[logo] M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
MFS(R) INTERMEDIATE
INCOME TRUST
SEMIANNUAL REPORT o APRIL 30,2001
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 9
Financial Statements ...................................................... 13
Notes to Financial Statements ............................................. 17
Trustees and Officers ..................................................... 24
MFS(R) PRIVACY POLICY
At MFS(R), we are committed to protecting your privacy.
On behalf of the MFS Family of Funds(R), the MFS(R) Institutional Trusts, the
Vertex(SM) Funds, Massachusetts Financial Services Company, and certain
affiliates(1) (collectively, "MFS," "we," "us" or "our"), this privacy policy
outlines certain of our policies designed to maintain the privacy of your
nonpublic personal information.
Nonpublic personal information includes much of the information you provide to
us and the related information about you and your transactions involving your
MFS investment product or service. Examples of nonpublic personal information
include the information you provide on new account applications for MFS
investment products or services, your share balance or transactional history,
and the fact that you are a customer of MFS.
We may collect nonpublic personal information about you from the following
sources:
o information we receive from you on applications or other forms
o information about your transactions with us, our affiliates, or others, and
o information we receive from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may disclose all of
the information we collect, as described above, to companies that perform
marketing services on our behalf or to other financial institutions with whom we
have joint marketing arrangements.
We restrict access to nonpublic personal information about you to personnel who
are necessary or appropriate to provide products or services to you. We maintain
physical, electronic, and procedural safeguards that comply with federal
regulations to guard your nonpublic personal information.
Our privacy policy applies only to individual MFS investors who have a direct
relationship with us. If you own MFS products or receive MFS investment services
in the name of a third-party broker-dealer, bank, investment adviser or other
financial service provider, that third-party's privacy policies may apply to you
and our privacy policy may not.
If you have any questions with respect to MFS' privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
(1)MFS Institutional Advisors, Inc., Vertex Investment Management, Inc., MFS
Original Research Advisors, LLC, MFS Original Research Partners, LLC, and
MFS(R) Heritage Trust Company(SM).
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
When we talk to you about the information you want from MFS(R), you tell us
you're looking for answers to three basic questions:
1. How is my money being managed, over both the short and the long term?
2. What's going on in the market, and how will that affect me?
3. How can I get more out of my relationship with my investment
professional?
Traditionally, we've attempted to answer these and other questions through a
range of printed materials sent through the mail, including statements and
annual and semiannual reports. As the Internet has reached an ever-larger
percentage of households, however, we and most other investment management firms
have come to believe that the Web can be an additional -- and potentially more
effective -- way to communicate with investors.
The Internet holds the promise of near-instantaneous delivery, communication
when you want it rather than when we mail it, easy access to the specific
information you want, and an experience customized to each investor. With the
relaunch of our Web site, WWW.MFS.COM, earlier this year, we believe we've moved
a giant step closer to delivering the Internet's promise and created a site that
we're committed to improving every day. Our site now makes it easy for you to
find answers to your three basic questions.
HOW IS MY MONEY BEING MANAGED?
One of the most exciting features of our site is MFS(R) Interactive(SM): One
click to an expert(SM) -- a series of video interviews with MFS portfolio
managers and executives. Located in the "Investor Education" section of the
site, MFS Interactive uses video streamed over the Web to allow you to see and
hear from the people who are managing your money, to give you greater insight
into our investment approach and our response to market conditions. MFS
Interactive includes "Meet the Manager" interviews that cover the background and
investment style of a particular portfolio manager, as well as other Webcasts
that cover a specific fund or investment topic.
WHAT'S GOING ON IN THE MARKET, AND HOW WILL THAT AFFECT ME?
In our view, the tougher the market, the more you need to hear from the people
who are managing your money -- and the past year or so has certainly been one of
the toughest markets in recent memory. We think the immediacy of the Web
provides an ideal way to communicate with you frequently and to offer our views
on the current volatility and uncertainty in the market. On your "My MFS"
homepage, in many MFS Interactive interviews, and in the "News & Commentary"
section of the site, you'll find our views on the current situation and our
market outlook. Our goal is to help you understand what's going on and help you
make decisions based on facts and market history, rather than on the emotion of
the moment.
HOW CAN I GET MORE OUT OF MY RELATIONSHIP WITH MY INVESTMENT PROFESSIONAL?
Perhaps your best resource in a tough market is your own investment
professional. This is the person who may have the best understanding of your
financial goals and your unique financial situation. In our view, the Web is
incredible at delivering information, but it cannot take the place of an
investment professional working with you to incorporate that information into a
long-range financial plan -- a plan that may help you weather market volatility
and help you work toward reaching your own financial goals.
To a large degree, the MFS Web site is about preparing you to have a deeper
dialogue with your investment professional. We believe that if we can help you
"do your homework," you'll be able to spend less time with your investment
professional simply getting information and more time creating a financial plan
and making investment decisions.
On a final note, we want to assure you that our commitment to the Internet does
not signal a lessening of our commitment to other forms of communication. If
you're not yet connected to the Web, rest assured that we will continue to
strive to deliver outstanding communications in print and on the phone, as well
as electronically. We hope, however, that as we continue to improve our site, we
will give you more and more incentive to take advantage of the opportunities
that the Web offers investors.
For some time, I've ended my letters to you by saying that we appreciate your
confidence in MFS and welcome any questions or comments you may have. With the
relaunched WWW.MFS.COM, there is now an easy way for you to e-mail us those
questions or comments and receive a reply. Simply click on "Contact Us" at the
top of our homepage. We look forward to hearing from you.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
May 15, 2001
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
MANAGEMENT REVIEW AND OUTLOOK
Dear Shareholders,
For the six months ended April 30, 2001, the trust provided a total return of
9.64% 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 6.49%. These returns compare to
returns of 6.30% and 1.26%, 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 includes bonds issued by the U.S. government or
by government agencies with a maturity range greater than or equal to one year,
and less than 10 years. The Morgan Index is an unmanaged aggregate index of
actively traded government bonds issued from 12 countries (excluding the United
States) with remaining maturities of at least one year.
A very proactive program of cuts in interest rates by the Federal Reserve Board
(the Fed) highlighted the period. With inflation remaining benign during the
period, the Fed turned its focus toward easing monetary policy in order to
support growth. Overall, the Fed cut the fed funds rate by two percentage points
during the period, including two surprise cuts of 0.50 percentage points
implemented between regularly scheduled meetings. By acting this dramatically,
we think the Fed demonstrated its forcefulness and indicated its intent to do
whatever it takes to sustain growth. A sharp decline in corporate spending --
particularly for technology products and services -- seemed to be the main
culprit that slowed economic growth. While consumer spending and construction
remained strong, consumer confidence waned in the face of rising unemployment.
During the period, sharp declines in short-term interest rates caused the yield
curve -- a representation of the difference between short- and long-term rates
-- to steepen. Within this backdrop, we've positioned the portfolio to take
advantage of such a scenario. That approach called for a "bulleted" structure,
where we targeted certain parts of the yield curve, including more exposure to
bonds with maturities in the one- to three-year range. As far as sector
allocation was concerned, we underweighted mortgage-backed securities (MBSs)
substantially. Within a falling-rate environment, MBSs are unattractive due to
increased refinancing activity. When interest rates fall, mortgage holders tend
to pay off their loans early in order to take advantage of lower borrowing
costs, and the holder of the MBS is then left to re-invest the principal at
lower prevailing rates.
Looking at the portfolio's international component, it's important to note that
we only venture overseas if we feel alternatives there offer the opportunity to
outperform domestic bonds. That said, we devoted only a small portion of the
portfolio to both developed and developing country bonds because we held a very
favorable view of the opportunities available in the United States. Within the
developed world, we favored bonds offered by the dollar-bloc countries,
including the United States, Australia, New Zealand, and Canada. These markets
performed best among government issuers in 2000. We also kept a very small
position in Europe. Overall, Europe has been less appealing to us because growth
there has been stronger than in the United States for the first time since 1991,
with the ensuing inflation making it difficult for the European Central Bank to
justify interest rate cuts. Greece performed well due to the positive effects of
its inclusion into the European Monetary Union (EMU). We avoided Japan because
yields there were very low and would not have provided us with adequate income,
in our opinion. Our small emerging market position was largely focused on very
short-term Mexican paper, a higher-quality investment that was meant to add
diversity to the portfolio.
Going forward, we believe a main issue will be whether or not businesses will be
able to work through an economic downturn and resume capital expenditures in the
technology area without unemployment going that much higher. Any surge in the
jobless rate would dampen consumer spending both for those who have lost their
jobs as well as for those who have feared losing them. Fortunately, the fiscal
and monetary policies that have characterized the first few months of 2001 seem
to be geared toward increasing economic growth. The tax cut that has worked its
way through Congress could provide a substantial stimulus to growth. In
addition, we believe the Fed has made it clear through both its words and its
actions that it stands ready to lend support to the economy. If growth
strengthens in the United States, we might add investments in European bonds if
trends there indicate that growth is slowing from the peak levels we saw during
the period.
Respectfully,
/s/ Stephen C. Bryant /s/ Steven E. Nothern
Stephen C. Bryant Steven E. Nothern
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of MFS 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 due to market and other conditions.
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 MANAGERS' PROFILES
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STEPHEN C. BRYANT IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
(MFS(R)) AND PORTFOLIO MANAGER OF OUR GLOBAL FIXED-INCOME INSTITUTIONAL PRODUCTS
AND THE GLOBAL GOVERNMENTS PORTFOLIOS OF OUR MUTUAL FUNDS AND VARIABLE ANNUITY
PRODUCTS. HE ALSO MANAGES MFS(R) GOVERNMENT MARKETS INCOME TRUST AND MFS(R)
INTERMEDIATE INCOME TRUST, TWO CLOSED-END FUNDS. HE JOINED MFS IN 1987 AS
ASSISTANT VICE PRESIDENT. HE WAS NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER
IN 1992, AND SENIOR VICE PRESIDENT IN 1993. STEVE IS A GRADUATE OF WESLEYAN
UNIVERSITY.
STEVEN E. NOTHERN, CFA, IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
(MFS(R)). HE IS PORTFOLIO MANAGER OF THE GOVERNMENT SECURITIES PORTFOLIOS OF OUR
MUTUAL FUNDS, VARIABLE ANNUITIES, AND OFFSHORE FUNDS, AND ALSO MANAGES TWO
CLOSED-END FUNDS, MFS(R) INTERMEDIATE INCOME TRUST AND MFS(R) GOVERNMENT MARKETS
INCOME TRUST. STEVE JOINED MFS IN 1986 IN THE FIXED INCOME DEPARTMENT AND WAS
NAMED VICE PRESIDENT IN 1989, PORTFOLIO MANAGER IN 1991, AND SENIOR VICE
PRESIDENT IN 1993. HE IS A GRADUATE OF MIDDLEBURY COLLEGE AND HOLDS A MASTER OF
BUSINESS ADMINISTRATION DEGREE FROM BOSTON UNIVERSITY. HE HOLDS THE CHARTERED
FINANCIAL ANALYST (CFA) DESIGNATION AND IS A MEMBER OF THE BOSTON SECURITY
ANALYSTS SOCIETY, INC.
ALL PORTFOLIO MANAGERS AT MFS ARE SUPPORTED BY AN INVESTMENT STAFF OF OVER 160
PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A GLOBAL, SECURITY-ORIENTED,
BOTTOM-UP PROCESS OF SELECTING SECURITIES.
In accordance with Section 23(c) of the Investment Company Act of 1940, the
trust hereby gives notice that it may from time to time repurchase shares of the
Trust in the open market at the option of the Board of Trustees and on such
terms as the Trustees shall determine.
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, 2001)
NET ASSET VALUE PER SHARE
October 31, 2000 $7.06
April 30, 2001 $7.25
NEW YORK STOCK EXCHANGE PRICE
October 31, 2000 $6.36
March 2, 2001 (high)* $6.94
November 13, 2000 (low)* $6.31
April 30, 2001 $6.74
*For the six months ended April 30, 2001
RISK CONSIDERATIONS
Investments in foreign and emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes, as well as by
market, economic, and political conditions of the countries where investments
are made. There may be greater returns but also greater risk than with U.S.
investments.
The trust may invest in derivative securities which may include futures and
options. These types of hedging instruments can increase price fluctuation.
The trust is nondiversified and has more risk than a portfolio that is
diversified. The trust invests in a limited number of securities and may have
more risk because a change in one security's value may have a more significant
effect on the trust's net asset value. An investment in the trust is not a
complete investment program.
Government guarantees apply to the underlying securities only and not to the
prices and yields of the managed portfolio.
The trust may invest in mortgage-backed securities, which are subject to unique
interest and maturity risks. When interest rates fall, mortgages may be paid
early through refinancing, which may shorten the expected maturity of these
securities. Alternaively, when interest rates rise, mortgages are not likely to
be paid early, which may lengthen the expected maturity of these securities.
Therefore, during times of fluctuating interest rates, these factors may cause
the value of mortgage-backed securities to increase or decrease more than those
of other fixed-income securities.
These risks may increase share price volatility. See the prospectus for details.
NUMBER OF SHAREHOLDERS
As of April 30, 2001, our records indicate that there are 10,528 registered
shareholders and approximately 57,300 shareholders owning trust shares in
"street" name, such as through brokers, banks, and other financial
intermediaries.
If you are a "street" name shareholder and wish to directly receive our reports,
which contain important information about the trust, please write or call:
State Street Bank and Trust Company
P.O. Box 8200
Boston, MA 02266-8200
1-800-637-2304
DIVIDEND REINVESTMENT AND CASH PURCHASE PLAN
MFS offers a Dividend Reinvestment and Cash Purchase Plan that allows you to
reinvest either all of the distributions paid by the trust or only the long-
term capital gains. Purchases are made at the market price unless that price
exceeds the net asset value (the shares are trading at a premium). If the shares
are trading at a premium, purchases will be made at a discounted price of either
the net asset value or 95% of the market price, whichever is greater. Twice each
year you can also buy shares. Investments from $100 to $2,500 can be made in
January and July on the 15th of the month or shortly thereafter.
If your shares are in the name of a brokerage firm, bank, or other nominee, you
can ask the firm or nominee to participate in the plan on your behalf. If the
nominee does not offer the plan, you may wish to request that your shares be
re-registered in your own name so that you can participate.
There is no service charge to reinvest distributions, nor are there brokerage
charges for shares issued directly by the trust. However, when shares are bought
on the New York Stock Exchange or otherwise on the open market, each participant
pays a pro rata share of the commissions. 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, 2001
Bonds - 97.3%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
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U.S. Bonds - 85.9%
Corporate Asset-Backed - 0.3%
Commercial Mortgage Asset Trust, 0s, 2020
(interest only) $ 112 $ 3,657
DLJ Commercial Mortgage Corp., 0s, 2005
(interest only) 95,100 2,881,026
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$ 2,884,683
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Oil Services - 0.1%
Pemex Project Funding Master Trust, 8.5s, 2008 $ 1,400 $ 1,400,000
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Small Business Administration - 1.9%
SBA, 6.35s, 2021 $ 7,000 $ 7,000,000
SBA, 7.64s, 2010 9,903 10,357,294
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$ 17,357,294
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U.S. Government Agencies - 33.2%
AID, 6.625s, 2003 $ 15,000 $ 15,513,750
AID, 6.625s, 2004 14,600 15,163,998
FHLM, 6.625s, 2009 6,000 6,261,540
FHLM, 7.375s, 2003 15,000 15,768,750
FNMA, 4.75s, 2004 10,000 9,945,300
FNMA, 5.125s, 2004 5,000 5,022,650
FNMA, 5.75s, 2010 3,650 3,323,134
FNMA, 6.956s, 2007 5,502 5,633,006
FNMA, 7s, 2029 83,503 84,226,652
GNMA, 7s, 2023 51,973 52,669,593
GNMA, 7.5s, 2022 36,734 37,647,636
GNMA, 8s, 2026 36,603 37,864,390
GNMA, 8.5s, 2001 8,386 8,774,305
GNMA, 9.25s, 2001 1,785 1,807,287
GNMA TBA, 7s, 2025 200 201,962
HUD, 7.198s, 2009 6,000 6,465,000
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$306,288,953
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U.S. Treasury Obligations - 50.4%
U.S. Treasury Bonds, 10.75s, 2003 $ 24,000 $ 26,583,840
U.S. Treasury Bonds, 11.875s, 2003 43,000 50,451,040
U.S. Treasury Bonds, 12.375s, 2004 34,500 41,885,070
U.S. Treasury Bonds, 10.375s, 2009 18,350 21,575,563
U.S. Treasury Bonds, 13.875s, 2011 25,500 35,381,250
U.S. Treasury Bonds, 10.375s, 2012 84,600 107,944,524
U.S. Treasury Bonds, 12s, 2013 46,500 64,940,040
U.S. Treasury Bonds, 6.125s, 2029 606 624,653
U.S. Treasury Notes, 4.25s, 2010 20,373 21,818,277
U.S. Treasury Notes, 5.75s, 2010 50,480 51,765,725
U.S. Treasury Notes, 6.5s, 2010 23,370 25,173,930
U.S. Treasury Notes, 3.5s, 2011 16,159 16,411,607
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$464,555,519
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Total U.S. Bonds $792,486,449
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Foreign Bonds - 11.4%
Argentina - 0.4%
Republic of Argentina, 0s, 2001 $ 3,335 $ 3,243,288
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Australia - 1.0%
Commonwealth of Australia, 7.5s, 2009 AUD 16,519 $ 9,410,074
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Bulgaria - 0.3%
Republic of Bulgaria, 6.313s, 2024 $ 3,898 $ 2,865,030
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Canada - 4.1%
Government of Canada, 6s, 2005 CAD 12,692 $ 8,465,742
Government of Canada, 5.25s, 2008 20,942 20,184,905
Government of Canada, 5.5s, 2009 13,820 8,876,481
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$ 37,527,128
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Chile - 0.1%
HQI Transelec Chile S A, 7.875s, 2011
(Utilities - Electric) $ 800 $ 784,464
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Greece - 1.3%
Hellenic Republic, 6s, 2006 EUR 12,766 $ 11,732,176
Hellenic Republic, 8.7s, 2005 365 366,203
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$ 12,098,379
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Mexico - 1.0%
BBVA Bancomer Capital Trust I, 10.5s, 2011
(Conglomerates) $ 1,893 $ 1,945,057
United Mexican States, 8.125s, 2019 3,900 3,556,800
United Mexican States, 8.375s, 2011 1,975 1,955,250
United Mexican States, 10.375s, 2009 1,700 1,873,400
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$ 9,330,507
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Netherlands
Telefonica Europe BV, 6.125s, 2005
(Telecommunications) EUR 425 $ 383,383
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New Zealand - 0.4%
Government of New Zealand, 8s, 2006 NZD 9,120 $ 4,065,500
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Panama - 0.6%
Republic of Panama, 4.5s, 2014 $ 68 $ 58,140
Republic of Panama, 8.875s, 2027 987 878,430
Republic of Panama, 9.625s, 2011 1,983 2,012,745
Republic of Panama, 10.75s, 2020 2,778 2,840,505
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$ 5,789,820
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Qatar - 0.4%
State of Qatar, 9.75s, 2030 $ 3,139 $ 3,358,730
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Foreign Bonds - continued
Russia - 0.3%
Government of Russia, 10s, 2007## $ 638 $ 511,198
Government of Russia, 12.75s, 2028## 480 430,200
Russian Federation, 8.75s, 2005 2,293 1,920,387
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$ 2,861,785
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South Korea - 0.2%
Hanvit Bank, 12.75s, 2010 (Banks and
Credit Cos.)## $ 1,542 $ 1,572,840
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Spain - 0.9%
Kingdom of Spain, 7s, 2005 ESP 7,800 $ 8,191,226
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United Kingdom - 0.4%
Lloyds TSB Bank PLC, 7.375s, 2004
(Banks and Credit Cos.) GBP 2,580 $ 3,836,506
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Total Foreign Bonds $105,318,660
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Total Bonds (Identified Cost, $911,338,109) $897,805,109
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Rights
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SHARES
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United Mexican States (Identified Cost, $0)* 3,307,000 $ 39,684
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Put Options Purchased - 0.2%
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PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
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Euro Dollars/August/0.95 EUR 22,745 $ 124,029
Japanese Yen/May/120 JPY 5,747,078 1,344,816
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Total Put Options Purchased
(Premiums Paid, $991,065) $ 1,468,845
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Short-Term Obligations - 0.9%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED)
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Federal National Mortgage Assn., due 5/01/01,
at Amortized Cost $ 8,288 $ 8,288,000
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Total Investments (Identified Cost, $920,617,174) $907,601,638
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Call Options Written
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PRINCIPAL AMOUNT
OF CONTRACTS
DESCRIPTION/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
------------------------------------------------------------------------------
Euro Dollars/August/0.8691 (Premiums Received,
$411,567) EUR 20,808 $ (397,021)
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Other Assets, Less Liabilities - 1.6% 15,320,822
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Net Assets - 100.0% $922,525,439
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* 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 EU = Euro
CAD = Canadian Dollars GB = British Pounds
CHF = Swiss Francs JP = Japanese Yen
DKK = Danish Kroner NO = Norwegian Krone
ESP = Spanish Pesos NZ = New Zealand Dollars
See notes to financial statements.
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
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APRIL 30, 2001
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Assets:
Investments, at value (identified cost, $920,617,174) $ 907,601,638
Investments of cash collateral for securities loaned,
(at value and identified cost) 206,150,728
Cash 336
Interest receivable 18,976,561
Other assets 14,404
--------------
Total assets $1,132,743,667
--------------
Liabilities:
Payable to dividend disbursing agent $ 397,038
Collateral for securities loaned, at value 206,150,728
Net payable for forward foreign currency exchange
contracts to purchase 2,366,418
Net payable for forward foreign currency exchange
contracts to sell 128,412
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 106,649
Written options outstanding, at value (premiums
received, $411,567) 397,021
Payable to affiliates -
Management fee 17,785
Administrative fee 1,629
Transfer and dividend disbursing agent fee 18,168
Accrued expenses and other liabilities 634,380
--------------
Total liabilities $ 210,218,228
--------------
Net assets $ 922,525,439
==============
Net assets consist of:
Paid-in capital $ 994,273,282
Unrealized depreciation on investments and translation
of assets and liabilities in foreign currencies (15,607,426)
Accumulated net realized loss on investments and
foreign currency transactions (59,908,718)
Accumulated undistributed net investment income 3,768,301
--------------
Total $ 922,525,439
==============
Shares of beneficial interest outstanding
(202,648,016 issued, less 75,467,700 treasury shares) 127,180,316
===========
Net asset value
(net assets / shares of beneficial interest
outstanding) $7.25
=====
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
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SIX MONTHS ENDED APRIL 30, 2001
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Net investment income:
Income -
Interest $35,947,126
Dividends 36,846
-----------
Total investment income $35,983,972
-----------
Expenses -
Management fee $ 3,492,522
Trustees' compensation 88,776
Transfer and dividend disbursing agent fee 111,770
Administrative fee 56,019
Custodian fee 208,309
Auditing fees 24,501
Postage 33,413
Printing 34,423
Legal fees 2,965
Miscellaneous 308,889
-----------
Total expenses $ 4,361,587
Fees paid indirectly (62,038)
-----------
Net expenses $ 4,299,549
-----------
Net investment income $31,684,423
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 2,960,234
Written option transactions (413,424)
Foreign currency transactions (2,390,766)
-----------
Net realized gain on investments and foreign currency
transactions $ 156,044
-----------
Change in unrealized appreciation (depreciation) -
Investments $21,637,648
Written options 871,211
Translation of assets and liabilities in foreign
currencies 1,215,314
-----------
Net unrealized gain on investments and foreign
currency translation $23,724,173
-----------
Net realized and unrealized gain on investments and
foreign currency $23,880,217
-----------
Increase in net assets from operations $55,564,640
===========
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2001 YEAR ENDED
(UNAUDITED) OCTOBER 31, 2000
----------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets:
From operations -
Net investment income $ 31,684,423 $ 64,536,392
Net realized gain (loss) on investments and foreign
currency transactions 156,044 (27,345,281)
Net unrealized gain on investments and foreign currency
translation 23,724,173 2,628,300
------------- -------------
Increase in net assets from operations $ 55,564,640 $ 39,819,411
------------- -------------
Distributions declared to shareholders -
From net investment income $ (31,599,262) $ (42,804,474)
From paid-in capital -- (27,519,561)
------------- -------------
Total distributions declared to shareholders $ (31,599,262) $ (70,324,035)
------------- -------------
Trust share (principle) transactions -
Cost of shares reacquired $ (7,248,639) $ (40,697,949)
------------- -------------
Total increase (decrease) in net assets $ 16,716,739 $ (71,202,573)
Net assets:
At beginning of year 905,808,700 977,011,273
------------- -------------
At end of year (including undistributed net investment
income of $3,768,301 and $3,683,141, respectively) $ 922,525,439 $ 905,808,700
============= =============
See notes to financial statements.
FINANCIAL STATEMENTS -- continued
Financial Highlights
--------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ---------------------------------------------------------------
APRIL 30, 2001 2000 1999 1998 1997 1996
(UNAUDITED)
--------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 7.06 $ 7.25 $ 7.75 $ 7.76 $ 7.82 $ 7.83
---------- ---------- ---------- ---------- ---------- ----------
Income from investment operations# -
Net investment income(S) $ 0.25 $ 0.49 $ 0.49 $ 0.51 $ 0.54 $ 0.53
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 0.18 (0.20) (0.53) (0.01) (0.05) (0.03)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.43 $ 0.29 $ (0.04) $ 0.50 $ 0.49 $ 0.50
---------- ---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders -
From net investment income $ (0.25) $ (0.33) $ (0.45) $ (0.46) $ (0.54) $ (0.53)
In excess of net realized
gain on investments and
foreign currency
transactions -- -- -- -- (0.04) (0.04)
From paid in capital -- (0.21) (0.05) (0.05) -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions declared
to shareholders $ (0.25) $ (0.54) $ (0.50) $ (0.51) $ (0.58) $ (0.57)
---------- ---------- ---------- ---------- ---------- ----------
Net increase from repurchase of
capital shares $ 0.01 $ 0.06 $ 0.04 $ --+++ $ 0.03 $ 0.06
---------- ---------- ---------- ---------- ---------- ----------
Net asset value - end of period $ 7.25 $ 7.06 $ 7.25 $ 7.75 $ 7.76 $ 7.82
---------- ---------- ---------- ---------- ---------- ----------
Per share market value - end of period $ 6.740 $ 6.375 $ 6.250 $ 6.938 $ 7.000 $ 7.125
========== ========== ========== ========== ========== ==========
Total return at market value 9.64%++ 10.95% (2.92)% 6.56% 6.46% 17.40%
Ratios (to average net assets)/
Supplemental data:
Expenses## 0.95%+ 0.95% 0.93% 0.91% 0.91% 0.97%
Net investment income 6.90%+ 6.93% 6.57% 6.59% 6.92% 6.75%
Portfolio turnover 19% 93% 85% 184% 213% 257%
Net assets at end of period
(000,000 Omitted) $ 923 $ 906 $ 977 $ 1,091 $ 1,098 $ 1,160
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data is are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
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 generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The trust
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, forward foreign currency
exchange contracts, and swap agreements, are valued on the basis of valuations
furnished by dealers or by a pricing service with consideration to factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data, without exclusive reliance upon exchange or over-the- counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Options contracts listed on commodities
exchanges are reported at market value using closing settlement prices.
Over-the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes into
account foreign currency exchange spot and forward rates, implied volatility,
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued in good faith by the Trustees.
Repurchase Agreements - The trust may enter into repurchase agreements with
institutions that the trust's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The trust requires
that the securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the trust to obtain those securities
in the event of a default under the repurchase agreement. The trust monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the trust under each such
repurchase agreement. The trust, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Trustee Compensation - 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.
Written Options - The trust may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the trust realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the trust. The trust, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
trust's management on the direction of interest rates.
Security Loans - State Street Bank and Trust Company ("State Street") and Chase
Manhattan Bank ("Chase"), as lending agents, may loan the securities of the
trust to certain qualified institutions (the "Borrowers") approved by the trust.
The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street 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, 2001, the value of securities loaned was $202,094,979. These loans
were collateralized by cash of $206,150,728, which was invested in the following
short-term obligations:
ISSUER SHARES VALUE
------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 206,150,728 $206,150,728
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
original issue discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex- dividend or
ex-interest date in an amount equal to the value of the security on such date.
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 will adopt the provisions of the AICPA Audit and Accounting Guide for
Investment Companies, as revised, effective for fiscal years beginning after
December 15, 2000. As required, the trust will begin amortizing premiums on debt
securities effective November 1, 2001. Prior to this date, the trust did not
amortize premiums on debt securities. The cumulative effect of this accounting
change will have no impact on the total net assets of the trust. The impact of
this accounting change has not been determined, but will result in a decrease to
cost of securities and a corresponding increase in net unrealized appreciation.
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.
At April 30, 2001, the trust, for federal income tax purposes, had a capital
loss carryforward of $60,026,544 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on October 31, 2008, ($11,439,294), October 31, 2007, ($11,376,973),
October 31, 2006, ($13,874,621), October 31, 2004, ($645,525), October 31, 2003,
($6,526,984), and October 31, 2002, ($16,163,147).
(3) Transactions with Affiliates
Investment Adviser - The trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.32% of
the trust's average daily net assets and 5.65% of investment income.
The trust pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the trust, all of whom receive
remuneration for their services to the trust from MFS. Certain officers and
Trustees of the trust are officers or directors of MFS and MFS Service Center,
Inc. (MFSC). Included in Trustees' compensation is a net periodic pension
expense of $27,716 for the period ended April 30, 2001.
Administrator - The trust has an administrative services agreement with MFS to
provide the trust with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the trust pays MFS an administrative fee
at the following annual percentages of the trust's average daily net assets:
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 $116,915,891 $123,769,213
------------ ------------
Investments (non-U.S. government securities) $ 55,526,268 $ 72,033,213
------------ ------------
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 $920,655,396
------------
Gross unrealized depreciation $(30,772,320)
Gross unrealized appreciation 17,718,562
------------
Net unrealized depreciation $(13,053,758)
============
(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 202,648,016 full and fractional shares of beneficial interest.
Transactions in trust shares were as follows:
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2001 OCTOBER 31, 2000
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------
Treasury shares acquired 1,106,500 $7,248,639 6,476,000 $40,697,949
========= ========== ========= ===========
In accordance with the provisions of the trust's prospectus, 1,106,500 shares of
beneficial interest were purchased by the trust during period ended April 30,
2001, at an average price per share of $6.55 and a weighted average discount of
8.64% per share. The trust repurchased 6,476,000 shares of beneficial interest
during the year ended October 31, 2000, at an average price per shares of $6.28
and a weighted average discount of 11.46% per share.
(6) Line of Credit
The trust and other affiliated funds participate in a $1.225 billion unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. A commitment fee of $6,510 which is based on the average daily unused
portion of the line of credit is included in miscellaneous expense. The trust
had no significant 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 written options, forward foreign currency exchange
contracts, swap agreements, 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.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
-------------------------------------------------------------------------------
Outstanding, beginning of period 2 $ 573,723
Options written 2 895,279
Options terminated in closing transactions (3) (1,057,435)
-- ---------
Outstanding, end of period 1 $ 411,567
== ===========
At April 30, 2001, the trust had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
----------------------------------------------------------------------------------------------------------
Sales
06/13/01 AUD 59,315,767 $29,945,678 $30,229,736 $ (284,058)
06/13/01 EUR 24,127,941 21,581,478 21,388,730 192,748
06/13/01 NZD 8,313,495 3,388,622 3,425,724 (37,102)
----------- ----------- -----------
$54,915,778 $55,044,190 $ (128,412)
=========== =========== ===========
Purchases
06/13/01 AUD 17,639,987 $ 8,991,101 $ 8,990,057 $ (1,044)
06/13/01 CHF 241,673 146,468 139,526 (6,942)
06/13/01 DKK 8,082,363 1,007,361 959,923 (47,438)
06/13/01 EUR 52,983,607 49,313,433 46,968,454 (2,344,979)
06/13/01 NOK 197,316,217 21,581,478 21,615,463 33,985
----------- ----------- -----------
$81,039,841 $78,673,423 $(2,366,418)
=========== =========== ===========
At April 30, 2001, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $241,808 with
First Boston and a net payable of $143,104 with Deutsche Bank, $148,146 with
Merrill Lynch, and $57,207 with United Bank of Switzerland.
At April 30, 2001, the trust had sufficient cash and/or securities to cover any
commitments under these contracts.
MFS(R) INTERMEDIATE INCOME TRUST
TRUSTEES
Marshall N. Cohan+ (1) - Private Investor PORTFOLIO MANAGERS
Stephen C. Bryant*
Lawrence H. Cohn, M.D.+ (2) - Chief of Steven E. Nothern*
Cardiac Surgery, Brigham and Women's
Hospital; Professor of Surgery, TREASURER
Harvard Medical School James O. Yost*
The Hon. Sir J. David Gibbons, KBE+ ASSISTANT TREASURERS
(2) - Chief Executive Officer, Edmund Mark E. Bradley*
Gibbons Ltd.; Chairman, Colonial Robert R. Flaherty*
Insurance Company, Ltd. Laura F. Healy*
Ellen Moynihan*
Abby M. O'Neill+ (2) - Private
Investor SECRETARY
Stephen E. Cavan*
Walter E. Robb, III+ (1) - President
and Treasurer, Benchmark Advisors, ASSISTANT SECRETARY
Inc. (corporate financial James R. Bordewick, Jr.*
consultants); President, Benchmark
Consulting Group, Inc. (office TRANSFER AGENT, REGISTRAR, AND
services) DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
Arnold D. Scott* - Senior Executive c/o MFS Service Center, Inc.
Vice President, Director, and P.O. Box 9024
Secretary, MFS Investment Management Boston, MA 02205-9824
1-800-637-2304
Jeffrey L. Shames* - Chairman and
Chief Executive Officer, MFS CUSTODIAN
Investment Management State Street Bank and Trust Company
J. Dale Sherratt+ (1) - President,
Insight Resources, Inc. (acquisition
planning specialist)
Ward Smith+ (1) - Former Chairman
(until 1994), NACCO Industries
(holding company)
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
+ Independent Trustee.
* MFS Investment Management.
(1) Member of Audit Committee
(2) Member of Portfolio Trading Committee
------------
MFS (R)INTERMEDIATE INCOME TRUST PRSRT STD
U.S. Postage
[logo] M F S(R) Paid
INVESTMENT MANAGEMENT MFS
------------
500 Boylston Street
Boston, MA 02116- 3741
(C)2001 MFS Investment Management(R).
500 Boylston Street, Boston, MA 02116. MINCE-3 06/01 74.6M