ITEM 1. |
REPORTS TO STOCKHOLDERS. |
Semiannual Report
April 30, 2022
MFS® Intermediate
Income Trust
MANAGED DISTRIBUTION POLICY DISCLOSURE
The MFS Intermediate Income Trust’s (the fund) Board of
Trustees adopted a managed distribution policy. The fund seeks to pay monthly distributions based on an annual rate of 8.50% of the fund’s average monthly net asset value. The primary purpose of the managed distribution policy is to provide
shareholders with a constant, but not guaranteed, fixed rate of distribution each month. You should not draw any conclusions about the fund’s investment performance from the amount of the current distribution or from the terms of the
fund’s managed distribution policy. The Board may amend or terminate the managed distribution policy at any time without prior notice to fund shareholders. The amendment or termination of the managed distribution policy could have an adverse
effect on the market price of the fund’s shares.
With each distribution, the fund will issue a notice to
shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other related information. The amounts and sources of distributions reported in the notice to
shareholders are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the fund’s investment experience during the remainder of its
fiscal year and may be subject to changes based on tax regulations. The fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. Please refer to “Tax Matters
and Distributions” under Note 2 of the Notes to Financial Statements for information regarding the tax character of the fund’s distributions.
Under a managed distribution policy the fund may at times
distribute more than its net investment income and net realized capital gains; therefore, a portion of your distribution may result in a return of capital. A return of capital may occur, for example, when some or all of the money that you invested
in the fund is paid back to you. Any such returns of capital will decrease the fund’s total assets and, therefore, could have the effect of increasing the fund’s expense ratio. In addition, in order to make the level of distributions
called for under its managed distribution policy, the fund may have to sell portfolio securities at a less than opportune time. A return of capital does not necessarily reflect the fund’s investment performance and should not be confused with
‘yield’ or ‘income’. The fund’s total return in relation to changes in net asset value is presented in the Financial Highlights.
MFS® Intermediate
Income Trust
New York Stock Exchange Symbol:
MIN
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4
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4
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5
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15
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16
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17
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18
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20
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30
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31
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31
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NOT FDIC INSURED • MAY LOSE VALUE
• NO BANK GUARANTEE
LETTER FROM THE CHAIR AND
CEO
Dear Shareholders:
Global markets have recently been buffeted by a series of
crosscurrents, including rising inflation, tighter financial conditions, the continued spread of the coronavirus (particularly in Asia), and the evolving geopolitical landscape in the wake of Russia’s invasion of Ukraine. Consequently, at a
time when global growth faces multiple headwinds, central banks have been presented with the challenge of reining in rising prices without tipping economies into recession. The US Federal Reserve has hiked rates at consecutive meetings for the first
time since 2006 and raised rates by more than 0.25% for the first time since 2000. Additional half-point hikes are expected at the Fed’s next two meetings as it seeks to adopt a neutral monetary policy stance before the end of the year. Richly
valued growth equities have been hit particularly hard by higher interest rates, and volatility in credit markets has picked up too.
There are, however, encouraging signs for
the markets. The number of coronavirus cases outside of Asia remains well below prior peaks, and fewer are seriously ill. Meanwhile, unemployment is low and there are signs that some global supply chain bottlenecks are beginning to ease, though
lockdowns in China and disruptions stemming from Russia’s invasion of Ukraine could hamper these advances. Additionally, easier Chinese monetary and regulatory policies and the record pace of corporate stock buybacks are supportive elements,
albeit in an otherwise turbulent investment environment.
It is important to have a deep understanding of company
fundamentals during times of market transition, and we have built our global research platform to do just that.
At MFS®, we put our clients’ assets to work responsibly by carefully navigating increasingly complex global capital markets. Our investment team, guided by a commitment to
long-term fundamental investing, seeks to uncover what we believe are the best, most durable investment ideas in markets around the world. The result — combining collective expertise, long-term discipline, and thoughtful risk management
— is what we consider to be a unique global investment platform that enables us to create value for investors.
Respectfully,
Michael W.
Roberge
Chair and Chief Executive Officer
MFS Investment Management
June 15, 2022
The opinions expressed in this letter are subject to change
and may not be relied upon for investment advice. No forecasts can be guaranteed.
Portfolio structure (i)
Fixed income sectors
(i)
Investment
Grade Corporates |
51.6%
|
U.S.
Treasury Securities |
31.9%
|
Municipal
Bonds |
6.5%
|
Emerging
Markets Bonds |
3.6%
|
Commercial
Mortgage-Backed Securities |
2.5%
|
High
Yield Corporates |
1.6%
|
Collateralized
Loan Obligations |
1.4%
|
Mortgage-Backed
Securities |
0.7%
|
U.S.
Government Agencies (o) |
0.0%
|
Composition including fixed income credit quality (a)(i)
AAA
|
3.8%
|
AA
|
4.5%
|
A
|
17.8%
|
BBB
|
37.4%
|
BB
|
2.5%
|
CC
|
0.7%
|
D
|
0.5%
|
U.S.
Government |
32.0%
|
Federal
Agencies |
0.8%
|
Not
Rated |
(0.2)%
|
Cash
& Cash Equivalents (o) |
0.0%
|
Other
|
0.2%
|
Portfolio facts (i)
Average
Duration (d) |
3.9
|
Average
Effective Maturity (m) |
4.6 yrs.
|
(a)
|
For all
securities other than those specifically described below, ratings are assigned to underlying securities utilizing ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies and applying the following hierarchy: If all three
agencies provide a rating, the middle rating (after dropping the highest and lowest ratings) is assigned; if two of the three agencies rate a security, the lower of the two is assigned. If none of the 3 rating agencies above assign a rating, but the
security is rated by DBRS Morningstar, then the DBRS Morningstar rating is assigned. If none of the 4 rating agencies listed above rate the security, but the security is rated by the Kroll Bond Rating Agency (KBRA), then the KBRA rating is assigned.
Ratings are shown in the S&P and Fitch scale (e.g., AAA). Securities rated BBB or higher are considered investment grade. All ratings are subject to change. U.S. Government includes securities issued by the U.S. Department of the Treasury.
Federal Agencies includes rated and unrated U.S. Agency fixed-income securities, U.S. Agency mortgage-backed securities, and collateralized mortgage obligations of U.S. Agency mortgage-backed securities. |
Not Rated includes fixed income securities and
fixed income derivatives that have not been rated by any rating agency. The fund may or may not have held all of these instruments on this date. The fund is not rated by these agencies.
Portfolio Composition -
continued
(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 due to the interest rate move.
|
(i)
|
For
purposes of this presentation, the components include the value of securities, and reflect the impact of the equivalent exposure of derivative positions, if any. These amounts may be negative from time to time. Equivalent exposure is a calculated
amount that translates the derivative position into a reasonable approximation of the amount of the underlying asset that the portfolio would have to hold at a given point in time to have the same price sensitivity that results from the
portfolio’s ownership of the derivative contract. When dealing with derivatives, equivalent exposure is a more representative measure of the potential impact of a position on portfolio performance than value. The bond component will include
any accrued interest amounts. |
(m)
|
In
determining each instrument’s effective maturity for purposes of calculating the fund’s dollar-weighted average effective maturity, MFS uses the instrument’s stated maturity or, if applicable, an earlier date on which MFS believes
it is probable that a maturity-shortening device (such as a put, pre-refunding or prepayment) will cause the instrument to be repaid. Such an earlier date can be substantially shorter than the instrument’s stated maturity. |
Where the fund holds convertible
bonds, they are treated as part of the equity portion of the portfolio.
Cash & Cash Equivalents includes any cash, investments in
money market funds, short-term securities, and other assets less liabilities. Please see the Statement of Assets and Liabilities for additional information related to the fund’s cash position and other assets and liabilities.
Other includes equivalent exposure from currency derivatives
and/or any offsets to derivative positions and may be negative.
Percentages are based on net assets as of April 30, 2022.
The portfolio is actively managed and current holdings may be
different.
Portfolio
Managers' Profiles
Portfolio
Manager |
Primary
Role |
Since
|
Title
and Five Year History |
Geoffrey
Schechter |
Lead
Portfolio Manager |
2017
|
Investment
Officer of MFS; employed in the investment management area of MFS since 1993. |
Alexander
Mackey |
Investment
Grade Debt Instruments Portfolio Manager |
2017
|
Investment
Officer of MFS; employed in the investment management area of MFS since 2001. |
Other Notes
The fund’s shares may trade at a discount or premium to
net asset value. When fund shares trade at a premium, buyers pay more than the net asset value underlying fund shares, and shares purchased at a premium would receive less than the amount paid for them in the event of the fund’s concurrent
liquidation.
The fund's target annual distribution rate
is calculated based on an annual rate of 8.50% of the fund's average monthly net asset value, not a fixed share price, and the fund's dividend amount will fluctuate with changes in the fund's average monthly net assets.
In accordance with Section 23(c) of the Investment Company
Act of 1940, the fund hereby gives notice that it may from time to time repurchase shares of the fund in the open market at the option of the Board of Trustees and on such terms as the Trustees shall determine.
Portfolio of
Investments
4/30/22 (unaudited)
The Portfolio of Investments is a complete list of all
securities owned by your fund. It is categorized by broad-based asset classes.
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– 99.3% |
Aerospace
& Defense – 1.5% |
Boeing
Co., 1.167%, 2/04/2023 |
|
$
|
1,135,000
|
$
1,121,370 |
Boeing
Co., 1.433%, 2/04/2024 |
|
|
2,269,000
|
2,180,111
|
Huntington
Ingalls Industries, Inc., 3.844%, 5/01/2025 |
|
|
2,486,000
|
2,489,710
|
|
|
|
|
$
5,791,191 |
Apparel
Manufacturers – 0.7% |
NIKE,
Inc., 2.75%, 3/27/2027 |
|
$
|
2,600,000
|
$
2,509,888 |
Asset-Backed
& Securitized – 3.8% |
3650R
Commercial Mortgage Trust, 2021-PF1, “XA”, 1.147%, 11/15/2054 (i) |
|
$
|
10,518,116
|
$
699,087 |
ACREC
2021-FL1 Ltd., “AS”, FLR, 2.054% (LIBOR - 1mo. + 1.5%), 10/16/2036 (n) |
|
|
1,087,000
|
1,076,336
|
Arbor
Realty Trust, Inc., CLO, 2021-FL3, “AS”, FLR, 1.954% (LIBOR - 1mo. + 1.4%), 8/15/2034 (n) |
|
|
1,112,500
|
1,104,231
|
AREIT
2022-CRE6 Trust, “AS”, FLR, 1.925% (SOFR - 30 day + 1.65%), 11/17/2024 (n) |
|
|
1,522,500
|
1,500,008
|
BDS
2021-FL9 Ltd., “A”, 1.624%, 11/16/2038 (n) |
|
|
958,000
|
932,880
|
BSPDF
2021-FL1 Issuer Ltd., “A”, 1.754%, 10/15/2036 (n) |
|
|
599,000
|
584,789
|
BSPDF
2021-FL1 Issuer Ltd., “AS”, FLR, 2.034% (LIBOR - 1mo. + 1.48%), 10/15/2036 (n) |
|
|
774,500
|
757,952
|
BXMT
2021-FL4 Ltd., “AS”, FLR, 1.854% (LIBOR - 1mo. + 1.3%), 5/15/2038 (n) |
|
|
2,000,000
|
1,969,204
|
Commercial
Mortgage Trust, 2017-COR2, “A3”, 3.51%, 9/10/2050 |
|
|
1,676,352
|
1,635,911
|
LoanCore
2021-CRE6 Ltd., “AS”, FLR, 2.204% (LIBOR - 1mo. + 1.65%), 11/15/2038 (n) |
|
|
1,500,000
|
1,491,072
|
ReadyCap
Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.867% (LIBOR - 1mo. + 1.2%), 11/25/2036 (z) |
|
|
649,143
|
637,867
|
ReadyCap
Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 2.167% (LIBOR - 1mo. + 1.5%), 11/25/2036 (z) |
|
|
199,500
|
196,087
|
Shackleton
2015-8A CLO Ltd., “A1R”, FLR, 1.982% (LIBOR - 3mo. + 0.92%), 10/20/2027 (n) |
|
|
1,009,507
|
1,003,384
|
UBS
Commercial Mortgage Trust, 2017-C1, “A4”, 3.544%, 11/15/2050 |
|
|
875,000
|
852,975
|
|
|
|
|
$
14,441,783 |
Automotive
– 2.3% |
Hyundai
Capital America, 5.875%, 4/07/2025 (n) |
|
$
|
2,094,000
|
$
2,182,842 |
Hyundai
Capital America, 1.65%, 9/17/2026 (n) |
|
|
1,000,000
|
890,590
|
Stellantis
Finance US, Inc., 1.711%, 1/29/2027 (n) |
|
|
1,150,000
|
1,020,062
|
Stellantis
N.V., 2.691%, 9/15/2031 (n) |
|
|
532,000
|
439,892
|
Volkswagen
Group of America Finance LLC, 2.85%, 9/26/2024 (n) |
|
|
1,765,000
|
1,732,792
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Automotive
– continued |
Volkswagen
Group of America Finance LLC, 1.625%, 11/24/2027 (n) |
|
$
|
1,500,000
|
$
1,309,652 |
Volkswagen
Group of America Finance LLC, 3.75%, 5/13/2030 (n) |
|
|
1,000,000
|
949,967
|
|
|
|
|
$
8,525,797 |
Broadcasting
– 0.6% |
Magallanes,
Inc., 4.279%, 3/15/2032 (n) |
|
$
|
2,524,000
|
$
2,344,530 |
Brokerage
& Asset Managers – 2.4% |
Brookfield
Finance, Inc., 2.724%, 4/15/2031 |
|
$
|
2,844,000
|
$
2,495,246 |
Charles
Schwab Corp., 3.3%, 4/01/2027 |
|
|
3,150,000
|
3,090,661
|
Low
Income Investment Fund, 3.386%, 7/01/2026 |
|
|
705,000
|
691,307
|
Low
Income Investment Fund, 3.711%, 7/01/2029 |
|
|
1,905,000
|
1,893,818
|
National
Securities Clearing Corp., 1.5%, 4/23/2025 (n) |
|
|
1,117,000
|
1,054,696
|
|
|
|
|
$
9,225,728 |
Business
Services – 1.0% |
Tencent
Holdings Ltd., 2.88%, 4/22/2031 (n) |
|
$
|
1,499,000
|
$
1,307,417 |
Western
Union Co., 1.35%, 3/15/2026 |
|
|
2,570,000
|
2,328,489
|
|
|
|
|
$
3,635,906 |
Cable
TV – 0.4% |
Charter
Communications Operating LLC/Charter Communications Operating Capital Corp., 4.908%, 7/23/2025 |
|
$
|
1,350,000
|
$
1,374,921 |
Computer
Software – 0.7% |
Dell
International LLC/EMC Corp., 5.85%, 7/15/2025 |
|
$
|
399,000
|
$
418,882 |
Dell
International LLC/EMC Corp., 4.9%, 10/01/2026 |
|
|
2,054,000
|
2,096,529
|
|
|
|
|
$
2,515,411 |
Computer
Software - Systems – 1.3% |
Apple,
Inc., 3.35%, 2/09/2027 |
|
$
|
2,700,000
|
$
2,686,547 |
VMware,
Inc., 1.4%, 8/15/2026 |
|
|
2,333,000
|
2,091,136
|
|
|
|
|
$
4,777,683 |
Conglomerates
– 0.5% |
Westinghouse
Air Brake Technologies Corp., 4.95%, 9/15/2028 |
|
$
|
1,760,000
|
$
1,765,649 |
Consumer
Products – 0.2% |
GSK
Consumer Healthcare Capital US LLC, 3.375%, 3/24/2029 (n) |
|
$
|
860,000
|
$
810,952 |
Consumer
Services – 1.6% |
Booking
Holdings, Inc., 3.55%, 3/15/2028 |
|
$
|
2,737,000
|
$
2,669,931 |
Conservation
Fund, 3.474%, 12/15/2029 |
|
|
563,000
|
541,562
|
Toll
Road Investors Partnership II LP, Capital Appreciation, NPFG, 0%, 2/15/2026 (n) |
|
|
480,000
|
393,695
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Consumer
Services – continued |
Toll
Road Investors Partnership II LP, Capital Appreciation, NPFG, 0%, 2/15/2027 (n) |
|
$
|
1,525,000
|
$
1,171,988 |
Toll
Road Investors Partnership II LP, Capital Appreciation, NPFG, 0%, 2/15/2029 (n) |
|
|
1,392,000
|
952,186
|
Toll
Road Investors Partnership II LP, Capital Appreciation, NPFG, 0%, 2/15/2031 (n) |
|
|
480,000
|
292,304
|
|
|
|
|
$
6,021,666 |
Containers
– 0.4% |
Berry
Global, Inc., 1.65%, 1/15/2027 |
|
$
|
1,542,000
|
$
1,367,309 |
Electronics
– 1.0% |
Broadcom,
Inc., 3.469%, 4/15/2034 (n) |
|
$
|
2,055,000
|
$
1,744,267 |
Broadcom,
Inc., 3.137%, 11/15/2035 (n) |
|
|
1,845,000
|
1,490,248
|
Qorvo,
Inc., 1.75%, 12/15/2024 (n) |
|
|
634,000
|
598,078
|
|
|
|
|
$
3,832,593 |
Emerging
Market Quasi-Sovereign – 1.3% |
DAE
Funding LLC (United Arab Emirates), 1.55%, 8/01/2024 (n) |
|
$
|
613,000
|
$
571,649 |
DAE
Funding LLC (United Arab Emirates), 2.625%, 3/20/2025 (n) |
|
|
1,000,000
|
936,954
|
Qatar
Petroleum, 2.25%, 7/12/2031 (n) |
|
|
1,635,000
|
1,426,537
|
Sinopec
Capital (2013) Ltd. (People's Republic of China), 3.125%, 4/24/2023 (n) |
|
|
733,000
|
732,428
|
Sinopec
Group Overseas Development (2018) Ltd. (People's Republic of China), 1.45%, 1/08/2026 (n) |
|
|
1,357,000
|
1,254,808
|
|
|
|
|
$
4,922,376 |
Energy
- Integrated – 1.4% |
Cenovus
Energy, Inc., 5.375%, 7/15/2025 |
|
$
|
885,000
|
$
917,797 |
Eni
S.p.A., 4%, 9/12/2023 (n) |
|
|
1,327,000
|
1,335,427
|
Exxon
Mobil Corp., 3.294%, 3/19/2027 |
|
|
3,000,000
|
2,964,581
|
|
|
|
|
$
5,217,805 |
Financial
Institutions – 2.9% |
AerCap
Ireland Capital DAC/AerCap Global Aviation Trust, 4.875%, 1/16/2024 |
|
$
|
1,719,000
|
$
1,728,761 |
AerCap
Ireland Capital DAC/AerCap Global Aviation Trust, 6.5%, 7/15/2025 |
|
|
2,326,000
|
2,410,946
|
AerCap
Ireland Capital DAC/AerCap Global Aviation Trust, 3.3%, 1/30/2032 |
|
|
332,000
|
276,234
|
Avolon
Holdings Funding Ltd., 3.95%, 7/01/2024 (n) |
|
|
3,123,000
|
3,067,753
|
Avolon
Holdings Funding Ltd., 3.25%, 2/15/2027 (n) |
|
|
583,000
|
528,610
|
Avolon
Holdings Funding Ltd., 2.528%, 11/18/2027 (n) |
|
|
869,000
|
747,299
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Financial
Institutions – continued |
Avolon
Holdings Funding Ltd., 2.75%, 2/21/2028 (n) |
|
$
|
2,336,000
|
$
2,009,262 |
|
|
|
|
$
10,768,865 |
Food
& Beverages – 1.7% |
Constellation
Brands, Inc., 4.4%, 11/15/2025 |
|
$
|
3,306,000
|
$
3,365,153 |
JBS
USA Lux S.A./JBS USA Food Co./JBS USA Finance, Inc., 3%, 2/02/2029 (n) |
|
|
1,451,000
|
1,291,390
|
JDE
Peet's N.V., 1.375%, 1/15/2027 (n) |
|
|
1,931,000
|
1,684,199
|
|
|
|
|
$
6,340,742 |
Gaming
& Lodging – 1.6% |
GLP
Capital LP/GLP Financing II, Inc., 4%, 1/15/2031 |
|
$
|
3,055,000
|
$
2,765,951 |
Hyatt
Hotels Corp., 1.8%, 10/01/2024 |
|
|
1,286,000
|
1,222,573
|
Marriott
International, Inc., 5.75%, 5/01/2025 |
|
|
29,000
|
30,394
|
Marriott
International, Inc., 2.85%, 4/15/2031 |
|
|
802,000
|
689,742
|
Marriott
International, Inc., 2.75%, 10/15/2033 |
|
|
1,750,000
|
1,437,827
|
|
|
|
|
$
6,146,487 |
Industrial
– 0.3% |
Howard
University, Washington D.C., AGM, 2.757%, 10/01/2027 |
|
$
|
1,250,000
|
$
1,143,268 |
Insurance
– 1.3% |
AIA
Group Ltd., 3.375%, 4/07/2030 (n) |
|
$
|
563,000
|
$
535,509 |
Corebridge
Financial, Inc., 3.85%, 4/05/2029 (n) |
|
|
2,500,000
|
2,386,856
|
Sammons
Financial Group, Inc., 4.75%, 4/08/2032 (n) |
|
|
2,000,000
|
1,898,267
|
|
|
|
|
$
4,820,632 |
Insurance
- Health – 0.2% |
Humana,
Inc., 3.7%, 3/23/2029 |
|
$
|
867,000
|
$
831,821 |
Insurance
- Property & Casualty – 1.6% |
Allied
World Assurance Co. Holdings Ltd., 4.35%, 10/29/2025 |
|
$
|
3,110,000
|
$
3,090,912 |
Fairfax
Financial Holdings Ltd., 4.85%, 4/17/2028 |
|
|
2,971,000
|
2,984,851
|
|
|
|
|
$
6,075,763 |
Internet
– 0.4% |
Baidu,
Inc., 3.875%, 9/29/2023 |
|
$
|
1,361,000
|
$
1,373,094 |
Machinery
& Tools – 0.9% |
CNH
Industrial Capital LLC, 4.2%, 1/15/2024 |
|
$
|
472,000
|
$
477,739 |
CNH
Industrial Capital LLC, 3.85%, 11/15/2027 |
|
|
3,066,000
|
2,980,368
|
|
|
|
|
$
3,458,107 |
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Major
Banks – 11.4% |
Bank
of America Corp., 4.125%, 1/22/2024 |
|
$
|
2,876,000
|
$
2,917,875 |
Bank
of America Corp., 1.734% to 7/22/2026, FLR (SOFR - 1 day + 0.96%) to 7/22/2027 |
|
|
2,224,000
|
1,995,780
|
Barclays
PLC, 2.279% to 11/24/2026, FLR (CMT - 1yr. + 1.05%) to 11/24/2027 |
|
|
1,435,000
|
1,291,081
|
BNP
Paribas S.A., 2.591% to 1/20/2027, FLR (SOFR - 1 day + 1.228%) to 1/20/2028 (n) |
|
|
1,723,000
|
1,568,265
|
Credit
Suisse Group AG, 6.5%, 8/08/2023 (n) |
|
|
915,000
|
937,875
|
Credit
Suisse Group AG, 3.869% to 1/12/2028, FLR (LIBOR - 3mo. + 1.41%) to 1/12/2029 (n) |
|
|
2,250,000
|
2,101,579
|
Deutsche
Bank AG, 1.447% to 4/1/2024, FLR (SOFR - 1 day + 1.131%) to 4/01/2025 |
|
|
2,012,000
|
1,900,723
|
Deutsche
Bank AG, 2.311% to 11/16/2026, FLR (SOFR - 1 day + 1.219%) to 11/16/2027 |
|
|
457,000
|
404,107
|
Goldman
Sachs Group, Inc., 2.908% to 6/05/2022, FLR (LIBOR - 3mo. + 1.053%) to 6/05/2023 |
|
|
1,750,000
|
1,749,660
|
Goldman
Sachs Group, Inc., 3.5%, 4/01/2025 |
|
|
1,500,000
|
1,477,343
|
Goldman
Sachs Group, Inc., 1.093% to 12/09/2025, FLR (SOFR - 1 day + 0.789%) to 12/09/2026 |
|
|
894,000
|
799,567
|
HSBC
Holdings PLC, 3.033% to 11/22/2022, FLR (LIBOR - 3mo. + 0.923%) to 11/22/2023 |
|
|
1,500,000
|
1,499,016
|
HSBC
Holdings PLC, 2.251% to 11/22/2026, FLR (SOFR - 1 day + 1.1%) to 11/22/2027 |
|
|
1,446,000
|
1,307,992
|
JPMorgan
Chase & Co., 2.005% to 3/13/2025, FLR (SOFR - 1 day + 1.585%) to 3/13/2026 |
|
|
2,500,000
|
2,355,211
|
JPMorgan
Chase & Co., 2.58% to 4/22/2031, FLR (SOFR - 1 day + 1.25%) to 4/22/2032 |
|
|
2,250,000
|
1,926,493
|
Lloyds
Banking Group PLC, 3.511% to 3/18/2025, FLR (CMT - 1yr. + 1.6%) to 3/18/2026 |
|
|
2,546,000
|
2,496,893
|
Morgan
Stanley, 3.875%, 1/27/2026 |
|
|
5,400,000
|
5,352,833
|
Morgan
Stanley, 3.95%, 4/23/2027 |
|
|
1,100,000
|
1,078,071
|
Morgan
Stanley, 1.512% to 7/20/2026, FLR (SOFR - 1 day + 0.858%) to 7/20/2027 |
|
|
977,000
|
869,732
|
NatWest
Group PLC, 4.269% to 3/22/2024, FLR (LIBOR - 3mo. + 1.762%) to 3/22/2025 |
|
|
2,621,000
|
2,621,687
|
NatWest
Markets PLC, 3.479%, 3/22/2025 (n) |
|
|
585,000
|
579,571
|
Sumitomo
Mitsui Trust Bank Ltd., 0.85%, 3/25/2024 (n) |
|
|
946,000
|
900,722
|
UBS
Group AG, 1.008% to 7/30/2023, FLR (CMT - 1yr. + 0.83%) to 7/30/2024 (n) |
|
|
770,000
|
747,541
|
UBS
Group Funding (Switzerland) AG, 4.253%, 3/23/2028 (n) |
|
|
2,449,000
|
2,416,896
|
UniCredit
S.p.A., 2.569% to 9/22/2025, FLR (CMT - 1yr. + 2.3%) to 9/22/2026 (n) |
|
|
2,088,000
|
1,902,939
|
|
|
|
|
$
43,199,452 |
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Medical
& Health Technology & Services – 1.2% |
ProMedica
Toledo Hospital, “B”, AGM, 5.75%, 11/15/2038 |
|
$
|
1,250,000
|
$
1,323,023 |
Thermo
Fisher Scientific, Inc., 1.215%, 10/18/2024 |
|
|
3,589,000
|
3,404,819
|
|
|
|
|
$
4,727,842 |
Metals
& Mining – 2.0% |
Anglo
American Capital PLC, 4.75%, 4/10/2027 (n) |
|
$
|
1,547,000
|
$
1,551,248 |
Anglo
American Capital PLC, 2.25%, 3/17/2028 (n) |
|
|
744,000
|
660,211
|
Anglo
American Capital PLC, 2.875%, 3/17/2031 (n) |
|
|
870,000
|
748,404
|
Glencore
Funding LLC, 4.125%, 5/30/2023 (n) |
|
|
1,518,000
|
1,527,745
|
Glencore
Funding LLC, 1.625%, 4/27/2026 (n) |
|
|
1,191,000
|
1,078,031
|
Glencore
Funding LLC, 3.875%, 10/27/2027 (n) |
|
|
1,887,000
|
1,833,105
|
|
|
|
|
$
7,398,744 |
Midstream
– 1.7% |
Enbridge,
Inc., 2.5%, 2/14/2025 |
|
$
|
483,000
|
$
467,893 |
Enbridge,
Inc., 3.125%, 11/15/2029 |
|
|
1,506,000
|
1,389,613
|
MPLX
LP, 3.5%, 12/01/2022 |
|
|
1,584,000
|
1,591,609
|
MPLX
LP, 4%, 3/15/2028 |
|
|
1,395,000
|
1,352,470
|
Plains
All American Pipeline LP, 3.8%, 9/15/2030 |
|
|
1,510,000
|
1,397,673
|
Targa
Resources Corp., 4.2%, 2/01/2033 |
|
|
357,000
|
338,353
|
|
|
|
|
$
6,537,611 |
Mortgage-Backed
– 0.7% |
|
Fannie
Mae, 6.5%, 11/01/2031 |
|
$
|
388,256
|
$
419,735 |
Freddie
Mac, 3.064%, 8/25/2024 |
|
|
1,435,108
|
1,429,955
|
Freddie
Mac, 3.187%, 9/25/2027 |
|
|
550,000
|
546,992
|
Freddie
Mac, 6%, 8/01/2034 |
|
|
4,951
|
5,354
|
Ginnie
Mae, 6%, 6/15/2033 - 10/15/2036 |
|
|
253,558
|
276,534
|
|
|
|
|
$
2,678,570 |
Municipals
– 6.4% |
Bridgeview,
IL, Stadium and Redevelopment Projects, Taxable, AAC, 5.06%, 12/01/2025 |
|
$
|
3,360,000
|
$
3,307,584 |
California
Earthquake Authority Rev., Taxable, “B”, 1.327%, 7/01/2022 |
|
|
575,000
|
575,218
|
California
Earthquake Authority Rev., Taxable, “B”, 1.477%, 7/01/2023 |
|
|
405,000
|
400,185
|
Florida
State Board of Administration Finance Corp. Rev., Taxable, “A”, 1.705%, 7/01/2027 |
|
|
1,709,000
|
1,555,008
|
Gainesville,
TX, Hospital District, Taxable, “A”, 5.711%, 8/15/2033 |
|
|
2,330,000
|
2,563,784
|
Golden
State, CA, Tobacco Securitization Corp., Tobacco Settlement Rev., Taxable, “B”, 3%, 6/01/2046 |
|
|
765,000
|
678,734
|
Guam
International Airport Authority Rev., Taxable (A.B. Won Pat Airport), “A”, 3.839%, 10/01/2036 |
|
|
110,000
|
98,008
|
Massachusetts
Educational Financing Authority, Education Loan Subordinate Rev., Taxable, “A”, 2.641%, 7/01/2037 |
|
|
2,070,000
|
1,810,106
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Municipals
– continued |
Michigan
Finance Authority Hospital Refunding Rev., Taxable (Trinity Health Credit Group), “T”, 3.084%, 12/01/2034 |
|
$
|
2,500,000
|
$
2,289,880 |
Michigan
Finance Authority Tobacco Settlement Asset-Backed Rev., Taxable (2006 Sold Tobacco Receipts), “A-1”, 2.326%, 6/01/2030 |
|
|
324,730
|
310,783
|
New
Jersey Economic Development Authority State Pension Funding Rev., Capital Appreciation, Taxable, “B”, AGM, 0%, 2/15/2023 |
|
|
3,704,000
|
3,637,590
|
Puerto
Rico Electric Power Authority Rev., “RR”, NPFG, 5%, 7/01/2022 |
|
|
1,675,000
|
1,709,739
|
Rhode
Island Student Loan Authority, Education Loan Rev., Taxable, “2”, 2.348%, 12/01/2040 |
|
|
890,000
|
845,917
|
Syracuse,
NY, Industrial Development Agency PILOT Rev., Taxable (Carousel Center Project), “B”, 5%, 1/01/2036 (n) |
|
|
3,635,000
|
2,615,522
|
University
of California, General Taxable Rev., Taxable, “BG”, 1.614%, 5/15/2030 |
|
|
2,010,000
|
1,700,002
|
|
|
|
|
$
24,098,060 |
Network
& Telecom – 0.4% |
Verizon
Communications, Inc., 2.355%, 3/15/2032 |
|
$
|
1,726,000
|
$
1,449,239 |
Oils
– 0.3% |
Marathon
Petroleum Corp., 3.625%, 9/15/2024 |
|
$
|
1,003,000
|
$
998,013 |
Other
Banks & Diversified Financials – 0.4% |
Macquarie
Group Ltd., 1.34% to 1/12/2026, FLR (SOFR - 1 day + 1.069%) to 1/12/2027 (n) |
|
$
|
1,784,000
|
$
1,583,936 |
Real
Estate - Retail – 2.1% |
Brixmor
Operating Partnership LP, REIT, 4.05%, 7/01/2030 |
|
$
|
2,349,000
|
$
2,218,595 |
Realty
Income Corp., REIT, 3.4%, 1/15/2028 |
|
|
2,875,000
|
2,771,068
|
Regency
Centers Corp., 3.7%, 6/15/2030 |
|
|
3,000,000
|
2,803,385
|
|
|
|
|
$
7,793,048 |
Retailers
– 1.0% |
Alibaba
Group Holding Ltd., 2.8%, 6/06/2023 |
|
$
|
1,605,000
|
$
1,596,574 |
Kohl's
Corp., 9.5%, 5/15/2025 |
|
|
1,634,000
|
1,833,329
|
Nordstrom,
Inc., 2.3%, 4/08/2024 |
|
|
518,000
|
495,985
|
|
|
|
|
$
3,925,888 |
Supranational
– 0.8% |
Corporacion
Andina de Fomento, 4.375%, 6/15/2022 |
|
$
|
2,950,000
|
$
2,955,374 |
Telecommunications
- Wireless – 2.5% |
American
Tower Corp., REIT, 3.55%, 7/15/2027 |
|
$
|
4,000,000
|
$
3,816,465 |
Crown
Castle International Corp., 2.25%, 1/15/2031 |
|
|
1,000,000
|
823,095
|
Crown
Castle International Corp., REIT, 3.65%, 9/01/2027 |
|
|
947,000
|
909,735
|
Rogers
Communications, Inc., 3.2%, 3/15/2027 (n) |
|
|
1,739,000
|
1,655,043
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Telecommunications
- Wireless – continued |
T-Mobile
USA, Inc., 3.875%, 4/15/2030 |
|
$
|
2,500,000
|
$
2,366,097 |
|
|
|
|
$
9,570,435 |
Tobacco
– 0.5% |
B.A.T.
Capital Corp., 4.7%, 4/02/2027 |
|
$
|
2,000,000
|
$
1,982,524 |
Transportation
- Services – 0.8% |
Element
Fleet Management Corp., 1.6%, 4/06/2024 (n) |
|
$
|
2,990,000
|
$
2,871,379 |
U.S.
Government Agencies and Equivalents – 0.0% |
Small
Business Administration, 4.93%, 1/01/2024 |
|
$
|
26,886
|
$
27,060 |
Small
Business Administration, 5.36%, 11/01/2025 |
|
|
79,765
|
80,604
|
Small
Business Administration, 5.39%, 12/01/2025 |
|
|
46,808
|
47,125
|
|
|
|
|
$
154,789 |
U.S.
Treasury Obligations – 31.8% |
U.S.
Treasury Notes, 1.75%, 5/15/2022 |
|
$
|
3,250,000
|
$
3,251,636 |
U.S.
Treasury Notes, 2.125%, 12/31/2022 (f) |
|
|
14,635,000
|
14,669,873
|
U.S.
Treasury Notes, 2.5%, 8/15/2023 |
|
|
12,710,000
|
12,725,391
|
U.S.
Treasury Notes, 2.75%, 2/15/2024 |
|
|
8,385,000
|
8,398,429
|
U.S.
Treasury Notes, 2.375%, 8/15/2024 |
|
|
9,230,000
|
9,135,537
|
U.S.
Treasury Notes, 2%, 2/15/2025 |
|
|
9,900,000
|
9,666,422
|
U.S.
Treasury Notes, 2%, 8/15/2025 |
|
|
5,225,000
|
5,072,740
|
U.S.
Treasury Notes, 2.25%, 11/15/2025 |
|
|
5,086,000
|
4,967,989
|
U.S.
Treasury Notes, 2%, 11/15/2026 |
|
|
6,254,000
|
5,995,778
|
U.S.
Treasury Notes, 1.625%, 11/30/2026 |
|
|
7,750,000
|
7,309,824
|
U.S.
Treasury Notes, 1.875%, 2/28/2027 |
|
|
10,066,500
|
9,585,982
|
U.S.
Treasury Notes, 2.375%, 5/15/2027 |
|
|
4,075,000
|
3,965,962
|
U.S.
Treasury Notes, 0.5%, 6/30/2027 |
|
|
6,500,000
|
5,739,043
|
U.S.
Treasury Notes, 0.375%, 9/30/2027 |
|
|
5,672,000
|
4,943,059
|
U.S.
Treasury Notes, 1.75%, 11/15/2029 |
|
|
4,500,000
|
4,148,438
|
U.S.
Treasury Notes, 1.5%, 2/15/2030 |
|
|
5,043,500
|
4,549,395
|
U.S.
Treasury Notes, 1.875%, 2/15/2032 |
|
|
6,605,500
|
6,031,647
|
|
|
|
|
$
120,157,145 |
Utilities
- Electric Power – 3.3% |
Enel
Americas S.A., 4%, 10/25/2026 |
|
$
|
252,000
|
$
244,634 |
FirstEnergy
Corp., 4.4%, 7/15/2027 |
|
|
2,827,000
|
2,742,727
|
ITC
Holdings Corp., 2.95%, 5/14/2030 (n) |
|
|
3,000,000
|
2,710,458
|
Liberty
Utilities Finance Co., 2.05%, 9/15/2030 (n) |
|
|
3,000,000
|
2,492,082
|
Pacific
Gas & Electric Co., 1.7%, 11/15/2023 |
|
|
435,000
|
422,458
|
Pacific
Gas & Electric Co., 3.25%, 2/16/2024 |
|
|
926,000
|
913,476
|
Pacific
Gas & Electric Co., 2.1%, 8/01/2027 |
|
|
952,000
|
820,091
|
Southern
California Edison, 6.65%, 4/01/2029 |
|
|
816,000
|
889,240
|
Transelec
S.A., 4.625%, 7/26/2023 (n) |
|
|
927,000
|
936,279
|
Portfolio of
Investments (unaudited) – continued
Issuer
|
|
|
Shares/Par
|
Value
($) |
Bonds
– continued |
Utilities
- Electric Power – continued |
Transelec
S.A., 4.25%, 1/14/2025 (n) |
|
$
|
228,000
|
$
225,722 |
|
|
|
|
$
12,397,167 |
Total
Bonds (Identified Cost, $394,298,761) |
|
$374,519,183
|
Investment
Companies (h) – 0.0% |
Money
Market Funds – 0.0% |
|
MFS
Institutional Money Market Portfolio, 0.28% (v) (Identified Cost, $204,291) |
|
|
204,291
|
$
204,291 |
|
|
Other
Assets, Less Liabilities – 0.7% |
|
2,567,375
|
Net
Assets – 100.0% |
$377,290,849
|
(f)
|
All or a
portion of the security has been segregated as collateral for open futures contracts. |
(h)
|
An
affiliated issuer, which may be considered one in which the fund owns 5% or more of the outstanding voting securities, or a company which is under common control. At period end, the aggregate values of the fund's investments in affiliated issuers
and in unaffiliated issuers were $204,291 and $374,519,183, respectively. |
(i)
|
Interest
only security for which the fund receives interest on notional principal (Par amount). Par amount shown is the notional principal and does not reflect the cost of the security. |
(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 $85,157,515, representing 22.6% of net assets. |
(v)
|
Affiliated
issuer that is available only to investment companies managed by MFS. The rate quoted for the MFS Institutional Money Market Portfolio is the annualized seven-day yield of the fund at period end. |
(z)
|
Restricted
securities are not registered under the Securities Act of 1933 and are subject to legal restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are subsequently
registered. Disposal of these securities may involve time-consuming negotiations and prompt sale at an acceptable price may be difficult. The fund holds the following restricted securities: |
Restricted
Securities |
Acquisition
Date |
Cost
|
Value
|
ReadyCap
Commercial Mortgage Trust, 2021-FL7, “A”, FLR, 1.867% (LIBOR - 1mo. + 1.2%), 11/25/2036 |
11/12/21
|
$649,143
|
$637,867
|
ReadyCap
Commercial Mortgage Trust, 2021-FL7, “AS”, FLR, 2.167% (LIBOR - 1mo. + 1.5%), 11/25/2036 |
11/12/21
|
199,500
|
196,087
|
Total
Restricted Securities |
|
|
$833,954
|
%
of Net assets |
|
|
0.2%
|
The
following abbreviations are used in this report and are defined: |
AAC
|
Ambac
Assurance Corp. |
AGM
|
Assured
Guaranty Municipal |
CLO
|
Collateralized
Loan Obligation |
CMT
|
Constant
Maturity Treasury |
Portfolio of
Investments (unaudited) – continued
FLR
|
Floating Rate. Interest rate
resets periodically based on the parenthetically disclosed reference rate plus a spread (if any). The period-end rate reported may not be the current rate. All reference rates are USD unless otherwise noted. |
LIBOR
|
London
Interbank Offered Rate |
NPFG
|
National
Public Finance Guarantee Corp. |
REIT
|
Real
Estate Investment Trust |
SOFR
|
Secured
Overnight Financing Rate |
Derivative
Contracts at 4/30/22
Futures
Contracts |
Description
|
Long/
Short |
Currency
|
Contracts
|
Notional
Amount |
Expiration
Date |
Value/Unrealized
Appreciation (Depreciation) |
Asset
Derivatives |
Interest
Rate Futures |
|
|
U.S.
Treasury Ultra Note 10 yr |
Short
|
USD
|
5
|
$645,000
|
June
– 2022 |
$53,306
|
At April 30, 2022, the fund had
liquid securities with an aggregate value of $14,033 to cover any collateral or margin obligations for certain derivative contracts.
Financial Statements
Statement of Assets and Liabilities
At 4/30/22 (unaudited)
This statement represents your fund’s balance sheet,
which details the assets and liabilities comprising the total value of the fund.
Assets
|
|
Investments
in unaffiliated issuers, at value (identified cost, $394,298,761) |
$374,519,183
|
Investments
in affiliated issuers, at value (identified cost, $204,291) |
204,291
|
Receivables
for |
|
Net
daily variation margin on open futures contracts |
1,252
|
Investments
sold |
1,854,290
|
Interest
|
2,621,412
|
Other
assets |
76,876
|
Total
assets |
$379,277,304
|
Liabilities
|
|
Payables
for |
|
Distributions
|
$105,120
|
Investments
purchased |
1,742,928
|
Payable
to affiliates |
|
Investment
adviser |
15,288
|
Administrative
services fee |
597
|
Transfer
agent and dividend disbursing costs |
4,931
|
Payable
for independent Trustees' compensation |
1,430
|
Accrued
expenses and other liabilities |
116,161
|
Total
liabilities |
$1,986,455
|
Net
assets |
$377,290,849
|
Net
assets consist of |
|
Paid-in
capital |
$411,477,579
|
Total
distributable earnings (loss) |
(34,186,730)
|
Net
assets |
$377,290,849
|
Shares
of beneficial interest outstanding |
116,054,480
|
Net
asset value per share (net assets of $377,290,849 / 116,054,480 shares of beneficial interest outstanding) |
$3.25
|
See Notes to Financial
Statements
Financial Statements
Statement of Operations
Six months ended 4/30/22 (unaudited)
This statement describes how much your fund earned in
investment income and accrued in expenses. It also describes any gains and/or losses generated by fund operations.
Net
investment income (loss) |
|
Income
|
|
Interest
|
$5,288,811
|
Dividends
from affiliated issuers |
5,284
|
Total
investment income |
$5,294,095
|
Expenses
|
|
Management
fee |
$965,253
|
Transfer
agent and dividend disbursing costs |
41,726
|
Administrative
services fee |
33,072
|
Independent
Trustees' compensation |
4,465
|
Stock
exchange fee |
55,926
|
Custodian
fee |
13,045
|
Shareholder
communications |
76,301
|
Audit
and tax fees |
43,266
|
Legal
fees |
6,137
|
Miscellaneous
|
22,493
|
Total
expenses |
$1,261,684
|
Net
investment income (loss) |
$4,032,411
|
Realized
and unrealized gain (loss) |
Realized
gain (loss) (identified cost basis) |
|
Unaffiliated
issuers |
$609,417
|
Futures
contracts |
(42,999)
|
Net
realized gain (loss) |
$566,418
|
Change
in unrealized appreciation or depreciation |
|
Unaffiliated
issuers |
$(32,395,966)
|
Futures
contracts |
(32,938)
|
Net
unrealized gain (loss) |
$(32,428,904)
|
Net
realized and unrealized gain (loss) |
$(31,862,486)
|
Change
in net assets from operations |
$(27,830,075)
|
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 |
|
4/30/22
(unaudited) |
10/31/21
|
Change
in net assets |
|
|
From
operations |
|
|
Net
investment income (loss) |
$4,032,411
|
$9,189,818
|
Net
realized gain (loss) |
566,418
|
4,708,337
|
Net
unrealized gain (loss) |
(32,428,904)
|
(11,737,007)
|
Change
in net assets from operations |
$(27,830,075)
|
$2,161,148
|
Distributions
to shareholders |
$(4,633,799)
|
$(14,680,602)
|
Tax
return of capital distributions to shareholders |
$—
|
$(23,172,859)
|
Distributions
from other sources |
$(12,849,737)
|
$—
|
Change
in net assets from fund share transactions |
$222,731
|
$229,698
|
Total
change in net assets |
$(45,090,880)
|
$(35,462,615)
|
Net
assets |
|
|
At
beginning of period |
422,381,729
|
457,844,344
|
At
end of period |
$377,290,849
|
$422,381,729
|
See Notes to Financial
Statements
Financial
Statements
Financial Highlights
The financial highlights table is intended to help you
understand the fund's financial performance for the semiannual period and the past 5 fiscal years. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund share class (assuming reinvestment of all distributions) held for the entire period.
|
Six months ended |
Year
ended |
|
4/30/22
(unaudited) |
10/31/21
|
10/31/20
|
10/31/19
|
10/31/18
|
10/31/17
|
Net
asset value, beginning of period |
$3.64
|
$3.95
|
$4.04
|
$4.03
|
$4.46
|
$4.80
|
Income
(loss) from investment operations |
Net
investment income (loss) (d) |
$0.03
|
$0.08
|
$0.09
|
$0.10
|
$0.10
|
$0.10(c)
|
Net
realized and unrealized gain (loss) |
(0.27)
|
(0.06)
|
0.16
|
0.25
|
(0.17)
|
(0.05)
|
Total
from investment operations |
$(0.24)
|
$0.02
|
$0.25
|
$0.35
|
$(0.07)
|
$0.05
|
Less
distributions declared to shareholders |
From
net investment income |
$(0.04)
|
$(0.10)
|
$(0.11)
|
$(0.10)
|
$(0.10)
|
$(0.02)
|
From
net realized gain |
—
|
(0.03)
|
(0.04)
|
—
|
—
|
—
|
From
tax return of capital |
—
|
(0.20)
|
(0.19)
|
(0.24)
|
(0.26)
|
(0.37)
|
From
other sources |
(0.11)
|
—
|
—
|
—
|
—
|
—
|
Total
distributions declared to shareholders |
$(0.15)
|
$(0.33)
|
$(0.34)
|
$(0.34)
|
$(0.36)
|
$(0.39)
|
Net
increase from repurchase of capital shares |
$—
|
$—
|
$0.00(w)
|
$0.00(w)
|
$0.00(w)
|
$—
|
Net
asset value, end of period (x) |
$3.25
|
$3.64
|
$3.95
|
$4.04
|
$4.03
|
$4.46
|
Market
value, end of period |
$3.00
|
$3.63
|
$3.73
|
$3.77
|
$3.69
|
$4.24
|
Total
return at market value (%) |
(13.53)(n)
|
6.18
|
8.24
|
11.87
|
(4.56)
|
4.30
|
Total
return at net asset value (%) (j)(r)(s)(x) |
(6.58)(n)
|
0.54
|
6.96
|
9.77
|
(0.90)
|
1.72(c)
|
Ratios
(%) (to average net assets) and Supplemental data: |
Expenses
|
0.63(a)
|
0.62
|
0.64
|
0.65
|
0.64
|
0.61(c)
|
Net
investment income (loss) |
2.01(a)
|
2.08
|
2.33
|
2.58
|
2.33
|
2.07(c)
|
Portfolio
turnover |
14(n)
|
20
|
43
|
18
|
50
|
65
|
Net
assets at end of period (000 omitted) |
$377,291
|
$422,382
|
$457,844
|
$472,422
|
$473,577
|
$524,864
|
See Notes to Financial Statements
Financial
Highlights – continued
(a)
|
Annualized.
|
(c)
|
Amount
reflects a one-time reimbursement of expenses by the custodian (or former custodian) without which net investment income and performance would be lower and expenses would be higher. |
(d)
|
Per share
data is based on average shares outstanding. |
(j)
|
Total return
at net asset value is calculated using the net asset value of the fund, not the publicly traded price and therefore may be different than the total return at market value. |
(n)
|
Not
annualized. |
(r)
|
Certain
expenses have been reduced without which performance would have been lower. |
(s)
|
From time to
time the fund may receive proceeds from litigation settlements, without which performance would be lower. |
(w)
|
Per share
amount was less than $0.01. |
(x)
|
The
net asset values and total returns at net asset value have been calculated on net assets which include adjustments made in accordance with U.S. generally accepted accounting principles required at period end for financial reporting purposes.
|
See Notes to Financial Statements
Notes to Financial
Statements
(unaudited)
(1) Business and Organization
MFS Intermediate Income Trust (the fund) is organized as a
Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as a diversified closed-end management investment company.
The fund is an investment company and accordingly follows the
investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services - Investment Companies.
(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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. In the preparation of these
financial statements, management has evaluated subsequent events occurring after the date of the fund’s Statement of Assets and Liabilities through the date that the financial statements were issued.
The fund invests 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 market,
economic, industrial, political, regulatory, geopolitical, environmental, public health, and other conditions.
Balance Sheet Offsetting
— The fund's accounting policy with respect to balance sheet offsetting is that, absent an event of default by the counterparty or a termination of the agreement, the International Swaps and Derivatives Association (ISDA) Master Agreement, or
similar agreement, does not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the fund and the applicable counterparty. The fund's right to
setoff may be restricted or prohibited by the bankruptcy or insolvency laws of the particular jurisdiction to which a specific master netting agreement counterparty is subject. Balance sheet offsetting disclosures, to the extent applicable to the
fund, have been included in the fund’s Significant Accounting Policies note under the captions for each of the fund’s in-scope financial instruments and transactions.
Investment Valuations
— Debt instruments and floating rate loans, including restricted debt instruments, are generally valued at an evaluated or composite bid as provided by a third-party 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 on their
primary exchange as provided by a third-party pricing service. Futures contracts for which there were no trades that day for a particular position are generally valued at the closing bid quotation on their primary exchange as provided by a
third-party pricing service. Open-end investment companies are generally valued at net asset value per share. Securities and other assets generally valued on the basis
of information from a third-party pricing service may also be valued at a broker/dealer bid quotation. In determining values, third-party pricing services can utilize both transaction data and market
information such as yield, quality, coupon rate, maturity, type of issue, trading
Notes to Financial
Statements (unaudited) - continued
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 provided by a third-party pricing service.
The Board of Trustees has delegated primary responsibility for
determining or causing to be determined the value of the fund’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 fund’s valuation policies and
procedures, market quotations are not considered to be readily available for most types of debt instruments and floating rate loans and many types of derivatives. These investments are generally valued at fair value based on information from
third-party 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 fund’s net asset value, or after the halt 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. The adviser generally relies on third-party 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 fund’s net asset value can differ depending on the source and method used to determine value. When fair valuation is used, the value of an investment used to determine the fund’s net asset
value may differ from quoted or published prices for the same investment. There can be no assurance that the fund could obtain the fair value assigned to an investment if it were to sell the investment at the same time at which the fund determines
its net asset value per share.
Various inputs are used in
determining the value of the fund's assets or liabilities. These inputs are categorized into three broad levels. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an
investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fund's assessment of the significance of a particular input to the fair value measurement in its entirety
requires judgment, and considers factors specific to the investment. Level 1 includes unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 includes other significant observable market-based inputs (including quoted
prices for similar securities, interest rates, prepayment speed, and credit risk). Level 3 includes unobservable inputs, which may include the adviser's own assumptions in determining the fair value of investments. Other financial instruments are
derivative instruments, such as futures contracts. The following is a summary of the levels used as of April 30, 2022 in valuing the fund's assets and liabilities:
Notes to Financial
Statements (unaudited) - continued
Financial
Instruments |
Level
1 |
Level
2 |
Level
3 |
Total
|
U.S.
Treasury Bonds & U.S. Government Agencies & Equivalents |
$—
|
$120,311,934
|
$—
|
$120,311,934
|
Non
- U.S. Sovereign Debt |
—
|
7,877,750
|
—
|
7,877,750
|
Municipal
Bonds |
—
|
24,098,060
|
—
|
24,098,060
|
U.S.
Corporate Bonds |
—
|
131,706,674
|
—
|
131,706,674
|
Residential
Mortgage-Backed Securities |
—
|
2,678,570
|
—
|
2,678,570
|
Commercial
Mortgage-Backed Securities |
—
|
9,224,593
|
—
|
9,224,593
|
Asset-Backed
Securities (including CDOs) |
—
|
5,217,190
|
—
|
5,217,190
|
Foreign
Bonds |
—
|
73,404,412
|
—
|
73,404,412
|
Mutual
Funds |
204,291
|
—
|
—
|
204,291
|
Total
|
$204,291
|
$374,519,183
|
$—
|
$374,723,474
|
Other
Financial Instruments |
|
|
|
|
Futures
Contracts – Assets |
$53,306
|
$—
|
$—
|
$53,306
|
For further information regarding
security characteristics, see the Portfolio of Investments.
Derivatives — The fund
uses derivatives primarily to increase or decrease exposure to a particular market or segment of the market, or security, to increase or decrease interest rate or currency exposure, or as alternatives to direct investments. Derivatives are used for
hedging or non-hedging purposes. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. When the fund uses derivatives as an investment to increase market exposure, or for hedging purposes, gains and losses from
derivative instruments may be substantially greater than the derivative’s original cost.
The derivative instruments used by the fund during the period
were futures contracts. Depending on the type of derivative, a fund may exit a derivative position by entering into an offsetting transaction with a counterparty or exchange, negotiating an agreement with the derivative counterparty, or novating the
position to a third party. The fund may be unable to promptly close out a futures position in instances where the daily fluctuation in the price for that type of future exceeds the daily limit set by the exchange. The fund's period end derivatives,
as presented in the Portfolio of Investments and the associated Derivative Contract tables, generally are indicative of the volume of its derivative activity during the period.
The following table presents, by major type of derivative
contract, the fair value, on a gross basis, of the asset and liability components of derivatives held by the fund at April 30, 2022 as reported in the Statement of Assets and Liabilities:
|
|
Fair
Value (a) |
|
Risk
|
Derivative
Contracts |
Asset
Derivatives |
|
Interest
Rate |
Futures
Contracts |
$53,306
|
|
(a)
|
Values
presented in this table for futures contracts correspond to the values reported in the Portfolio of Investments. Only the current day net variation margin for futures contracts is separately reported within the Statement of Assets and Liabilities.
|
Notes to Financial
Statements (unaudited) - continued
The following table presents, by major type of derivative
contract, the realized gain (loss) on derivatives held by the fund for the six months ended April 30, 2022 as reported in the Statement of Operations:
Risk
|
Futures
Contracts |
Interest
Rate |
$(42,999)
|
The following table presents, by
major type of derivative contract, the change in unrealized appreciation or depreciation on derivatives held by the fund for the six months ended April 30, 2022 as reported in the Statement of Operations:
Risk
|
Futures
Contracts |
Interest
Rate |
$(32,938)
|
Derivative counterparty credit risk
is managed through formal evaluation of the creditworthiness of all potential counterparties. On certain, but not all, uncleared derivatives, the fund attempts to reduce its exposure to counterparty credit risk whenever possible by entering into an
ISDA Master Agreement on a bilateral basis. The ISDA Master Agreement gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in the credit quality of the other
party. Upon an event of default or a termination of the ISDA Master Agreement, the non-defaulting party has the right to close out all transactions traded under such agreement and to net amounts owed under each agreement to one net amount payable by
one party to the other. This right to close out and net payments across all transactions traded under the ISDA Master Agreement could result in a reduction of the fund's credit risk to such counterparty equal to any amounts payable by the fund under
the applicable transactions, if any.
Collateral and
margin requirements differ by type of derivative. For cleared derivatives (e.g., futures contracts, cleared swaps, and exchange-traded options), margin requirements are set by the clearing broker and the clearing house and collateral, in the form of
cash or securities, is posted by the fund directly with the clearing broker. Collateral terms are counterparty agreement specific for uncleared derivatives (e.g., forward foreign currency exchange contracts, uncleared swap agreements, and uncleared
options) and collateral, in the form of cash and securities, is held in segregated accounts with the fund's custodian in connection with these agreements. For derivatives traded under an ISDA Master Agreement, which contains a collateral support
annex, the collateral requirements are netted across all transactions traded under such counterparty-specific agreement and an amount is posted from one party to the other to collateralize such obligations. Cash that has been segregated or delivered
to cover the fund's collateral or margin obligations under derivative contracts, if any, will be reported separately in the Statement of Assets and Liabilities as restricted cash for uncleared derivatives and/or deposits with brokers for cleared
derivatives. Securities pledged as collateral or margin for the same purpose, if any, are noted in the Portfolio of Investments. The fund may be required to make payments of interest on uncovered collateral or margin obligations with the broker. Any
such payments are included in “Miscellaneous” expense in the Statement of Operations.
Notes to Financial
Statements (unaudited) - continued
Futures Contracts — The
fund entered into futures contracts which may be used to hedge against or obtain broad market exposure, interest rate exposure, currency exposure, or to manage duration. A futures contract represents a commitment for the future purchase or sale of
an asset at a specified price on a specified date.
Upon entering into a futures contract, the fund is required to
deposit with the broker, either in cash or securities, an initial margin in an amount equal to a specified percentage of the notional amount of the contract. Subsequent payments (variation margin) are made or received by the fund each day, depending
on the daily fluctuations in the value of the contract, and are recorded for financial statement purposes as unrealized gain or loss by the fund until the contract is closed or expires at which point the gain or loss on futures contracts is
realized.
The fund bears the risk of interest rates,
exchange rates or securities prices moving unexpectedly, in which case, the fund may not achieve the anticipated benefits of the futures contracts and may realize a loss. While futures contracts may present less counterparty risk to the fund since
the contracts are exchange traded and the exchange’s clearinghouse guarantees payments to the broker, there is still counterparty credit risk due to the insolvency of the broker. The fund’s maximum risk of loss due to counterparty credit
risk is equal to the margin posted by the fund to the broker plus any gains or minus any losses on the outstanding futures contracts.
Indemnifications — Under
the fund'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 fund. Additionally, in the normal course of business, the fund enters
into agreements with service providers that may contain indemnification clauses. The fund's maximum exposure under these agreements is unknown as this would involve future claims that may be made against the fund 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. Interest payments received in additional securities are recorded on the
ex-interest date in an amount equal to the value of the security on such date. In determining the net gain or loss on securities sold, the cost of securities is determined on the identified cost
basis.
The fund 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 fund or in unrealized gain/loss if the security
is still held by the fund. Any other proceeds from litigation not related to portfolio holdings are reflected as other income in the Statement of Operations.
To mitigate the counterparty credit risk on TBA transactions,
mortgage dollar rolls, and other types of forward settling mortgage-backed and asset-backed security transactions, the fund whenever possible enters into a Master Securities Forward Transaction Agreement (“MSFTA”) on a bilateral basis
with each of the counterparties with whom it undertakes a significant volume of transactions. The MSFTA gives each party to the agreement the right to terminate all transactions traded under such agreement if there is a specified deterioration in
the credit quality of the other party. Upon an event of default or a termination of the MSFTA, the non-defaulting party has
Notes to Financial
Statements (unaudited) - continued
the right to close out all transactions traded under such agreement and to net
amounts owed under each transaction to one net amount payable by one party to the other. This right to close out and net payments across all transactions traded under the MSFTA could result in a reduction of the fund's credit risk to such
counterparty equal to any amounts payable by the fund under the applicable transactions, if any.
For mortgage-backed and asset-backed securities traded under a
MSFTA, the collateral and margining requirements are contract specific. Collateral amounts across all transactions traded under such agreement are netted and an amount is posted from one party to the other to collateralize such obligations. Cash
that has been pledged to cover the fund's collateral or margin obligations under a MSFTA, if any, will be reported separately on the Statement of Assets and Liabilities as restricted cash. Securities pledged as collateral or margin for the same
purpose, if any, are noted in the Portfolio of Investments.
Tax Matters and Distributions
— The fund 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. As a result, no provision for federal
income tax is required. The fund’s federal tax returns, when filed, will remain subject to examination by the Internal Revenue Service for a three year period. Management has analyzed the fund’s tax positions taken on federal and state
tax returns for all open tax years and does not believe that there are any uncertain tax positions that require recognition of a tax liability. Foreign taxes, if any, have been accrued by the fund in the accompanying financial statements in
accordance with the applicable foreign tax law. Foreign income taxes may be withheld by certain countries in which the fund invests. Additionally, capital gains realized by the fund on securities issued in or by certain foreign countries may be
subject to capital gains tax imposed by those countries.
Distributions to shareholders are recorded on the ex-dividend
date. The fund seeks to pay monthly distributions based on an annual rate of 8.50% of the fund’s average monthly net asset value. As a result, distributions may exceed actual earnings which may result in a tax return of capital. 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.
Book/tax differences primarily relate to amortization and
accretion of debt securities.
For the six months ended
April 30, 2022, the amount of distributions estimated to be a tax return of capital was approximately $12,849,737 which is reported as distributions from other sources in the Statements of Changes in Net Assets. All or a portion of this amount may
be redesignated as capital gains at fiscal year end.
Notes to Financial
Statements (unaudited) - continued
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 for the last fiscal year is as follows:
|
Year
ended 10/31/21 |
Ordinary
income (including any short-term capital gains) |
$11,019,633
|
Long-term
capital gains |
3,660,969
|
Tax
return of capital (b) |
23,172,859
|
Total
distributions |
$37,853,461
|
(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 4/30/22 |
|
Cost
of investments |
$395,953,722
|
Gross
appreciation |
574,189
|
Gross
depreciation |
(21,804,437)
|
Net
unrealized appreciation (depreciation) |
$
(21,230,248) |
As
of 10/31/21 |
|
Net
unrealized appreciation (depreciation) |
11,126,881
|
The aggregate cost above includes
prior fiscal year end tax adjustments, if applicable.
(3) Transactions with Affiliates
Investment Adviser — The
fund has an investment advisory agreement with MFS to provide overall investment management and related administrative services and facilities to the fund. The management fee is computed daily and paid
monthly at an annual rate of 0.32% of the fund’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 fund's average daily net assets. This
written agreement will continue until modified by the fund's Board of Trustees, but such agreement will continue at least until October 31, 2022. For the six months ended April 30, 2022, the fund’s average daily net assets and gross income
fees did not meet the thresholds required to waive the management fee under this agreement. The management fee, from net assets and gross income, incurred for the six months ended April 30, 2022 was equivalent to an annual effective rate of 0.48% of
the fund’s average daily net assets.
Transfer
Agent — The fund engages Computershare Trust Company, N.A. (“Computershare”) as the sole transfer agent for the fund. MFS Service Center, Inc. (MFSC) monitors and supervises the activities of
Computershare for an agreed upon fee approved by the Board of Trustees. For the six months ended April 30, 2022, these fees paid to MFSC amounted to $14,907.
Notes to Financial
Statements (unaudited) - continued
Administrator — MFS
provides certain financial, legal, shareholder communications, compliance, and other administrative services to the fund. Under an administrative services agreement, the fund reimburses MFS the costs incurred to provide these services. The fund is
charged an annual fixed amount of $17,500 plus a fee based on average daily net assets. The administrative services fee incurred for the six months ended April 30, 2022 was equivalent to an annual effective rate of 0.0165% of the fund's average
daily net assets.
Trustees’ and
Officers’ Compensation — The fund pays compensation to independent Trustees in the form of a retainer, attendance fees, and additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to Trustees or officers of the fund who are also officers of the investment adviser, all of whom receive remuneration from MFS for their services to the fund. Certain officers and Trustees of the fund are officers or
directors of MFS and MFSC.
Other — The fund invests in the MFS Institutional Money Market Portfolio which is managed by MFS and seeks current income consistent with preservation of capital and liquidity. This money market fund does not pay a
management fee to MFS but does incur investment and operating costs.
(4) Portfolio Securities
For the six months ended April 30, 2022, purchases and sales of
investments, other than short-term obligations, were as follows:
|
Purchases
|
Sales
|
U.S.
Government securities |
$16,889,530
|
$26,056,978
|
Non-U.S.
Government securities |
36,302,011
|
37,166,077
|
(5) Shares of Beneficial
Interest
The fund'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 fund of up to 10% annually of its own shares of beneficial interest.
During the six months ended April 30, 2022 and the year ended October 31,
2021, the fund did not repurchase any shares. Transactions in fund shares were as follows:
|
Six
months ended 4/30/22 |
|
Year
ended 10/31/21 |
|
Shares
|
Amount
|
|
Shares
|
Amount
|
Shares
issued to shareholders in reinvestment of distributions |
61,956
|
$222,731
|
|
61,996
|
$229,698
|
(6) Line of Credit
The fund and certain other funds managed by MFS participate in
a $1.45 billion unsecured committed line of credit of which $1.2 billion is reserved for use by the fund and certain other MFS U.S. funds. The line of credit is provided by a syndicate of banks under a credit agreement. 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 highest of Daily Simple SOFR plus 0.10%, the Federal Funds Effective Rate, and the Overnight Bank Funding Rate, plus an agreed
upon spread. A commitment fee, based on the average daily, unused portion of the committed line of credit, is allocated
Notes to Financial
Statements (unaudited) - continued
among the participating funds. In addition, the fund and other funds managed
by MFS have established unsecured uncommitted borrowing arrangements with certain banks for temporary financing needs. Interest is charged to each fund, based on its borrowings, at rates equal to customary reference rates plus an agreed upon spread.
For the six months ended April 30, 2022, the fund’s commitment fee and interest expense were $777 and $0, respectively, and are included in “Miscellaneous” expense in the Statement of Operations.
(7) Investments in Affiliated Issuers
An affiliated issuer may be considered one in which the fund
owns 5% or more of the outstanding voting securities, or a company which is under common control. For the purposes of this report, the following were affiliated issuers:
Affiliated
Issuers |
Beginning
Value |
Purchases
|
Sales
Proceeds |
Realized
Gain (Loss) |
Change
in Unrealized Appreciation or Depreciation |
Ending
Value |
MFS
Institutional Money Market Portfolio |
$3,207,574
|
$57,772,990
|
$60,776,273
|
$—
|
$—
|
$204,291
|
Affiliated
Issuers |
Dividend
Income |
Capital
Gain Distributions |
MFS
Institutional Money Market Portfolio |
$5,284
|
$—
|
(8) LIBOR Transition
Certain of the fund's investments, including investments in
certain debt instruments and derivatives (if any), as well as borrowings by the fund and certain other contractual arrangements of the fund, may be based on the London Interbank Offered Rate (“LIBOR”). In 2017, the regulatory authority
that oversees financial services firms in the United Kingdom announced plans to transition away from LIBOR by the end of 2021. In March 2021, the administrator of LIBOR announced the extension of the publication of the more commonly used U.S. dollar
LIBOR settings to the end of June 2023. Although the full impacts of the transition away from LIBOR are not fully known, the transition may result in, among other things, an increase in volatility or illiquidity of the markets for instruments that
currently rely on LIBOR to determine interest rates and this could have an adverse impact on the fund's performance. With respect to the fund's accounting for investments, including investments in certain debt instruments and derivatives, as well as
borrowings by the fund and any other contractual arrangements of the fund that undergo reference rate-related modifications as a result of the transition, management will rely upon the relief provided by FASB Codification Topic 848 – Reference
Rate Reform (Topic 848). The guidance in Topic 848 permits the fund to account for those modified contracts as a continuation of the existing contracts. Management is still evaluating the impact to the fund of the June 30, 2023 planned
discontinuation of the more commonly used U.S. dollar LIBOR settings.
Notes to Financial
Statements (unaudited) - continued
(9) Russia and Ukraine Conflict
The market disruptions, which began in late February 2022,
associated with geopolitical events related to the conflict between Russia and Ukraine may adversely affect the value of the fund’s assets and thus the fund’s performance. Management continues to monitor these events and to evaluate the
related impacts, if any, to the fund.
Report of Independent
Registered Public Accounting Firm
To the Trustees and
Shareholders of MFS Intermediate Income Trust:
Results of
Review of Interim Financial Statements
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, 2022, and the related statements of operations and changes in net assets and the
financial highlights for the six-month period ended April 30, 2022, and the related notes. 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 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) (PCAOB), the statement of assets and liabilities, including the portfolio of investments, as of October 31, 2021 (not presented herein), the related statement of operations for the year
ended October 31, 2021 (not presented herein), the statements of changes in net assets for the years ended October 31, 2021 and October 31, 2020 (2020 not presented herein) and the financial highlights for each of the five years in the period ended
October 31, 2021; and in our report dated December 15, 2021, we expressed an unqualified opinion on those financial statements.
Basis for Review Results
These interim financial statements and financial highlights are
the responsibility of the Trust's management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our review in accordance with the standards of the
PCAOB. 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 PCAOB, 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.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
June 15, 2022
We have served as the auditor of one or more of the MFS
investment companies since 1924.
Proxy
Voting Policies and Information
MFS votes proxies on
behalf of the fund pursuant to proxy voting policies and procedures that are available without charge, upon request, by calling 1-800-225-2606, by visiting mfs.com/proxyvoting, or by visiting the SEC’s
Web site at http://www.sec.gov.
Information regarding how the fund voted proxies relating to
portfolio securities during the most recent twelve-month period ended June 30 is available by August 31 of each year without charge by visiting mfs.com/proxyvoting, or by visiting the SEC’s Web site at http://www.sec.gov.
Quarterly Portfolio Disclosure
The fund files a complete schedule of portfolio holdings with
the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s Web site at
http://www.sec.gov. A shareholder can obtain the portfolio holdings report for the first and third quarters of the fund's fiscal year at
mfs.com/closedendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Prospectus and Reports” tab.
Further Information
From time to time, MFS may post important information about the
fund or the MFS Funds on the MFS Web site (mfs.com). This information is available at https://www.mfs.com/announcements or at
mfs.com/closedendfunds by choosing the fund's name and then scrolling to the “Resources” section and clicking on the “Announcements” tab, if any.
Additional information about the fund (e.g., performance,
dividends and the fund’s price history) is also available at mfs.com/closedendfunds by choosing the fund's name, if any.
INFORMATION ABOUT FUND CONTRACTS AND LEGAL CLAIMS
The fund has entered into contractual arrangements with an
investment adviser, administrator, transfer agent, and custodian who each provide services to the fund. Unless expressly stated otherwise, shareholders are not parties to, or intended beneficiaries of these contractual arrangements, and these
contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the fund.
Under the Trust’s By-Laws and Declaration of Trust, any
claims asserted against or on behalf of the MFS Funds, including claims against Trustees and Officers, must be brought in state and federal courts located within the Commonwealth of Massachusetts.
CONTACT US
TRANSFER AGENT, REGISTRAR, AND
DIVIDEND DISBURSING
AGENT
CALL
1-800-637-2304
9 a.m. to 5 p.m. Eastern time
WRITE
Computershare Trust Company, N.A.
P.O. Box 505005
Louisville, KY 40233-5005
New York Stock Exchange Symbol: MIN
A copy of the notice transmitted to the Registrants shareholders in reliance on Rule 30e-3 of the Investment
Company Act of 1940, as amended that contains disclosure specified by paragraph (c)(3) of Rule 30e-3 is attached hereto as
EX-99.30e-3Notice.