MFS INTERMEDIATE INCOME TRUST
ANNUAL MEETING OF SHAREHOLDERS
PRESENTATION TO RISKMETRICS GROUP
SEPTEMBER 22, 2008
M F S(R)
INVESTMENT MANAGEMENT
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CONTENTS
1. Overview (slides 2-7)
2. MFS Intermediate Income Trust (slides 8-9)
3. Dialogue with Karpus (slides 10-11)
4. Election of Trustees (slides 12-15)
5. Shareholder Proposal to Conduct Annual Tender Offers (slides 16-18)
6. Summary (slides 19-20)
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
OVERVIEW
ABOUT MFS
o MFS is a global asset management firm that serves investors around the
world.
o 15 offices around the globe.
o MFS' global research team covers the world through their offices in six
international cities - Boston, London, Mexico City, Singapore, Sydney and
Tokyo.
o MFS invests in securities in more than 60 countries.
o MFS' parent company, Sun Life Financial, is a worldwide financial services
organization headquartered in Toronto. Sun Life has more than 18,000
employees and offers individuals and corporate clients around the globe a
diverse range of financial products and services.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
OVERVIEW
ABOUT MFS (CONTINUED)
o MFS has followed a disciplined, bottom-up security-selection process, known
as MFS Original Research(R) since 1932, when we established one of the
first in-house research groups in the industry. We believe this fundamental
bottom-up Original Research is the most effective process to take advantage
of investment opportunities in capital markets across all asset classes
around the world.
o Our research analysts develop in-depth, firsthand knowledge of companies
and make assessments of each company's long-term prospects.
o Constant communication enables our analysts and portfolio managers to
exchange opinions and challenge ideas in a spirit of collaboration.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
OVERVIEW
ABOUT MFS (CONTINUED)
o Our portfolio managers construct diversified portfolios by taking into
account the analysts' recommendations, drawing on their own experience, and
using that combined knowledge to select securities that match their
portfolio's investment discipline.
o MFS' quantitative teams help the managers ensure that the risk levels they
assume are appropriate for their portfolios' objectives.
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OVERVIEW
MATTERS FOR THE 2008 ANNUAL MEETING
o Elect four trustees, each for a three-year term.
o Act upon a shareholder proposal from Karpus Investment Management
("Karpus") to conduct annual tender offers.
o Karpus also soliciting for an alternate slate of trustees.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
OVERVIEW
SUMMARY OF CONTEST
MFS INTERMEDIATE INCOME TRUST
o THE FUND'S BOARD IS INDEPENDENT AND ENGAGED.
> The Chairman is independent of MFS as are ten of the twelve Trustees.
> The Trustees and the Fund have independent counsel.
o THE TRUSTEES HAVE:
> Taken actions to enhance net asset value and narrow the discount.
> Overseen good performance and met the Fund's investment objective.
DISSIDENT SHAREHOLDER
o KARPUS' INTERESTS ARE NOT ALIGNED WITH ALL SHAREHOLDERS.
> Within the past year, Karpus has more than doubled its holdings in the
Fund, purchasing shares below NAV, and is now trying to coerce the
Board into adopting a strategy that would enable Karpus to cash out at
a profit, regardless of that strategy's adverse effect on the Fund's
remaining shareholders or its long-term efficacy in narrowing the
discount.
o KARPUS'S APPROACH WILL HAVE AN ADVERSE IMPACT ON LONG-TERM SHAREHOLDERS.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
MFS INTERMEDIATE INCOME TRUST
FUND PERFORMANCE
o INVESTMENT OBJECTIVE: The Fund's investment objective is to seek high
current income, but may also consider capital appreciation.
> Invests substantially all of its assets in investment grade debt
instruments.
> 63% is rated AAA, 14% is rated AA as of August 31, 2008.
o NYSE traded; market cap $727 million as of September 12, 2008.
o Distribution rate 8.5% (managed distribution plan).
o MFS has managed the Fund since its inception in 1988.
o The Fund's portfolio managers, James Calmas and Erik Weisman have been
managing the Fund since 2002 and 2004, respectively, and have been with MFS
since 1988 and 2002, respectively.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
MFS INTERMEDIATE INCOME TRUST
OUTPERFORMED THE LIPPER GENERAL BOND FUND - CLOSED-END AVERAGE FOR THE ONE AND
THREE YEAR PERIODS ENDED AUGUST 31, 2008
FUND PERFORMANCE (AS OF 8/31/08)(1)
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1 YEAR 3 YEAR
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NAV MARKET NAV MARKET
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MIN 5.50% 10.38% 3.91% 4.82%
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Lipper 2.15% 2.23% 3.17% 1.57%
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o Strong and improving market performance benefitting all shareholders.
(1) All data from Lipper, including Lipper General Bond Funds- Closed-End
average. The performance data quoted represents past performance. Past
performance is no guarantee of future performance. The value of an
investment will fluctuate and shares may be worth more or less than their
original cost. Current performance may be lower or higher than the
performance data quoted.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
DIALOGUE WITH KARPUS
o MFS is responsive to shareholders and committed to dialogue with our
shareholders.
o MFS has an established history of dialogue with Karpus on a different MFS
fund.
o October 2007, before Karpus raises any concerns, the Fund announces Board
approval of level distribution plan and change in investment strategy to
provide a more competitive yield.
> Annual distribution rate of 8.5%.
> Increased investment in higher yielding investment-grade securities.
o Karpus sends e-mail in response on the day the plan is announced: "Very
pleased with press release this morning. I think it was best for all
concerned. Great work!"
o January 2008 - Karpus again praises the Board's actions regarding the
discount, noting that the "Board's actions reflect their commitment to
address" the discount. In the same letter, Karpus expresses concern that
the investment strategy change increases risk.
o March 2008 - Trustees respond, noting that it was premature to judge the
effect of distributions that commenced in January, adding that Karpus had
displayed confidence in Fund management by acquiring nearly 1 million
additional shares in January 2008/December 2007.
o March 2008 - Karpus submits shareholder proposal for annual tender offers.
o May 2008 - Karpus notifies the Fund of its intention to nominate four
trustees for election at the October 2008 shareholder meeting.
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DIALOGUE WITH KARPUS (CONTINUED)
o The Board carefully considered Karpus' nominees.
> Requested and reviewed detailed information about nominees - the same
information requested of any nominee considered by the Board.
> One of Karpus' nominees did not respond to the Board's request for
additional information and was not interviewed.
> One of Karpus' nominees declined to interview on any of the three
dates offered, even after the committee offered to conduct the
interview via video conference.
> The Board's nomination committee interviewed two Karpus nominees.
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ELECTION OF TRUSTEES
INDEPENDENT AND ENGAGED BOARD
o The Board has, and continues to, conduct periodic comprehensive reviews of
closed-end market and options to address the discount.
> In 2006, UBS conducted a comprehensive review and analysis for the
Board.
- Market overview.
- Review of potential corporate actions to narrow discount.
- Individual fund profiles.
- Investment performance.
> Trustees conduct an annual comprehensive review.
- Market overview.
- Review of potential corporate actions.
- Individual fund profiles.
- Investment performance.
> Quarterly Board review.
- Premium/discount and trading volume.
- Repurchase activity.
- Fund expense ratios.
- Investment strategy changes.
> Monthly Board review.
- Investment performance.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
ELECTION OF TRUSTEES
INDEPENDENT AND ENGAGED BOARD (CONTINUED)
o Authorized adoption of a level-distribution plan (October 2007).
> 8.50% annual rate.
o Approved changes to investment strategies as a means to potentially
increase yield (October 2007).
> Increased investment in higher yielding investment-grade securities.
o Authorized revisions to open-market share repurchase procedures to provide
for more frequent repurchase activity.
> Commenced Summer 2008.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
ELECTION OF TRUSTEES
INDEPENDENT, ENGAGED AND EXPERIENCED TRUSTEES
EACH OF THE BOARD'S NOMINEES, SIMILAR TO THE CONTINUING TRUSTEES, HAS MANY
YEARS OF SERVICE AS A FUND TRUSTEE OR RELATED INDUSTRY EXPERIENCE.
o J. ATWOOD IVES - Retired Chairman, Trustee and CEO of Eastern Enterprises;
independent Chairman of MFS Funds Board of Trustees; certified public
accountant; Trustee of MFS funds since 1992.
o WILLIAM R. GUTOW - Vice Chairman of Capitol Entertainment Company and
Atlantic Coast Tan; real estate consultant; attorney; trustee of MFS funds
since 1993.
o MICHAEL HEGARTY - Retired Vice Chairman and COO of AXA Financial; former
senior officer of several large banking institutions; trustee of MFS funds
since 2004.
o ROBERT W. UEK - Retired partner of PricewaterhouseCoopers LLP (headed
financial services practice); chairman, Independent Directors Council;
consultant to mutual fund industry; trustee of MFS fund since 2006.
EACH OF THE BOARD'S NOMINEES HAS EXTENSIVE PUBLIC BOARD EXPERIENCE.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
ELECTION OF TRUSTEES
KARPUS' NOMINEES LESS QUALIFIED
o The Board's four nominees are better qualified to serve as closed-end fund
trustees.
o Karpus has a history of self-serving activism against closed-end funds. In
spite of its expressed displeasure at the modifications of the Fund's
investment strategy, it increased its holdings from 5.10% of the Fund's
assets in April 2007 to 11.98% in May 2008.
o None of Karpus' nominees has any experience serving as trustee of a
closed-end fund that invests in public securities. In fact, only one of
Karpus' nominees has ever served on the board of any public company at all.
o Karpus' nominees may be conflicted - will they serve the interests of all
shareholders or the investors whose assets are managed by Karpus?
> The Trustees believe Karpus' nominees would advocate for Karpus'
proposals even if not in the best interest of all shareholders.
o In an August 2008 letter to the Fund's Trustees, one of the Karpus'
nominees indicated that he wasn't "sure the discount is the primary issue"
and advocated an active share repurchase plan. The current Trustees have
already authorized such a plan.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
SHAREHOLDER PROPOSAL
o Karpus' proposal requests that the Trustees adopt a policy that if the
Fund's shares trade at an average discount of greater than 6% over the
final 12 weeks previous to the end of October each year, the Board will
conduct a tender offer for at least 10% of the shares at 99% of net asset
value by the end of that calendar year.
o Karpus is requesting that shareholders vote for annual tender offers by
the Fund as a means to narrow the Fund's discount.
o There is no evidence that periodic tenders narrow discounts over the
long-term - they provide temporary liquidity above market value and
primarily benefit speculators.
o In difficult economic times such as the present, the proposal, applied to
the universe of closed-end funds, would trigger tender offers by more than
85% of closed-end funds.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
SHAREHOLDER PROPOSAL (CONTINUED)
o If the Fund were to adopt the proposal, the Trustees believe that:
> Expenses for long-term shareholders would likely increase.
o MFS estimates that the Fund's expense ratio would increase by
approximately 0.08% in the first year of mandatory tender due to
the reduction in asset base and costs to conduct the tender.
> Arbitrageurs could take advantage of the inflexible tender requirement
to the detriment of long-term shareholders.
> The portfolio would not be able to remain fully invested during the
pendency of the tender.
o An inflexible tender requirement in November or December in any
year would be operative without regard to prevailing market
conditions and the portfolio manager's judgment as to whether it is
in the best interest of the Fund to liquidate 10% of its assets and
incur associated costs to conduct the self-tender.
> Open-market repurchases are a better vehicle to build value for
long-term shareholders.
o The fund has a policy to purchase shares in open market
transactions when shares trade at a substantial discount. By
providing that repurchases occur at market prices, the policy
enables the Fund to provide liquidity to departing shareholders
while at the same time building value for remaining shareholders
who benefit from the difference between net asset value and market
price.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
SHAREHOLDER PROPOSAL (CONTINUED)
o However, the Board has taken actions to address the discount:
> In October 2007, the Board authorized the adoption of a
level-distribution plan pursuant to which the Fund will make monthly
distributions at a minimum annual rate of 8.50%. The plan took effect
in January 2008. In October and December, 2007, the Board approved
changes in the Fund's investment strategy as a means to potentially
increase yield.
> In October and December, 2007, the Board approved changes in the Fund's
investment strategy as a means to potentially increase yield.
> In June 2008, the Board approved a more aggressive share repurchase
policy than had previously been in effect.
o In addition, the Board conducts an annual comprehensive review of
closed-end markets and options to address discounts, and will continue to
review the Fund's discount at quarterly meetings.
o The Board believes that these actions are meaningful and responsive to the
dissidents' expressed concern about the Fund's discount.
o The Board believes these actions should be afforded an opportunity to serve
their intended purpose prior to taking any further actions to address the
Fund's discount.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
SUMMARY
o ELECTION OF TRUSTEES.
> Independent, engaged and experienced Trustees.
> Board has taken actions to enhance NAV and narrow discount.
> Overseen strong and improving Fund performance.
o SHAREHOLDER PROPOSAL
> Fund expenses would increase.
> Arbitrageurs could take advantage of mandatory annual tenders.
> Open-market repurchases are a better vehicle to build value for
long-term shareholders.
o The Board's actions are meaningful and responsive to the dissident's
expressed concern about the discount.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116
FORWARD-LOOKING STATEMENTS
o Statements made in this presentation that look forward in time involve
risks and uncertainties and are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such risks
and uncertainties include, without limitation, the adverse effect from a
decline in the securities markets or a decline in the Fund's performance, a
general downturn in the economy, competition from other closed-end
investment companies, changes in government policy or regulation, inability
of the Fund's investment adviser to attract or retain key employees,
inability of the Fund to implement its investment strategy, inability of
the Fund to manage rapid expansion and unforeseen costs and other effects
related to legal proceedings or investigations of governmental and
self-regulatory organizations.
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(C) 2008 MFS Investment Management(R) 500 Boylston Street, Boston, MA 02116