,500,000 9,188,657
U.S. Treasury Notes, 4.25%, 2014 24,000,000 23,490,000
U.S. Treasury Notes, 4.75%, 2014 3,770,000 3,810,497
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$167,432,363
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Utilities - Electric Power - 0.4%
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HQI Transelec Chile S.A., 7.875%, 2011 $ 2,926,000 $ 3,141,087
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TOTAL BONDS (IDENTIFIED COST, $772,714,694) $767,134,689
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Short-Term Obligations - 3.9% (y)
----------------------------------------------------------------------------------------------------------------
New Center Asset Trust, 5.29%, due 5/01/07,
at Amortized Cost and Value $ 31,544,000 $ 31,544,000
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TOTAL INVESTMENTS (IDENTIFIED COST, $804,258,694) (k) $798,678,689
----------------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.2% 9,875,213
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NET ASSETS - 100.0% $808,553,902
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(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(i) Interest only security for which the trust receives interest on notional principal (Par amount). Par amount
shown is the notional principal and does not reflect the cost of the security.
(k) As of April 30, 2007, the trust held securities fair valued in accordance with the policies adopted by the
Board of Trustees, aggregating $765,833,761 and 95.89% of market value. An independent pricing service
provided an evaluated bid for 95.71% of the market value.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be
sold in the ordinary course of business in transactions exempt from registration, normally to qualified
institutional buyers. At period end, the aggregate value of these securities was $10,426,967, representing
1.3% of net assets.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in this report and are defined:
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
Abbreviations indicate amounts shown in currencies other than the U.S. dollar. All amounts are stated in U.S.
dollars unless otherwise indicated. A list of abbreviations is shown below:
AUD Australian Dollar
CAD Canadian Dollar
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AT 4/30/07
Appreciation and Depreciation in the table below are reported by currency.
NET
UNREALIZED
CONTRACTS TO SETTLEMENT IN EXCHANGE CONTRACTS APPRECIATION
TYPE CURRENCY DELIVER/RECEIVE DATE RANGE FOR AT VALUE (DEPRECIATION)
---------------------------------------------------------------------------------------------------------------
APPRECIATION
---------------------------------------------------------------------------------------------------------------
SELL AUD 3,555,657 6/04/07 $2,968,974 $2,950,374 $ 18,600
BUY CAD 2,642,249 5/23/07 2,350,000 2,383,549 33,549
BUY DKK 2,187,290 6/13/07 400,000 401,324 1,324
BUY EUR 2,200,000 6/20/07 2,999,735 3,009,056 9,321
SELL GBP 13,027,900 6/20/07 26,113,383 26,038,823 74,560
-----------
$ 137,354
===========
DEPRECIATION
---------------------------------------------------------------------------------------------------------------
BUY AUD 2,573,746 6/04/07 $2,146,583 $2,135,614 $ (10,969)
SELL AUD 1,452,477 6/04/07 1,200,000 1,205,220 (5,220)
SELL CAD 13,116,592 5/23/07 11,339,477 11,832,358 (492,881)
SELL DKK 37,501,133 6/13/07 6,767,936 6,880,702 (112,766)
SELL EUR 73,790,309 6/20/07 98,530,724 100,926,903 (2,396,179)
BUY GBP 1,192,667 6/20/07 2,390,957 2,383,779 (7,178)
-----------
$(3,025,193)
===========
At April 30, 2007, forward foreign currency purchases and sales under master netting agreements excluded above
amounted to a net receivable of $2,084,741 with Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT 4/30/07
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------
U.S. Treasury Note 10 yr (Long) 90 $9,749,531 Jun-07 $26,404
At April 30, 2007, the trust had sufficient cash and/or other liquid securities to cover any commitments under
these derivative contracts.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
4/30/07 (unaudited)
This statement represents your trust's balance sheet, which details the assets and liabilities
comprising the total value of the trust.
ASSETS
------------------------------------------------------------------------------------------------------
Investments, at value (identified cost, $804,258,694) $798,678,689
Cash 34,752
Receivable for forward foreign currency exchange contracts 137,354
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 2,084,741
Receivable for daily variation margin on open futures contracts 43,594
Interest receivable 11,193,641
Other assets 107,953
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Total assets $812,280,724
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LIABILITIES
------------------------------------------------------------------------------------------------------
Distributions payable $151,653
Payable for forward foreign currency exchange contracts 3,025,193
Payable to affiliates
Management fee 54,683
Transfer agent and dividend disbursing costs 101,057
Administrative services fee 1,640
Payable for independent trustees' compensation 240,367
Accrued expenses and other liabilities 152,229
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Total liabilities $3,726,822
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Net assets $808,553,902
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NET ASSETS CONSIST OF
------------------------------------------------------------------------------------------------------
Paid-in capital $908,030,120
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies (6,252,957)
Accumulated net realized gain (loss) on investments and
foreign currency transactions (90,840,558)
Accumulated distributions in excess of net investment income (2,382,703)
------------------------------------------------------------------------------------------------------
Net assets $808,553,902
------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding (124,917,066 issued,
less 8,404,650 treasury shares) 116,512,416
------------------------------------------------------------------------------------------------------
Net asset value per share (net assets of $808,553,902/
116,512,416 shares of beneficial interest outstanding) $6.94
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF OPERATIONS
Six months ended 4/30/07 (unaudited)
This statement describes how much your trust earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by trust operations.
NET INVESTMENT INCOME
-------------------------------------------------------------------------------------------------------
Interest income $19,139,625
-------------------------------------------------------------------------------------------------------
Expenses
Management fee $2,489,843
Transfer agent and dividend disbursing costs 91,723
Administrative services fee 74,375
Independent trustees' compensation 68,305
Custodian fee 109,113
Shareholder communications 61,632
Auditing fees 31,637
Legal fees 7,690
Miscellaneous 82,270
-------------------------------------------------------------------------------------------------------
Total expenses $3,016,588
-------------------------------------------------------------------------------------------------------
Fees paid indirectly (27,104)
Reduction of expenses by investment adviser (2,028)
-------------------------------------------------------------------------------------------------------
Net expenses $2,987,456
-------------------------------------------------------------------------------------------------------
Net investment income $16,152,169
-------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
-------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $2,810,636
Futures contracts 2,908
Foreign currency transactions (9,668,438)
-------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $(6,854,894)
-------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $3,116,344
Futures contracts (16,292)
Translation of assets and liabilities in foreign currencies 2,422,418
-------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $5,522,470
-------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $(1,332,424)
-------------------------------------------------------------------------------------------------------
Change in net assets from operations $14,819,745
-------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
SIX MONTHS ENDED YEAR ENDED
4/30/07 10/31/06
(UNAUDITED)
CHANGE IN NET ASSETS
FROM OPERATIONS
------------------------------------------------------------------------------------------------------
Net investment income $16,152,169 $32,656,675
Net realized gain (loss) on investments and foreign
currency transactions (6,854,894) (15,095,435)
Net unrealized gain (loss) on investments and foreign
currency translation 5,522,470 12,620,374
------------------------------------------------------------------------------------------------------
Change in net assets from operations $14,819,745 $30,181,614
------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------
From net investment income $(18,210,777) $(38,057,404)
From paid-in capital -- (3,010,966)
------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(18,210,777) $(41,068,370)
------------------------------------------------------------------------------------------------------
Change in net assets from trust share transactions $-- $(22,202,058)
------------------------------------------------------------------------------------------------------
Total change in net assets $(3,391,032) $(33,088,814)
------------------------------------------------------------------------------------------------------
NET ASSETS
------------------------------------------------------------------------------------------------------
At beginning of period 811,944,934 845,033,748
At end of period (including accumulated distributions in
excess of net investment income of $2,382,703 and
$324,095, respectively) $808,553,902 $811,944,934
------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the trust's financial performance for the semiannual period
and the past 5 fiscal years. Certain information reflects financial results for a single trust share. The total returns in
the table represent the rate by which an investor would have earned (or lost) on an investment in the trust share class
(assuming reinvestment of all distributions) held for the entire period.
SIX MONTHS YEARS ENDED 10/31
ENDED --------------------------------------------------------------------
4/30/07 2006 2005 2004 2003 2002
(UNAUDITED)
Net asset value, beginning of period $6.97 $7.04 $7.32 $7.40 $7.57 $7.54
------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.14 $0.28 $0.29 $0.31 $0.31 $0.38
Net realized and unrealized
gain (loss) on investments and
foreign currency (0.01) (0.02) (0.23) (0.04) (0.08) 0.09
------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.13 $0.26 $0.06 $0.27 $0.23 $0.47
------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.32) $(0.36) $(0.37) $(0.40) $(0.44)
From paid-in capital -- (0.03) -- -- -- --
------------------------------------------------------------------------------------------------------------------------------
Total distributions declared
to shareholders $(0.16) $(0.35) $(0.36) $(0.37) $(0.40) $(0.44)
------------------------------------------------------------------------------------------------------------------------------
Net increase from repurchase of
capital shares $-- $0.02 $0.02 $0.02 $-- $0.00(w)
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $6.94 $6.97 $7.04 $7.32 $7.40 $7.57
------------------------------------------------------------------------------------------------------------------------------
Per share market value,
end of period $6.18 $6.12 $6.29 $6.59 $6.89 $6.91
------------------------------------------------------------------------------------------------------------------------------
Total return at market value (%) 3.55(n) 2.88 0.85 1.02 5.49 5.33
------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET
ASSETS) AND SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.75(a) 0.78 0.84 0.84 0.86 0.90
Expenses after expense reductions (f) 0.75(a) 0.78 0.84 0.84 N/A N/A
Net investment income 4.03(a) 3.98 4.01 4.24 4.14 5.09
Portfolio turnover 22 45 58 45 90 115
Net assets at end of period
(000 omitted) $808,554 $811,945 $845,034 $905,112 $936,653 $958,663
------------------------------------------------------------------------------------------------------------------------------
(a) Annualized
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(n) Not annualized
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(unaudited)
(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 closed-end diversified management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with U.S.
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, including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Debt instruments (other than short-term instruments),
including restricted debt instruments, are generally valued at an evaluated or
composite bid as reported by an independent pricing service. Short-term
instruments with a maturity at issuance of 60 days or less may be valued at
amortized cost, which approximates market value. Futures contracts are
generally valued at last posted settlement price as reported by an independent
pricing service on the market on which they are primarily traded. Futures
contracts for which there were no trades that day for a particular position are
generally valued at the closing bid quotation as reported by an independent
pricing service on the market on which such futures contracts are primarily
traded. Forward foreign currency contracts are generally valued at the mean of
bid and asked prices for the time period interpolated from rates reported by an
independent pricing service for proximate time periods. Securities and other
assets generally valued on the basis of information from an independent pricing
service may also be valued at a broker-dealer bid quotation. Values obtained
from pricing services can utilize both dealer- supplied valuations and
electronic data processing techniques, which take into account 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. The values of foreign securities and other assets and liabilities
expressed in foreign currencies are converted to U.S. dollars using the mean of
bid and asked prices for rates reported by an independent pricing service.
The Board of Trustees has delegated primary responsibility for determining or
causing to be determined the value of the trust's investments (including any
fair valuation) to the adviser pursuant to valuation policies and procedures
approved by the Board. If the adviser determines that reliable market
quotations are not readily available, investments are valued at fair value as
determined in good faith by the adviser in accordance with such procedures
under the oversight of the Board of Trustees. Under the trust's valuation
policies and procedures, market quotations are not considered to be readily
available for many types of debt instruments and certain types of derivatives.
These investments are generally valued at fair value based on information from
independent pricing services. In addition, investments may be valued at fair
value if the adviser determines that an investment's value has been materially
affected by events occurring after the close of the exchange or market on which
the investment is principally traded (such as foreign exchange or market) and
prior to the determination of the trust's net asset value, or after the halting
of trading of a specific security where trading does not resume prior to the
close of the exchange or market on which the security is principally traded.
Events that occur on a frequent basis after foreign markets close (such as
developments in foreign markets and significant movements in the U.S. markets)
and prior to the determination of the trust's net asset value may be deemed to
have a material affect on the value of securities traded in foreign markets.
Accordingly, the trust's foreign equity securities may often be valued at fair
value. The adviser may rely on independent pricing services or other
information (such as the correlation with price movements of similar securities
in the same or other markets; the type, cost and investment characteristics of
the security; the business and financial condition of the issuer; and trading
and other market data) to assist in determining whether to fair value and at
what value to fair value an investment. The value of an investment for purposes
of calculating the trust's net asset value can differ depending on the source
and method used to determine value. When fair valuation is used, the value of
investments used to determine the trust's net asset value may differ from
quoted or published prices for the same investments.
In September 2006, FASB Statement No. 157, Fair Value Measurements (the
"Statement") was issued, and is effective for fiscal years beginning after
November 15, 2007 and for all interim periods within those fiscal years. This
Statement provides a single definition of fair value, a hierarchy for measuring
fair value and expanded disclosures about fair value measurements. Management
is evaluating the application of the Statement to the trust, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in the trust's financial statements.
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159 (FAS 159) "The Fair Value Option for Financial Assets and Financial
Liabilities - including an amendment of FASB Statement No. 115." FAS 159
permits entities to elect to measure certain financial assets and liabilities
at fair value. Unrealized gains and losses on items for which the fair value
option has been elected will be reported in earnings at each subsequent
reporting date. FAS 159 is effective for fiscal years beginning after November
15, 2007. Management is evaluating the application of the Statement to the
trust and its impact on the trust's financial statements, if any, has not been
determined.
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 and other funds managed by
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 - 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.
DERIVATIVE RISK - The trust may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the trust uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative's original cost.
Derivative instruments include futures contracts and forward foreign currency
exchange contracts.
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. Upon entering into such contracts, the
trust bears the risk of interest or exchange rates or securities prices moving
unexpectedly, in which case, the trust may not achieve the anticipated benefits
of the futures contracts and may realize a loss.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The trust may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of the contract. 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.
INDEMNIFICATIONS - Under the trust's organizational documents, its officers
and trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the trust. Additionally, in
the normal course of business, the trust enters into agreements with service
providers that may contain indemnification clauses. The trust's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the trust that have not yet occurred.
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 U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations.
The trust may receive proceeds from litigation settlements. Any proceeds
received from litigation involving portfolio holdings are reflected in the
Statement of Operations in realized gain/loss if the security has been disposed
of by the trust or in unrealized gain/loss if the security is still held by the
trust. Any other proceeds from litigation not related to portfolio holdings are
reflected as other income in the Statement of Operations.
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, for the six months ended April 30, 2007, is shown as a
reduction of total expenses on the Statement of Operations.
TAX MATTERS AND DISTRIBUTIONS - The trust intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the trust in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to expiration of capital loss
carryforwards, amortization and accretion of debt securities, straddle loss
deferrals, and foreign currency transactions.
The tax character of distributions made during the current period will be
determined at fiscal year end. The tax character of distributions declared to
shareholders is as follows:
10/31/06
Ordinary income (including any
short-term capital gains) $38,057,404
Tax return of capital (b) 3,010,966
----------------------------------------------------------
Total distributions $41,068,370
(b) Distributions in excess of tax basis earnings and profits are reported in
the financial statements as a tax return of capital.
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 4/30/07
Cost of investments $820,699,773
----------------------------------------------------------
Gross appreciation 7,412,872
Gross depreciation (29,433,956)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $(22,021,084)
AS OF 10/31/06
Capital loss carryforwards $(68,305,405)
Other temporary differences (3,330,185)
Net unrealized appreciation (depreciation) (24,449,596)
The aggregate cost above includes prior fiscal year end tax adjustments.
As of October 31, 2006, the trust had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/07 $(11,376,973)
10/31/08 (11,439,294)
10/31/10 (1,074,810)
10/31/12 (20,820,223)
10/31/13 (4,450,744)
10/31/14 (19,143,361)
----------------------------------------------------------
$(68,305,405)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years as
of the effective date. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. This Interpretation prescribes a minimum threshold for financial
statement recognition of the benefit of a tax position taken or expected to be
taken in a tax return, and requires certain expanded disclosures. Management
has evaluated the application of the Interpretation to the trust, and has
determined that there is no impact resulting from the adoption of this
Interpretation on the trust's financial statements.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The trust has an investment advisory agreement with MFS to
provide overall investment management and related administrative services and
facilities to the trust. 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
gross income. Gross income is calculated based on tax elections that generally
include the accretion of discount and exclude the amortization of premium,
which may differ from investment income reported in the Statement of
Operations. MFS has agreed to reduce its management fee to the lesser of the
contractual management fee as set forth above or 0.85% of the average daily net
assets. The management fee, from net assets and gross income, incurred for the
six months ended April 30, 2007 was equivalent to an annual effective rate of
0.62% of the trust's average daily net assets.
TRANSFER AGENT - Prior to December 18, 2006, MFS Service Center, Inc. (MFSC), a
wholly-owned subsidiary of MFS, received a fee from the trust for its services
as registrar and dividend-disbursing agent. Pursuant to a written agreement,
the trust paid MFSC an account maintenance fee of no more than $9.00 and a
dividend services fee of $0.75 per reinvestment. Effective December 18, 2006,
the trust has engaged Computershare Trust Company, N.A. ("Computershare") as
the sole transfer agent for the trust. MFSC will continue to monitor and
supervise the activities of Computershare for an agreed upon fee approved by
the Board of Trustees. For the six months ended April 30, 2007, these fees paid
to MFSC amounted to $41,598. MFSC also receives payment from the trust for
out-of-pocket expenses paid by MFSC on behalf of the trust. For the six months
ended April 30, 2007, these costs amounted to $44,764.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the trust.
Under an administrative services agreement, the trust partially reimburses MFS
the costs incurred to provide these services. The trust is charged a fixed
amount plus a fee based on calendar year average net assets. The trust's annual
fixed amount is $17,500.
The administrative services fee incurred for the six months ended April 30,
2007 was equivalent to an annual effective rate of 0.0185% of the trust's
average daily net assets.
TRUSTEES' AND OFFICERS' COMPENSATION - The trust pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to Board and Committee chairpersons. The trust does not pay
compensation directly to trustees or to officers of the trust who are also
officers of the investment adviser, 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 MFSC. The trust has an unfunded, defined
benefit plan for certain retired independent trustees which resulted in a
pension expense of $4,609. The trust also has an unfunded retirement benefit
deferral plan for certain independent trustees which resulted in an expense of
$1,780. Both amounts are included in independent trustees' compensation for the
six months ended April 30, 2007. The liability for deferred retirement benefits
payable to certain independent trustees under both plans amounted to $202,581
at April 30, 2007, and is included in payable for independent trustees'
compensation.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent trustees previously were allowed to elect to defer receipt of all
or a portion of their annual compensation. Trustees are no longer allowed to
defer compensation under the Plan. Amounts previously deferred are treated as
though equivalent dollar amounts had been invested in shares of the trust or
other MFS funds 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 payable for independent trustees'
compensation is $16,798 of deferred trustees' compensation.
OTHER - This trust and certain other MFS funds (the funds) have entered into a
services agreement (the Agreement) which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the six months ended April 30, 2007, the fee paid to Tarantino
LLC was $3,131. MFS has agreed to reimburse the trust for a portion of the
payments made by the funds to Tarantino LLC in the amount of $2,028, which is
shown as a reduction of total expenses in the Statement of Operations.
Additionally, MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO.
(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 $76,625,219 $52,145,608
--------------------------------------------------------------------------------
Investments (non-U.S. government securities) $112,094,457 $114,069,941
(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 the repurchase by the trust of up to 10% annually of its own shares
of beneficial interest. During the six months ended April 30, 2007, the trust
did not repurchase any shares. The trust repurchased and retired 3,597,500
shares of beneficial interest during the year ended October 31, 2006 at an
average price per share of $6.17 and a weighted average discount of 11.11% per
share. Transactions in trust shares were as follows:
PERIOD ENDED YEAR ENDED
4/30/07 10/31/06
SHARES AMOUNT SHARES AMOUNT
Treasury shares reacquired -- $-- (3,597,500) $(22,202,058)
(6) LINE OF CREDIT
The trust and other funds managed by MFS participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the trust and other funds managed by MFS have
established uncommitted borrowing arrangements with certain banks. Borrowings
may be made for temporary financing needs. Interest is charged to each fund,
based on its borrowings, generally at a rate equal to the Federal Reserve funds
rate plus 0.30% for the committed line of credit and 0.35% for the uncommitted
line of credit. In addition, a commitment fee, based on the average daily,
unused portion of the committed line of credit, is allocated among the
participating funds at the end of each calendar quarter. For the six months
ended April 30, 2007, the trust's commitment fee and interest expense were
$2,361 and $1,411, respectively, and are included in miscellaneous expense on
the Statement of Operations.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of MFS Intermediate Income Trust:
We have reviewed the accompanying statement of assets and liabilities of MFS
Intermediate Income Trust (the "Trust"), including the portfolio of
investments, as of April 30, 2007, and the related statement of operations,
changes in net assets, and financial highlights for the six-month period ended
April 30, 2007. These interim financial statements and financial highlights are
the responsibility of the Trust's management.
We conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying interim financial statements and financial
highlights referred to above for them to be in conformity with accounting
principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the statement of changes in
net assets for the year ended October 31, 2006, and financial highlights for
each of the five years in the period ended October 31, 2006, and in our report
dated December 21, 2006, we expressed an unqualified opinion on such statement
of changes in net assets and financial highlights.
DELOITTE & TOUCHE LLP
June 18, 2007
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
A discussion regarding the Board's most recent review and renewal of the
trust's investment advisory agreement is available by clicking on the trust's
name under "Select a fund" on the MFS Web site (mfs.com).
PROXY VOTING POLICIES AND INFORMATION
A general description of the MFS funds' proxy voting policies and procedures is
available without charge, upon request, by calling 1-800-225-2606, by visiting
the Proxy Voting section of mfs.com or by visiting the SEC's Web site at
http://www.sec.gov.
Information regarding how the trust voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available without charge by visiting the Proxy Voting section of mfs.com or by
visiting the SEC's Web site at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
The trust will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. The trust's Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. The trust's Form N-Q is available on
the EDGAR database on the Commission's Internet Web site at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
CONTACT INFORMATION AND NUMBER OF SHAREHOLDERS
INVESTOR INFORMATION
Transfer Agent, Registrar and Dividend Disbursing Agent
Call 1-800-637-2304 any business day from 9 a.m. to 5 p.m. Eastern time
Write to: Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
Effective December 18, 2006, Computershare Trust Company, N.A. became the
Transfer Agent and Registrar and Computershare Shareholder Services, Inc.
became the Dividend Disbursing Agent, succeeding MFS Service Center, Inc.
NUMBER OF SHAREHOLDERS
As of April 30, 2007, our records indicate that there are 6,318 registered
shareholders and approximately 44,564 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:
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, RI 02940-3078
1-800-637-2304
M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street, Boston, MA 02116
ITEM 2. CODE OF ETHICS.
The Registrant has not amended any provision in its Code of Ethics (the "Code")
that relates to any element of the Code's definition enumerated in paragraph
(b) of Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semi-annual reports.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable for semi- annual reports.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
=====================================================================================================================
MFS INTERMEDIATE INCOME TRUST
---------------------------------------------------------------------------------------------------------------------
(D) MAXIMUM NUMBER
(C) TOTAL NUMBER OF (OR APPROXIMATE
SHARES PURCHASED AS DOLLAR VALUE) OF
(B) AVERAGE PART OF PUBLICLY SHARES THAT MAY YET
(A) TOTAL NUMBER OF PRICE PAID ANNOUNCED PLANS BE PURCHASED UNDER
PERIOD SHARES PURCHASED PER SHARE OR PROGRAMS THE PLANS OR PROGRAMS
=====================================================================================================================
11/1/06 - 11/30/06 0 N/A N/A 9,706,882
---------------------------------------------------------------------------------------------------------------------
12/1/06 - 12/31/06 0 N/A N/A 9,706,882
---------------------------------------------------------------------------------------------------------------------
1/1/07 - 1/31/07 0 N/A N/A 9,706,882
---------------------------------------------------------------------------------------------------------------------
2/1/07 - 2/28/07 0 N/A N/A 9,706,882
---------------------------------------------------------------------------------------------------------------------
3/1/07 - 3/31/07 0 N/A N/A 11,651,242
---------------------------------------------------------------------------------------------------------------------
4/1/07 - 4/30/07 0 N/A N/A 11,651,242
---------------------------------------------------------------------------------------------------------------------
TOTAL 0 N/A N/A
---------------------------------------------------------------------------------------------------------------------
Note: The Board of Trustees approves procedures to repurchase Fund shares
annually. The notification to shareholders of the program is included in the
semi-annual and annual reports sent to shareholders. These annual programs
begin on March 1st of each year. The programs conform to the conditions of Rule
10b-18 of the Securities Exchange Act of 1934 and limit the aggregate number of
Fund shares that may be repurchased in each annual period (March 1 through the
following February 28) to 10% of the Registrant's outstanding shares as of the
first day of the plan year (March 1). The aggregate number of Fund shares
available for repurchase for the March 1, 2007 plan year is 11,651,242.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) of Schedule 14A), or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940 (the "Act")) as conducted within 90 days of
the filing date of this report on 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 required 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 changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter of the period covered by the report that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) 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.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) 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)), Rule 13a-14(b) or Rule 15d-14(b) under the Exchange Act (17
CFR 240.13a-14(b) or 240.15d-14(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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees or shareholders individually, but are binding only upon the
assets and property of the respective constituent series of the Registrant.
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: June 13, 2007
-------------
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: June 13, 2007
-------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: June 13, 2007
-------------
* Print name and title of each signing officer under his or her signature.