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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04813
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Standish, Ayer & Wood Investment Trust
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(Exact name of registrant as specified in charter)
One Boston Place Boston, MA 02108
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(Address of principal executive offices) (Zip code)
Denise Kneeland
One Boston Place Boston MA 02108
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(Name and address of agent for service)
Registrant's telephone number, including area code: 800-221-4795
Date of fiscal year end: 12/31/2003
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Date of reporting period: 1/1/03 - 6/30/03
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles. A registrant is required to disclose the
information specified by Form N-CSR, and the Commission will make this
information public. A registrant is not required to respond to the collection of
information contained in Form N-CSR unless the Form displays a currently valid
Office of Management and Budget ("OMB") control number. Please direct comments
concerning the accuracy of the information collection burden estimate and any
suggestions for reducing the burden to Secretary, Securities and Exchange
Commission, 450 Fifth Street, NW, Washington, DC 0549-0609. The OMB has reviewed
this collection of information under the clearance requirements of 44 U.S.C. ss.
3507.
Item 1. Reports to Stockholders.
(Semi-Annual Report for the period 1/1/03 through 6/30/03 is filed herewith)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $11,703,762 (Note 7)) (identified cost,
$97,626,396) $99,200,960
Cash 1,384
Receivable for investments sold 18,388,525
Receivable for Fund shares sold 1,589
Interest receivable 437,572
Receivable for delayed delivery transactions (Note 8) 309,469
Prepaid expenses 10,935
-----------
Total assets 118,350,434
LIABILITIES
Payable for investments purchased $26,994,856
Payable for variation margin on open financial futures
contracts (Note 6) 9,375
Payable upon return of securities loaned (Note 7) 11,967,837
Payable for delayed delivery transactions (Note 8) 11,567,344
Options written, at value (Note 6) (premiums received,
$15,277) 18,941
Accrued accounting, custody and transfer agent fees 17,763
Accrued trustees' fees and expenses (Note 2) 2,129
Accrued expenses and other liabilities 18,473
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Total liabilities 50,596,718
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NET ASSETS $67,753,716
===========
NET ASSETS CONSIST OF:
Paid-in capital $64,041,832
Accumulated net realized gain 2,076,921
Undistributed net investment income 41,180
Net unrealized appreciation 1,593,783
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TOTAL NET ASSETS $67,753,716
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SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,202,391
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 21.16
===========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$7,510 (Note 7)) $1,476,116
Dividend income 984
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Total investment income 1,477,100
EXPENSES
Investment advisory fee (Note 2) $ 163,262
Accounting, custody, and transfer agent fees 76,735
Legal and audit services 19,034
Insurance expense 5,858
Trustees' fees and expenses (Note 2) 4,337
Registration fees 3,360
Miscellaneous 3,747
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Total expenses 276,333
Deduct:
Waiver of investment advisory fee (Note 2) (113,070)
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Net expenses 163,263
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Net investment income 1,313,837
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REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 2,206,823
Financial futures contracts (236,790)
Written options transactions 126,295
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Net realized gain 2,096,328
Change in unrealized appreciation (depreciation)
Investment securities (597,151)
Financial futures contracts 148,462
Written options (52,219)
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Change in net unrealized appreciation (depreciation) (500,908)
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Net realized and unrealized gain 1,595,420
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NET INCREASE IN NET ASSETS FROM OPERATIONS $2,909,257
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,313,837 $ 3,126,579
Net realized gain 2,096,328 1,225,101
Change in net unrealized appreciation (depreciation) (500,908) 1,604,794
----------- -----------
Net increase in net assets from investment operations 2,909,257 5,956,474
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DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D)
From net investment income (1,253,106) (3,279,497)
From net realized gains on investments (138,062) (1,358,763)
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Total distributions to shareholders (1,391,168) (4,638,260)
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FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 3,705,203 21,825,313
Value of shares issued to shareholders in payment of
distributions declared 513,414 2,339,137
Cost of shares redeemed (22,083,927) (4,946,160)
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Net increase (decrease) in net assets from Fund share
transactions (17,865,310) 19,218,290
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TOTAL INCREASE (DECREASE) IN NET ASSETS (16,347,221) 20,536,504
NET ASSETS
At beginning of period 84,100,937 63,564,433
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At end of period (including undistributed net investment
income of $41,180 and distributions in excess of net
investment income of $19,551, respectively) $67,753,716 $84,100,937
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS YEAR ENDED JUNE 1, 2000
ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2003 -------------------- OPERATIONS) TO
(UNAUDITED) 2002 2001(A) DECEMBER 31, 2000
------------- --------- --------- --------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.80 $ 20.41 $ 20.65 $ 20.00
------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income*(1) 0.34 0.89 1.27 0.86
Net realized and unrealized gain on investments 0.40 0.79 0.59 0.89
------- ------- ------- -------
Total from investment operations 0.74 1.68 1.86 1.75
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.35) (0.91) (1.30) (0.88)
From net realized gain on investments (0.03) (0.38) (0.80) (0.22)
------- ------- ------- -------
Total distributions to shareholders (0.38) (1.29) (2.10) (1.10)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 21.16 $ 20.80 $ 20.41 $ 20.65
======= ======= ======= =======
TOTAL RETURN+++ 3.59%++ 8.44% 9.21% 8.87%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.40%+ 0.40% 0.21% 0.00%+
Net Investment Income (to average daily net assets)* 3.22%+ 4.30% 6.00% 7.21%+
Portfolio Turnover 285%++ 391% 357% 136%++
Net Assets, End of Period (000's omitted) $67,754 $84,101 $63,564 $57,447
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* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and ratios would
have been:
Net investment income per share(1) $ 0.31 $ 0.83 $ 1.17 $ 0.78
Ratios (to average daily net assets):
Expenses 0.68%+ 0.69% 0.68% 0.72%+
Net investment income 2.94%+ 4.01% 5.53% 6.48%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income per share by
$0.004, increase net realized and unrealized gains and losses per share by
$0.004 and decrease the ratio of net investment income to average net
assets from 6.02% to 6.00%. Per share data and ratios/supplemental data for
the periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 113.1%
ASSET BACKED -- 16.7%
Advanta Home Equity Trust 1997-2 M1 7.550% 06/25/2027 $ 140,865 $ 143,933
Advanta Mortgage Loan Trust 1997-4 M1 7.040% 01/25/2029 240,403 247,465
Americredit Auto Receivables Trust 2001-D A3(a) 1.610% 09/12/2006 688,828 689,583
ANRC Auto Owner Trust 1999-A A4 6.940% 04/17/2006 252,728 253,319
BMW Vehicle Owner Trust 2001-A A3 4.700% 03/25/2005 153,729 154,741
Capital One Master Trust 2000-5 B(a) 1.555% 08/15/2006 1,000,000 1,000,455
Citibank Credit Card Issuance Trust 2003-A5 A5 2.500% 04/07/2008 1,045,000 1,061,514
Citibank Credit Card Master Trust I 1997-6 B, PO(b) 0.000% 08/15/2006 500,000 491,571
Citifinancial Mortgage Securities, Inc. 2003-2
AV1(a) 1.128% 05/25/2033 305,000 304,905
Daimler Chrysler Auto Trust 2001-C A3 4.210% 07/06/2005 1,000,000 1,011,782
Discover Card Master Trust I 1998-7 A 5.600% 05/16/2006 1,000,000 1,016,883
First Bankcard Master Credit Card Trust 2000-2A
A(a) 1.350% 04/17/2006 400,000 400,062
First USA Credit Card Master Trust 1997-7 B(a) 1.666% 05/17/2007 1,500,000 1,501,484
MBNA Master Credit Card Trust 1996-K A(a) 1.310% 03/15/2006 800,000 800,158
MBNA Master Credit Card Trust 1998-J B 5.650% 02/15/2006 800,000 807,550
Residential Asset Mortgage Products, Inc. 2003-RS1
AI1(a) 1.480% 01/25/2019 316,763 316,703
Residential Asset Securities Corp. 2000-KS5 AI3 7.040% 04/25/2026 28,513 28,495
SLMA Student Loan Trust 2003-6 A1(a) 1.280% 06/16/2008 825,000 825,258
Toyota Auto Receivables Owner Trust 2002-B A2 2.790% 12/15/2004 286,795 287,592
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Total Asset Backed (Cost $11,371,054) 11,343,453
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COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3%
Bear Stearns Mortgage 1998-2 B 6.750% 04/30/2030 64,354 63,228
Calwest Industrial Trust 2002-CALW A 144A 6.127% 02/15/2017 250,000 285,140
FNMA Grantor Trust 2001-T6 B 6.088% 05/25/2011 340,000 394,573
FNMA Grantor Trust 2002-T11 A 4.769% 04/25/2012 186,522 199,824
GNMA 2002-48 PF(a) 1.610% 05/15/2029 182,400 182,400
GNMA 2003-48 AC 2.712% 02/16/2020 284,116 285,928
Housing Securities, Inc. 1994-2 A1 6.500% 07/25/2009 53,675 56,383
Merrill Lynch Mortgage Investors, Inc. 1996-C2 D
Non-ERISA 6.960% 11/21/2028 150,000 167,531
Vendee Mortgage Trust 2003-1 A 5.750% 09/15/2012 591,099 615,033
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Total Collateralized Mortgage Obligations (Cost $2,175,485) 2,250,040
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CORPORATE -- 17.9%
BANKING -- 4.0%
BankBoston NA 6.500% 12/19/2007 125,000 142,711
Fleet National Bank 5.750% 01/15/2009 225,000 250,458
National City Corp. 6.875% 05/15/2019 375,000 453,199
SunTrust Banks, Inc. 7.750% 05/01/2010 275,000 340,645
SunTrust Banks, Inc. Sub Notes 5.545% 12/01/2017 100,000 110,435
Union Planters Bank 5.125% 06/15/2007 155,000 168,250
Wachovia Corp. 7.500% 07/15/2006 25,000 28,727
Wells Fargo & Co. 4.250% 08/15/2003 1,000,000 1,003,704
Wells Fargo & Co. 5.000% 11/15/2014 200,000 212,100
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2,710,229
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The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.7%
Republic Services, Inc. 7.125% 05/15/2009 $ 125,000 $ 147,502
Republic Services, Inc. Senior Notes 6.750% 08/15/2011 195,000 224,113
Westvaco Corp. 8.200% 01/15/2030 95,000 120,230
------------
491,845
------------
CAPITAL GOODS -- 0.1%
Boeing Co. 6.125% 02/15/2033 50,000 52,532
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COMMUNICATIONS -- 0.3%
AOL Time Warner, Inc. 7.700% 05/01/2032 155,000 180,523
------------
CONSUMER CYCLICAL -- 2.4%
Coors Brewing Co. 6.375% 05/15/2012 180,000 204,860
General Motors Corp. 8.375% 07/15/2033 225,000 221,247
International Flavors & Fragrance 6.450% 05/15/2006 275,000 304,701
New England Telephone & Telegraph Co. 7.875% 11/15/2029 145,000 188,564
News America, Inc. 6.750% 01/09/2038 250,000 281,314
Viacom, Inc. 5.625% 05/01/2007 325,000 361,260
Wal-Mart Stores 4.550% 05/01/2013 60,000 62,359
------------
1,624,305
------------
CONSUMER NONCYCLICAL -- 0.9%
Aramark Services, Inc. 7.000% 07/15/2006 95,000 105,667
Archer-Daniels-Midland 7.000% 02/01/2031 325,000 393,989
Laboratory Corp. of America Holdings 5.500% 02/01/2013 85,000 90,664
------------
590,320
------------
ELECTRIC -- 1.3%
Dominion Resources, Inc. Senior Notes 5.700% 09/17/2012 180,000 196,542
DTE Energy Co. Senior Notes 6.650% 04/15/2009 225,000 260,733
Niagara Mohawk Power 7.375% 07/01/2003 207,927 207,954
Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 200,000 240,108
------------
905,337
------------
ENERGY -- 0.9%
Amoco Co. 6.500% 08/01/2007 225,000 258,681
Conoco, Inc. Senior Notes 6.950% 04/15/2029 45,000 54,030
Progress Energy, Inc. Senior Notes 7.750% 03/01/2031 165,000 198,214
Waste Management, Inc. 7.750% 05/15/2032 70,000 87,548
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598,473
------------
FINANCIAL -- 6.2%
Allstate Corp. 5.350% 06/01/2033 80,000 78,465
Allstate Corp. Senior Notes 6.125% 12/15/2032 65,000 72,054
Allstate Corp. Senior Notes 7.200% 12/01/2009 125,000 152,574
Archstone-Smith Trust REIT 5.000% 08/15/2007 75,000 80,616
ASIF Global Financng XIX 144A 4.900% 01/17/2013 425,000 445,041
Boston Properties, Inc. 144A REIT 5.625% 04/15/2015 70,000 73,582
Boston Properties, Inc. REIT Senior Notes 6.250% 01/15/2013 170,000 183,641
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
City National Corp. Senior Notes 144A 5.125% 02/15/2013 $ 375,000 $ 385,657
EOP Operating LP 7.875% 07/15/2031 150,000 181,685
EOP Operating LP Senior Notes 7.000% 07/15/2011 145,000 169,420
Exxon Capital Corp. 6.125% 09/08/2008 140,000 161,482
Ford Motor Credit Co. 6.500% 01/25/2007 85,000 89,289
Ford Motor Credit Co. 7.250% 10/25/2011 380,000 389,694
General Electric Capital Corp. 6.750% 03/15/2032 200,000 234,208
General Motors Corp. 7.200% 01/15/2011 100,000 101,559
Goldman Sachs Group, Inc. 6.875% 01/15/2011 250,000 293,326
Jefferies Group, Inc. Senior Notes 7.500% 08/15/2007 195,000 223,315
Morgan Stanley 4.250% 05/15/2010 175,000 179,467
Morgan Stanley Dean Witter 6.600% 04/01/2012 200,000 233,371
Morgan Stanley Dean Witter Capital, Inc. 2001-PPM
A2 6.400% 02/15/2031 153,996 172,415
SLM Corp. 5.000% 04/15/2015 200,000 207,641
Travelers Property Casualty Corp. Senior Notes 6.375% 03/15/2033 100,000 109,893
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4,218,395
------------
PUBLIC UTILITY -- 0.6%
Appalachian Power Co. 5.950% 05/15/2033 85,000 85,158
Keyspan Corp. 4.650% 04/01/2013 95,000 97,770
Northern States Power Co. 8.000% 08/28/2012 45,000 56,802
Public Service Co. of CO 7.875% 10/01/2012 45,000 56,650
Wisconsin Electric Power 5.625% 05/15/2033 130,000 133,991
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430,371
------------
TRANSPORTATION -- 0.5%
CSX Corp. 7.250% 05/01/2027 40,000 47,343
Union Pacific Corp. 3.875% 02/15/2009 250,000 254,305
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301,648
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Total Corporate (Cost $11,235,701) 12,103,978
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MUNICIPAL OBLIGATIONS -- 2.9%
Illinois State 5.100% 06/01/2033 560,000 550,687
New Jersey Economic Development Authority(b) 0.000% 02/15/2017 380,000 190,650
New Jersey State Turnpike Authority 4.252% 01/01/2016 625,000 625,119
New York NY NCL 5.250% 06/01/2012 200,000 220,378
New York NY NCL 5.500% 08/01/2012 350,000 392,871
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Total Municipal Obligations (Cost $1,997,811) 1,979,705
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YANKEE BONDS -- 3.7%
British Telecom PLC 8.875% 12/15/2030 40,000 54,726
Carnival Corp. 6.650% 01/15/2028 75,000 78,875
Carnival PLC 7.875% 06/01/2027 125,000 148,984
ChevronTexaco Capital Co. 3.500% 09/17/2007 225,000 233,318
Deutsche Telekom 8.750% 06/15/2030 180,000 228,181
France Telecom 8.500% 03/01/2031 140,000 193,723
National Westminster Bank(a) 7.750% 04/29/2049 545,000 644,600
Nordea Bank Sweden AB 144A 5.250% 11/30/2012 205,000 219,109
Potash Corp. Saskatchewan 7.750% 05/31/2011 175,000 213,394
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
YANKEE BONDS (CONTINUED)
Province of Ontario 5.125% 07/17/2012 $ 115,000 $ 127,212
Province of Quebec 5.000% 07/17/2009 115,000 126,052
United Mexican States 6.625% 03/03/2015 85,000 90,525
United Mexican States 8.300% 08/15/2031 110,000 126,665
------------
Total Yankee Bonds (Cost $2,279,024) 2,485,364
------------
NON-AGENCY -- 8.0%
PASS THRU SECURITIES -- 8.0%
Chase Commercial Mortgage Securities Corp. 1997-1 D
Non-ERISA 7.370% 06/16/2029 175,000 202,324
Chase Commercial Mortgage Securities Corp. 1997-1 E
Non-ERISA 7.370% 06/19/2029 300,000 345,471
Chase Commercial Mortgage Securities Corp. 1997-2 C 6.600% 12/12/2029 50,000 57,042
Chase Commercial Mortgage Securities Corp. 1998-1
A2 6.560% 05/18/2030 250,000 286,649
CS First Boston Mortgage Securities Corp. 2001-CF2
A4 6.505% 02/15/2034 220,000 256,225
DLJ Commercial Mortgage Corp. 1998-CF2 A1B 6.240% 11/12/2031 215,000 245,685
DLJ Commercial Mortgage Corp. 1998-CF2 B1(a) 7.058% 11/12/2031 215,000 248,139
DLJ Commercial Mortgage Corp. 1999-CG1 A1A 6.080% 03/10/2032 402,277 435,211
JP Morgan Commercial Mortgage Finance Corp.
1997-C5 A3 7.088% 09/15/2029 125,000 142,944
Morgan Stanley Capital I 1998-HF1 C 6.750% 03/15/2030 180,000 208,272
Morgan Stanley Capital I 1998-WF1 A2 6.550% 03/15/2030 250,000 285,958
Morgan Stanley Capital I 1999-CAM1 A2 6.760% 03/15/2032 243,208 268,245
Morgan Stanley Capital I 1999-CAM1 A4 7.020% 03/15/2032 125,000 147,891
Morgan Stanley Capital I 1999-RM1 A2 6.710% 12/15/2031 370,000 431,520
Morgan Stanley Dean Witter Capital I 2001-IQA A1 4.570% 12/18/2032 354,548 372,027
Morgan Stanley Dean Witter Capital I 2001-PPM A3 6.540% 02/01/2031 350,000 402,631
Mortgage Capital Funding, Inc. 1996-MC1A C 7.800% 04/15/2006 310,000 349,622
Mortgage Capital Funding, Inc. 1997-MC2 C 6.881% 11/20/2027 310,000 356,604
Mortgage Capital Funding, Inc. 1997-MC2 D 7.117% 11/20/2007 350,000 392,656
------------
5,435,116
------------
Total Non-Agency (Cost $5,125,570) 5,435,116
------------
U.S. GOVERNMENT AGENCY -- 37.2%
PASS THRU SECURITIES -- 37.2%
FHLMC Gold 6.000% 05/01/2017 497,072 516,921
FNMA 5.000% 07/01/2018 200,000 207,062
FNMA 6.000% 04/01/2017 - 05/01/2033 1,434,858 1,496,156
FNMA 6.500% 12/01/2015 - 08/01/2032 2,176,960 2,272,243
FNMA 7.000% 11/01/2031 - 06/01/2032 1,013,767 1,067,628
FNMA 7.500% 02/01/2029 - 09/01/2029 49,879 53,330
FNMA (TBA)# 5.000% 07/01/2018 - 07/01/2033 2,500,000 2,560,500
FNMA (TBA)# 5.500% 08/01/2033 - 09/01/2033 9,250,000 9,528,043
FNMA (TBA)# 6.000% 07/01/2033 6,215,000 6,457,770
FNMA (TBA)# 6.500% 07/01/2033 755,000 787,323
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
PASS THRU SECURITIES (CONTINUED)
GNMA 6.500% 07/15/2032 - 10/15/2032 $ 90,349 $ 94,870
GNMA 8.000% 08/15/2025 - 11/15/2026 173,616 188,278
------------
25,230,124
------------
Total U.S. Government Agency (Cost $25,170,603) 25,230,124
------------
U.S. TREASURY OBLIGATIONS -- 23.4%
TREASURY BONDS -- 4.3%
U.S. Treasury Bond 5.375% 02/15/2031 410,000 461,683
U.S. Treasury Bond 6.250% 05/15/2030 1,942,000 2,417,639
------------
2,879,322
------------
TREASURY NOTES -- 19.1%
U.S. Treasury Inflation Index Note 3.875% 01/15/2009 2,964,542 3,395,326
U.S. Treasury Note 2.625% 05/15/2008 3,925,000 3,960,878
U.S. Treasury Note 3.250% 08/15/2007 120,000 125,236
U.S. Treasury Note+ 6.750% 05/15/2005 100,000 110,129
U.S. Treasury Note+ 7.875% 11/15/2004 50,000 54,568
United States Treasury Note 1.250% 05/31/2005 5,285,000 5,281,903
------------
12,928,040
------------
Total U.S. Treasury Obligations (Cost $15,776,430) 15,807,362
------------
TOTAL BONDS AND NOTES (COST $75,131,678) 76,635,142
------------
SHARES
---------
PREFERRED STOCKS -- 0.0%
CONVERTIBLE PREFERRED STOCKS -- 0.0%
General Motors Corp. Series B 5.25% CVT Pfd 425 9,520
------------
Total Convertible Preferred Stocks (Cost $10,575) 9,520
------------
TOTAL PREFERRED STOCKS (COST $10,575) 9,520
------------
CONTRACT
SIZE
---------
PURCHASED OPTIONS -- 0.2%
UST 3.00% Call, Strike Price 100.00, 07/28/2003 16,750 49,988
UST 4.88% Call, Strike Price 107.47, 07/28/2003 24,750 88,365
------------
TOTAL PURCHASED OPTIONS (COST $66,035) 138,353
------------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE/ VALUE
SECURITY RATE MATURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 33.1%
CASH EQUIVALENTS -- 17.7%
Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 $1,491,499 $ 1,491,499
Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 1,636,928 1,636,928
Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 1,309,542 1,309,542
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(c) 1,636,928 1,636,928
Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 2,946,470 2,946,470
Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 2,946,470 2,946,470
------------
11,967,837
------------
U.S. GOVERNMENT -- 12.2%
FNMA Discount Note++ 0.957% 08/18/2003 620,000 619,256
FNMA Discount Note++ 2.340% 07/17/2003 1,111,000 1,110,427
U.S. Treasury Bill++ 1.062% 07/10/2003 5,175,000 5,173,448
U.S. Treasury Bill++ 1.094% 07/17/2003 1,349,000 1,348,326
------------
8,251,457
------------
REPURCHASE AGREEMENTS -- 3.2%
Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney,
Inc. and Investors Bank and Trust Company, due 07/01/03, with a maturity
value of $2,198,697 and an effective yield of 0.75%, collateralized by a
U.S. Government Obligation with a rate of 8.75%, a maturity date of
08/15/20 and an aggregated market value of $2,298,545. 2,198,651
------------
TOTAL SHORT-TERM INVESTMENTS (COST $22,418,108) 22,417,945
------------
TOTAL INVESTMENTS -- 146.4% (COST
$97,626,396) $ 99,200,960
OTHER ASSETS, LESS LIABILITIES --
(46.4%) (31,447,244)
-------------
NET ASSETS -- 100.0% $ 67,753,716
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
CVT - Convertible
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
NCL - Non-callable
PO - Principal Only
REIT - Real Estate Investment Trust
TBA - To Be Announced
UST - United States Treasury
(a) Variable Rate Security; rate indicated is as of 6/30/03.
(b) Zero coupon security.
(c) Represents investments of security lending collateral (Note 7).
# All or a portion of these securities are delayed delivery contracts (Note
8).
+ Denotes all or part of security pledged as collateral (Note 6).
++ Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Investment Grade Bond Fund (the "Fund") is a
separate diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal and liquidity, primarily through the generation of
current income and, to a lesser extent, capital appreciation by investing,
under normal circumstances, at least 80% of net assets in investment grade
fixed income securities including, but not limited to, government, agency,
corporate and mortgage and asset-backed issues.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Investment Grade Bond Fund was changed to Standish Mellon
Investment Grade Bond Fund. In addition, the name of the Standish, Ayer &
Wood Investment Trust was changed to Mellon Institutional Funds Investment
Trust. The name changes for the Fund and the Trust are effective July 1,
2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
D. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences, which may result in distribution reclassifications, are
primarily due to differing treatments for losses deferred due to wash
sales, amortization and/or accretion of premiums and discounts on certain
securities and the timing of recognition of gains and losses on futures
contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
E. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
F. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory and administrative
services and general office facilities, is paid monthly at the annual rate
of 0.40% of the Fund's average daily net assets. Standish Mellon
voluntarily agreed to limit total Fund operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.40% of the
Fund's average daily net assets for the six months ended June 30, 2003.
Pursuant to this agreement, for the six months ended June 30, 2003,
Standish Mellon voluntarily did not impose $113,070 of its investment
advisory fee. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
------------ ------------
U.S. Government Securities $234,452,553 $256,573,811
============ ============
Investments (non-U.S.Government Securities) $ 20,620,275 $ 12,143,602
============ ============
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 176,824 1,054,357
Shares issued to shareholders in payment of
distributions declared 24,430 113,335
Shares redeemed (1,041,548) (239,259)
---------- ----------
Net increase (decrease) (840,294) 928,433
========== ==========
At June 30, 2003, two shareholders held of record approximately 63% and
13% of the total outstanding shares of the Fund. Investment activity of
these shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $97,625,546
===========
Gross unrealized appreciation 1,751,464
Gross unrealized depreciation (176,050)
-----------
Net unrealized appreciation $ 1,575,414
===========
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
-------------------- ----------------
Outstanding, beginning of period 4 $ 86,013
Options written 11 90,269
Options expired (10) (61,763)
Options closed (5) (114,519)
------------ ---------
Outstanding, end of period 0 $ --
============ =========
At June 30, 2003, the Fund held no written put option contracts.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
-------------------- ---------------
Outstanding, beginning of period 4 $ 27,179
Options written 11 52,448
Options expired (2) (11,375)
Options closed (11) (52,975)
------------ --------
Outstanding, end of period 2 $ 15,277
============ ========
At June 30, 2003, the Fund held the following written call option
contracts:
SECURITY CONTRACTS VALUE
------------------------------------------------------------ --------- ----------
UST 3.00% Call, Strike Price 103.00, 11/15/2007 1 $ 8,113
UST 4.88% Call, Strike Price 112.47, 02/15/2012 1 10,828
-------
Total (premiums received $15,277) $18,941
=======
At June 30, 2003, the Fund had segregated sufficient securities for open
written options contracts.
INTEREST RATE FLOORS
Interest rate floors purchased by the Fund entitle the Fund to receive
payments on a notional principal amount from the party selling such floor
to the extent that a specified index falls below a predetermined interest
rate amount. Credit and market risk exist with respect to these
instruments. If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Fund expects to enter these transactions primarily
for hedging purposes including, but not limited to, preserving a return or
spread on a particular investment or portion of its portfolio, protecting
against currency fluctuations, as a duration management technique or
protecting against an increase in the price of securities the Fund
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
anticipates purchasing at a later date. Interest rate floors are
marked-to-market daily based on quotations from market makers and the
change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations. Realized gains or losses from these
agreements are disclosed in the Statement of Operations.
At June 30, 2003, the Fund held no open interest rate floor agreements.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2003, the Fund held the following financials futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
-----------------------------------------------------------------------------------------------
U.S. 10 Year Note (25 contracts) Short 9/30/2003 $2,935,937 $22,883
(7) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on
the next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the
risk of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears
the risk in the event that the interest and/or dividends received on
invested collateral is not sufficient to meet the Fund's obligations due
on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$11,703,762. The Fund received cash collateral of $11,967,837 which is
invested, together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. This Fund segregates securities
having a value at least equal to the amount of the purchase commitment.
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or
the Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the
unit price established at the date the commitment was entered into.
See Schedule of Investments for outstanding delayed delivery transactions.
16
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
17
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
18
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $125,736 (Note 7))
(identified cost, $6,920,951) $7,217,272
Receivable for investments sold 491,268
Receivable for Fund shares sold 1,850,000
Interest receivable 162,786
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 1,042
Prepaid expenses 4,702
----------
Total assets 9,727,070
LIABILITIES
Payable for investments purchased $ 412,112
Payable for closed forward foreign currency exchange
contracts (Note 6) 10,898
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 12,604
Payable upon return of securities loaned (Note 7) 128,950
Due to custodian 1,290,386
Accrued accounting, custody and transfer agent fees 7,393
Accrued trustees' fees and expenses (Note 2) 739
Accrued expenses and other liabilities 16,448
---------
Total liabilities 1,879,530
----------
NET ASSETS $7,847,540
==========
NET ASSETS CONSIST OF:
Paid-in capital $6,685,498
Accumulated net realized gain 797,574
Undistributed net investment income 80,919
Net unrealized appreciation 283,549
----------
TOTAL NET ASSETS $7,847,540
==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 368,785
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 21.28
==========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$115 (Note 7)) $ 314,993
EXPENSES
Investment advisory fee (Note 2) $17,184
Accounting, custody, and transfer agent fees 39,014
Legal and audit services 15,944
Registration fees 2,306
Insurance expense 1,954
Trustees' fees and expenses (Note 2) 1,309
Miscellaneous 2,568
-------
Total expenses 80,279
Deduct:
Waiver of investment advisory fee (Note 2) (17,184)
Reimbursement of Fund operating expenses (Note 2) (52,783)
-------
Total expense deductions (69,967)
-------
Net expenses 10,312
----------
Net investment income 304,681
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 884,864
Written options transactions 360
Foreign currency transactions and forward foreign
currency exchange contracts (11,279)
-------
Net realized gain 873,945
Change in unrealized appreciation (depreciation)
Investment securities (25,964)
Written options (2,295)
Foreign currency and forward foreign currency exchange
contracts (8,290)
-------
Change in net unrealized appreciation (depreciation) (36,549)
----------
Net realized and unrealized gain 837,396
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,142,077
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 304,681 $ 659,881
Net realized gain 873,945 130,459
Change in net unrealized appreciation (depreciation) (36,549) 217,507
----------- -----------
Net increase in net assets from investment operations 1,142,077 1,007,847
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (210,615) (592,613)
----------- -----------
Total distributions to shareholders (210,615) (592,613)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 3,770,000 10,547,142
Value of shares issued to shareholders in payment of
distributions declared 205,800 577,427
Cost of shares redeemed (4,329,216) (7,972,702)
----------- -----------
Net increase (decrease) in net assets from Fund share
transactions (353,416) 3,151,867
----------- -----------
TOTAL INCREASE IN NET ASSETS 578,046 3,567,101
NET ASSETS
At beginning of period 7,269,494 3,702,393
----------- -----------
At end of period (including undistributed net investment
income of $80,919 and distributions in excess of net
investment income of $13,147, respectively) $ 7,847,540 $ 7,269,494
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
MARCH 26, 2001
SIX MONTHS (COMMENCEMENT OF
ENDED OPERATIONS)
JUNE 30, 2003 YEAR ENDED TO DECEMBER 31,
(UNAUDITED) DECEMBER 31, 2002 2001
------------- ----------------- ----------------
NET ASSET VALUE, BEGINNING OF PERIOD $18.39 $17.67 $20.00
------ ------ ------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.88 1.59 1.58
Net realized and unrealized gain on investments 2.61 0.65 0.10
------ ------ ------
Total from investment operations 3.49 2.24 1.68
------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.60) (1.52) (3.90)
From tax return of capital -- -- (0.11)
------ ------ ------
Total distributions to shareholders (0.60) (1.52) (4.01)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $21.28 $18.39 $17.67
====== ====== ======
TOTAL RETURN+++ 19.14%++ 13.20% 8.94%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.30%+ 0.30% 0.30%+
Net Investment Income (to average daily net
assets)* 8.86%+ 8.83% 10.33%+
Portfolio Turnover 134%++ 421% 505%++
Net Assets, End of Period (000's omitted) $7,848 $7,269 $3,702
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and reimbursed the Fund for a
portion of its operating expenses. If this voluntary action had not been
taken, the investment income per share and ratios would have been:
Net investment income per share(1) $ 0.68 $ 1.23 $ 1.34
Ratios (to average daily net assets):
Expenses 2.33%+ 2.31% 1.82%+
Net investment income 6.83%+ 6.82% 8.81%+
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of fee waiver and expense
limitation.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 90.3%
CORPORATE -- 12.7%
ENERGY -- 6.0%
Gazprom OAO 144A Notes 9.625% 03/01/2013 USD 200,000 $ 220,000
Petroliam Nasional Berhad 144A 7.750% 08/15/2015 200,000 246,907
----------
466,907
----------
FINANCIAL -- 6.7%
Banque Centrale de Tunisie 7.375% 04/25/2012 USD 30,000 34,500
Pemex Project Funding Master Trust 8.625% 02/01/2022 240,000 272,400
Telefonos de Mexico SA 8.250% 01/26/2006 195,000 218,887
----------
525,787
----------
Total Corporate (Cost $956,913) 992,694
----------
SOVEREIGN BONDS -- 75.7%
Dominican Republic 144A 9.040% 01/23/2013 USD 39,000 34,710
Dominican Republic 144A 9.500% 09/27/2006 20,000 18,800
Dominican Republic Euro Registered 9.500% 09/27/2006 40,000 37,600
Dominican Republic Registered 9.040% 01/23/2013 25,000 22,250
Ministry Finance Russia 3.000% 05/14/2008 105,000 96,075
Nigeria Promissory Notes Series RC 5.092% 01/05/2010 240,000 84,000
Republic of Argentina(a) 1.369% 08/03/2012 125,000 74,250
Republic of Brazil(a) 2.188% 04/15/2012 155,000 116,637
Republic of Brazil 8.000% 04/15/2014 197,026 173,383
Republic of Brazil 8.875% 04/15/2024 90,000 69,300
Republic of Brazil 10.000% 01/16/2007 455,000 465,237
Republic of Brazil 10.125% 05/15/2027 250,000 215,625
Republic of Brazil 10.250% 06/17/2013 230,000 216,545
Republic of Brazil 11.000% 08/17/2040 85,000 77,137
Republic of Brazil 12.000% 04/15/2010 140,000 144,200
Republic of Brazil 14.500% 10/15/2009 110,000 126,500
Republic of Bulgaria 144A 8.250% 01/15/2015 62,000 73,160
Republic of Bulgaria IAB PDI(a) 2.188% 07/28/2011 57,600 55,296
Republic of Chile 7.125% 01/11/2012 30,000 34,885
Republic of Colombia 7.625% 02/15/2007 55,000 58,988
Republic of Colombia 9.750% 04/23/2009 130,000 148,200
Republic of Colombia 10.000% 01/23/2012 145,000 162,400
Republic of Ecuador 144A 12.000% 11/15/2012 45,000 36,450
Republic of Ecuador 144A Step Up Notes(b) 6.000% 08/15/2030 90,000 54,900
Republic of El Salvador 7.750% 01/24/2023 40,000 41,600
Republic of El Salvador 8.500% 07/25/2011 20,000 21,450
Republic of Panama 8.875% 09/30/2027 35,000 37,975
Republic of Panama 9.625% 02/08/2011 60,000 69,900
Republic of Peru 9.125% 02/21/2012 130,000 138,580
Republic of Peru PDI(a) 5.000% 03/07/2017 134,400 114,240
Republic of Philippines 8.375% 03/12/2009 140,000 149,450
Republic of Philippines 9.375% 01/18/2017 80,000 88,000
Republic of Philippines 10.625% 03/16/2025 55,000 64,075
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------
SOVEREIGN BONDS (CONTINUED)
Republic of Turkey 11.875% 01/15/2030 USD 45,000 $ 46,631
Republic of Turkey 11.750% 06/15/2010 175,000 181,563
Republic of Uruguay 7.500% 03/15/2015 48,000 36,960
Republic of Uruguay 7.875% 01/15/2033 32,115 21,356
Republic of Venezuela 9.250% 09/15/2027 300,000 222,000
Republic of Venezuela(a) 1.875% 12/18/2007 107,143 85,714
Russian Federation 5.000% 03/31/2030 630,000 610,313
Russian Federation 8.750% 07/24/2005 145,000 161,856
Russian Federation 11.000% 07/24/2018 210,000 300,300
Ukraine Government 144A 7.650% 06/11/2013 100,000 99,250
Ukraine Government Senior Notes 11.000% 03/15/2007 37,334 41,114
United Mexican States 8.125% 12/30/2019 90,000 103,275
United Mexican States 8.300% 08/15/2031 320,000 368,480
United Mexican States 8.625% 03/12/2008 65,000 77,935
United Mexican States 9.875% 02/01/2010 205,000 263,938
----------
Total Sovereign Bonds (Cost $5,698,307) 5,942,483
----------
FOREIGN DENOMINATED -- 1.9%
FRANCE -- 0.3%
Ivory Coast FLIRB{*}(a) 2.000% 03/29/2018 FRF 620,000 20,475
----------
SOUTH AFRICA -- 1.6%
Republic of South Africa 13.000% 08/31/2010 ZAR 790,000 129,045
----------
Total Foreign Denominated (Cost $136,781) 149,520
----------
TOTAL BONDS AND NOTES (COST $6,792,001) 7,084,697
----------
SHARES
-------
WARRANTS -- 0.1%
GOVERNMENT BACKED -- 0.1%
United Mexican States Series B, 6/30/2004
(USD) 250,000 2,500
United Mexican States Series C, 6/30/2005
(USD) 250,000 750
United Mexican States Series D, 6/30/2006
(USD) 250,000 250
United Mexican States Series E, 6/30/2007
(USD) 250,000 125
----------
3,625
----------
TOTAL WARRANTS (COST $0) 3,625
----------
PAR
VALUE
-------
SHORT-TERM INVESTMENTS -- 1.6%
CASH EQUIVALENTS -- 1.6%
Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 16,071 16,071
Credit Agricole Indosuez Eurodollar Time
Deposit(c) 1.050% 08/26/2003 17,638 17,638
Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 14,110 14,110
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR
VALUE/ VALUE
SECURITY RATE MATURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------
CASH EQUIVALENTS (CONTINUED)
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(c) USD 17,637 $ 17,637
Royal Bank of Canada Eurodollar Time
Deposit(c) 1.300% 07/01/2003 31,747 31,747
Royal Bank of Scotland Eurodollar Time
Deposit(c) 1.125% 07/01/2003 31,747 31,747
----------
128,950
----------
TOTAL SHORT-TERM INVESTMENTS (COST $128,950) 128,950
----------
TOTAL INVESTMENTS -- 92.0% (COST
$6,920,951) $ 7,217,272
OTHER ASSETS, LESS LIABILITIES -- 8.0% 630,268
-------------
NET ASSETS -- 100.0% $ 7,847,540
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
FLIRB - Front Loaded Interest Reduction Bond
FRF - French Franc
IAB - Interest Arrears Bonds
PDI - Past Due Interest Bonds
Step Up - Coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 2003.
Maturity date disclosed is the ultimate maturity.
USD - United States Dollar
ZAR - South African Rand
(a) Variable Rate Security; rate indicated is as of 6/30/03.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(c) Represents investments of security lending collateral (Note 7).
{*} Defaulted security.
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- ------------------------------------------------------------------------
Brazil 20.5%
Russia 17.7%
Mexico 13.2%
Colombia 4.7%
Venezuela 3.9%
Philippines 3.8%
United States 3.7%
Peru 3.2%
Malaysia 3.1%
Turkey 2.9%
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Opportunistic Emerging Markets Debt Fund (the
"Fund") is a separate non-diversified investment series of the Trust.
The objective of the Fund is to generate a high total return through a
combination of capital appreciation and income, by investing, under normal
circumstances, at least 80% of net assets in fixed income securities
issued by governments, companies and banks of emerging markets, as well as
preferred stocks, warrants and tax-exempt bonds.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Opportunistic Emerging Markets Debt Fund was changed to Standish
Mellon Opportunistic Emerging Markets Debt Fund. In addition, the name of
the Standish, Ayer & Wood Investment Trust was changed to Mellon
Institutional Funds Investment Trust. The name changes for the Fund and
the Trust are effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Fund does not isolate that portion of the
results of operations resulting from
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or
loss from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts usually received or paid.
D. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
E. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless the shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in distribution reclassifications, are primarily due to
differing treatments for losses deferred due to wash sales, foreign
currency gains and losses, post-October losses, amortization and/or
accretion of premiums and discounts on certain securities and the timing
of recognition of gains and losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
G. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
H. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory and administrative
services, and general office facilities, is paid monthly at the annual
rate of 0.50% of the Fund's average daily net assets. Standish Mellon
voluntarily agreed to limit total Fund operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.30% of the
Fund's average daily net assets for the six months ended June 30, 2003.
Pursuant to this agreement, for the six months ended June 30, 2003,
Standish Mellon voluntarily did not impose $17,184 of its investment
advisory fee and reimbursed the Fund for $52,783 of its operating
expenses. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
---------- ----------
U.S. Government Securities $ -- $ --
========== ==========
Investments (non-U.S.Government Securities) $9,050,539 $9,758,953
========== ==========
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 175,538 583,270
Shares issued to shareholders in payment of
distributions declared 10,041 32,307
Shares redeemed (212,063) (429,880)
------------ --------------
Net increase (decrease) (26,484) 185,697
============ ==============
At June 30, 2003, three shareholders held of record approximately 40%, 25%
and 19% of the total outstanding shares of the Fund.
All of the Fund's shares are beneficially owned by fiduciary accounts over
which Standish Mellon and its affiliates have either sole or joint
investment discretion.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $6,925,303
==========
Gross unrealized appreciation 360,152
Gross unrealized depreciation (68,183)
----------
Net unrealized appreciation $ 291,969
==========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Fund may use options to seek to hedge against risks
of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. Options, both held
and written by the Fund, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at
value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 5,535
Options expired (1) (5,535)
--- -------
Outstanding, end of period 0 $ --
=== =======
At June 30, 2003, the Fund held no written put option contracts.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 4,140
Options closed (1) (4,140)
--- -------
Outstanding, end of period 0 $ --
=== =======
At June 30, 2003, the Fund held no written call option contracts.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At June 30, 2003, the Fund held the following forward foreign currency or
cross currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
--------------------------------------------------------------------------------------------------
Euro 29,000 09/17/2003 $ 33,209 $ 34,251 $ 1,042
South African Rand 980,000 08/29/2003 128,889 116,285 (12,604)
------------- ------------- -------------
TOTAL $ 162,098 $ 150,536 $ (11,562)
============= ============= =============
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
investments. Buying futures tends to increase the Fund's exposure to the
underlying instrument, while selling futures tends to decrease the Fund's
exposure to the underlying instrument or hedge other Fund investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparties do
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to manage its exposure to certain markets
and to changes in securities prices and foreign currencies. Gains and
losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(7) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on
the next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the
risk of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears
the risk in the event that the interest and/or dividends received on
invested collateral is not sufficient to meet the Fund's obligations due
on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$125,736. The Fund received cash collateral of $128,950 which is invested,
together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. This Fund segregates securities
having a value at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or
the Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the
unit price established at the date the commitment was entered into.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
14
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
15
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon High Yield Bond Portfolio
("Portfolio"), at value (Note 1A) $55,270,484
Receivable for Fund shares sold 456
Prepaid expenses 9,655
-----------
Total assets 55,280,595
LIABILITIES
Payable for Fund shares redeemed $55,335
Accrued accounting, custody and transfer agent fees 2,684
Accrued trustees' fees and expenses (Note 2) 492
Accrued expenses and other liabilities 9,611
------
Total liabilities 68,122
-----------
NET ASSETS $55,212,473
===========
NET ASSETS CONSIST OF:
Paid-in capital $64,751,927
Accumulated net realized loss (12,299,500)
Undistributed net investment income 429,671
Net unrealized appreciation 2,330,375
-----------
TOTAL NET ASSETS $55,212,473
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,479,421
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 15.87
===========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $2,058,436
Dividend income allocated from Portfolio 60,965
Expenses allocated from Portfolio (123,304)
----------
Net investment income allocated from Portfolio 1,996,097
EXPENSES
Accounting, custody, and transfer agent fees $ 14,214
Registration fees 9,472
Legal and audit services 7,624
Trustees' fees and expenses (Note 2) 991
Insurance expense 475
Miscellaneous 3,612
---------
Total expenses 36,388
Deduct:
Reimbursement of Fund operating expenses (Note 2) (36,388)
---------
Net expenses 0
----------
Net investment income 1,996,097
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 1,428,076
Written options transactions 120
Swap Contracts (25,367)
Foreign currency transactions and forward foreign
currency exchange contracts (350,665)
---------
Net realized gain 1,052,164
Change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investment securities 3,250,556
Written options (765)
Swap Contracts 15,100
Foreign currency and forward foreign currency exchange
contracts 148,098
---------
Change in net unrealized appreciation (depreciation) 3,412,989
----------
Net realized and unrealized gain on investments 4,465,153
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,461,250
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,996,097 $ 3,783,370
Net realized gain (loss) 1,052,164 (3,642,617)
Change in net unrealized appreciation (depreciation) 3,412,989 2,085,028
----------- ------------
Net increase in net assets from investment operations 6,461,250 2,225,781
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (1,480,227) (3,605,252)
Return of capital -- (6,037)
----------- ------------
Total distributions to shareholders (1,480,227) (3,611,289)
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 8,858,677 17,255,283
Value of shares issued to shareholders in payment of
distributions declared 1,374,577 3,132,167
Cost of shares redeemed (4,060,818) (21,244,604)
----------- ------------
Net increase (decrease) in net assets from Fund share
transactions 6,172,436 (857,154)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,153,459 (2,242,662)
NET ASSETS
At beginning of period 44,059,014 46,301,676
----------- ------------
At end of period (including undistributed net investment
income of $429,671 and distributions in excess of net
investment income of $86,199, respectively) $55,212,473 $ 44,059,014
=========== ============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2003 -----------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.34 $ 14.88 $ 15.88 $ 17.39 $ 19.02 $ 20.51
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.61 1.26 1.40 1.64 1.84 1.70
Net realized and unrealized gain (loss) on
investments 1.37 (0.59) (1.18) (1.19) (1.45) (1.52)
------- ------- ------- ------- ------- -------
Total from investment operations 1.98 0.67 0.22 0.45 0.39 0.18
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.45) (1.21) (1.21) (1.93) (2.00) (1.67)
From tax return of capital -- -- (0.01) (0.03) (0.02) --
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.45) (1.21) (1.22) (1.96) (2.02) (1.67)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 15.87 $ 14.34 $ 14.88 $ 15.88 $ 17.39 $ 19.02
======= ======= ======= ======= ======= =======
TOTAL RETURN+++ 13.94%++ 4.70% 1.52% 2.84% 2.20% 0.86%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)*(2) 0.50%+ 0.50% 0.50% 0.37% 0.00% 0.00%
Net Investment Income (to average daily net
assets)* 8.08%+ 8.68% 8.86% 10.41% 9.87% 8.40%
Net Assets, End of Period (000's omitted) $55,212 $44,059 $46,302 $31,807 $31,138 $40,457
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment adisory fee payable to the
Portfolio and/or reimbursed the Fund for all or a portion of its operating
expenses. If this voluntary action had not been taken, the investment
income per share and ratios would have been:
Net investment income per share(1) $ 0.57 $ 1.21 $ 1.33 $ 1.64 $ 1.64 $ 1.51
Ratios (to average daily net assets):
Expenses(2) 1.00%+ 1.01% 0.97% 1.11% 1.08% 0.91%
Net investment income 7.58%+ 8.17% 8.39% 9.67% 8.79% 7.49%
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to decrease net
investment income per share by $0.05, increase net realized and unrealized
gains and losses per share by $.0.05 and decrease the ratio of net
investment income to average net assets from 9.20% to 8.86%. Per share data
and ratios/supplemental data for periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Standish Mellon High Yield Bond
Portfolio's allocated expenses.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absense of expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon High Yield Bond Fund (the "Fund") is a separate
diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consisting
primarily of a high level of income. The Fund invests all of its
investable assets in an interest of the Standish Mellon High Yield Bond
Portfolio (the "Portfolio"), a subtrust of the Mellon Institutional Funds
Master Portfolio (the "Portfolio Trust"), which is organized as a New York
trust and which has the same investment objective as the Fund. The
Portfolio Trust seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in fixed income securities
issued by U.S. and foreign governments, companies and banks, as well as
tax-exempt securities, preferreds and warrants. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (approximately 100% at June 30, 2003). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish High Yield Bond Fund was changed to Standish Mellon High Yield
Bond Fund. In addition, the name of the Standish, Ayer & Wood Investment
Trust was changed to Mellon Institutional Funds Investment Trust. The name
changes for the Fund and the Trust are effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with accounting principles
generally accepted in the United States of America. All realized and
unrealized gains and losses of the Portfolio are allocated pro rata among
the investors in the Portfolio.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date. The
Fund's dividends from short-term and long-term capital gains, if any,
after reduction of capital losses will be declared and distributed at
least annually, as will dividends from net investment income. In
determining the amounts of its dividends, the Fund will take into account
its share of the income, gains or losses, expenses, and any other tax
items of the Portfolio. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless a shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in distribution reclassifications, are primarily due to
differing treatments for foreign currency transactions, amortization
and/or accretion of premiums and discounts on certain securities,
non-taxable dividends, capital loss carryforwards, post-October losses,
losses deferred due to wash sales and excise tax regulations.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
E. COMMITMENT AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish Mellon Asset Management Company LLC ("Standish
Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. Standish Mellon voluntarily
agreed to limit the total operating expenses of the Fund and its pro rata
share of the Portfolio expenses (excluding commissions, taxes and
extraordinary expenses) to 0.50% of the Fund's average daily net assets.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time. Pursuant to this agreement, for
the six months ended June 30, 2003, Standish Mellon voluntarily reimbursed
the Fund for $36,388 of its operating expenses.
Effective January 28, 2003, the Fund began imposing a redemption fee of 2%
of the net asset value of the shares, with certain exceptions, which are
redeemed or exchanged less than 90 days from the day of their purchase.
The redemption fee is paid directly to the Fund, and is designed to offset
brokerage commissions, market impact, and other costs associated with
short-term trading. The fee does not apply to shares that were acquired
through reinvestment of distributions. The redemption fee is applicable to
shares of the Fund purchased on or after January 28, 2003. For the period
ended June 30, 2003, the Fund received $722 in redemption fees.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 2003 aggregated $8,858,959 and $4,193,656,
respectively.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 587,845 1,205,169
Shares issued to shareholders in payment of
distributions declared 89,536 217,488
Shares redeemed (269,861) (1,461,971)
------------ ---------------
Net increase (decrease) 407,520 (39,314)
============ ===============
At June 30, 2003, one shareholder held of record approximately 55% of the
total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 93.4%
ASSET BACKED -- 1.7%
Badger Tobacco Asset Securitization Corp. 6.125% 06/01/2027 USD 275,000 $ 255,918
Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 260,000 260,691
Louisiana Tobacco Settlement Funding Corp. 5.500% 05/15/2030 385,000 320,212
South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 90,000 82,737
-----------
Total Asset Backed (Cost $885,843) 919,558
-----------
CONVERTIBLE CORPORATE BONDS -- 1.7%
Davita, Inc. 7.000% 05/15/2009 260,000 270,400
Echostar DBS Corp. 4.875% 01/01/2007 260,000 260,629
Lamar Advertising Co. 5.250% 09/15/2006 175,000 179,802
Meristar Hospitality Corp. REIT CVT 9.500% 04/01/2010 175,000 177,375
Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 50,000 23,122
Xcel Energy, Inc. 144A 7.500% 11/21/2007 40,000 55,200
-----------
Total Convertible Corporate Bonds (Cost $917,505) 966,528
-----------
CORPORATE -- 74.6%
BASIC INDUSTRY -- 13.0%
Corn Products International, Inc. Senior
Notes 8.250% 07/15/2007 145,000 158,775
Corrections Corp. of America Senior Notes 7.500% 05/01/2011 60,000 62,850
Crompton Corp. Senior Notes 8.500% 03/15/2005 75,000 79,125
CSC Holdings, Inc. 8.125% 08/15/2009 450,000 461,250
CSC Holdings, Inc. Senior Notes 8.125% 07/15/2009 275,000 283,937
Earle M. Jorgensen Co. 9.750% 06/01/2012 100,000 106,000
Equistar Chemical/Funding 144A Senior Notes 10.625% 05/01/2011 235,000 240,875
Freeport-McMoRan Copper & Gold, Inc. 144A
Senior Notes 10.125% 02/01/2010 175,000 196,000
Georgia-Pacific Corp. 144A Senior Notes 7.375% 07/15/2008 440,000 447,700
Georgia-Pacific Corp. 144A Senior Notes 8.875% 02/01/2010 150,000 162,000
Great Lakes Dredge & Dock Co. 11.250% 08/15/2008 200,000 212,000
HMP Equity Holdings Corp. 144A(b) 0.000% 05/15/2008 110,000 56,100
Huntsman International LLC 9.875% 03/01/2009 225,000 235,125
IMC Global, Inc. 10.875% 06/01/2008 165,000 170,775
Kansas City Southern 7.500% 06/15/2009 250,000 258,750
National Waterworks, Inc. Series B 10.500% 12/01/2012 55,000 61,050
Owens-Brockway Glass Container, Inc. 144A 7.750% 05/15/2011 80,000 84,200
Owens-Illinois, Inc. 7.500% 05/15/2010 80,000 77,600
Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 885,000 911,550
Pioneer Natural Resources Co. 7.500% 04/15/2012 75,000 86,250
Resolution Performance Products Senior Sub
Notes 13.500% 11/15/2010 580,000 580,000
Steel Dynamics, Inc. 9.500% 03/15/2009 450,000 472,500
Texas Industries, Inc. 144A Senior Notes 10.250% 06/15/2011 390,000 405,600
US Steel Corp. Senior Notes 9.750% 05/15/2010 365,000 374,125
Williams Cos., Inc. 7.125% 09/01/2011 225,000 219,375
Williams Cos., Inc. 7.625% 07/15/2019 475,000 460,750
Williams Cos., Inc. Senior Notes 8.625% 06/01/2010 75,000 78,375
Williams Cos., Inc. Series A 7.500% 01/15/2031 115,000 109,250
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY (CONTINUED)
Witco Corp. 6.125% 02/01/2006 USD 50,000 $ 50,000
Xerox Corp. Senior Notes 7.125% 06/15/2010 75,000 75,562
-----------
7,177,449
-----------
CAPITAL GOODS -- 5.7%
Alliant Techsystems, Inc. 8.500% 05/15/2011 105,000 116,287
Allied Waste Industries Series B 8.500% 12/01/2008 300,000 323,250
Allied Waste Industries, Inc. 8.875% 04/01/2008 275,000 299,062
Allied Waste Industries, Inc. 9.250% 05/01/2021 360,000 385,200
Allied Waste North America Senior Notes 7.875% 04/15/2013 330,000 345,675
Esterline Technologies Corp. 144A Senior
Sub Notes 7.750% 06/15/2013 120,000 125,700
K&F Industries, Inc. Senior Sub Notes 9.625% 12/15/2010 65,000 71,500
NVR Inc. Senior Notes 8.000% 06/01/2005 420,000 437,850
Smurfit-Stone Container Corp. 8.250% 10/01/2012 100,000 108,500
SPX Corp. Senior Notes 6.250% 06/15/2011 80,000 81,600
SPX Corp. Senior Notes 7.500% 01/01/2013 450,000 483,750
Stone Container Corp. Senior Notes 8.375% 07/01/2012 360,000 387,000
-----------
3,165,374
-----------
COMMUNICATIONS -- 3.1%
Block Communications, Inc. 9.250% 04/15/2009 400,000 432,000
CBD Media LLC 144A Senior Sub Notes 8.625% 06/01/2011 350,000 362,250
Fairpoint Communications 144A Senior Notes 11.875% 03/01/2010 90,000 105,300
Nextel Communications, Inc. Step Up Senior
Discount Notes 9.750% 10/31/2007 145,000 150,075
Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 425,000 439,875
Triton PCS, Inc. 144A Senior Notes 8.500% 06/01/2013 80,000 86,200
Worldcom, Inc. Senior Notes{*} 6.500% 04/15/2010 200,000 152,500
-----------
1,728,200
-----------
CONSUMER CYCLICAL -- 19.0%
Advanced Accessory Systems LLC 144A Senior
Notes 10.750% 06/15/2011 460,000 489,900
American Media Operations 10.250% 05/01/2009 210,000 226,800
Ameristar Casinos, Inc. 10.750% 02/15/2009 500,000 567,500
Argosy Gaming Co. 10.750% 06/01/2009 825,000 901,312
Charter Communications Holdings LLC Senior
Notes 10.750% 10/01/2009 330,000 257,400
Chumash Casino & Resort 144A Senior Notes 9.000% 07/15/2010 515,000 556,200
Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 65,000 70,850
Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 70,000 76,300
Continental Cablevision Senior Notes 8.300% 05/15/2006 25,000 28,954
D.R. Horton, Inc. 8.500% 04/15/2012 50,000 56,000
D.R. Horton, Inc. 10.500% 04/01/2005 175,000 192,937
DirecTV Holdings/Finance 144A Senior Notes 8.375% 03/15/2013 275,000 307,312
Dominos, Inc. 144A Senior Sub Notes 8.250% 07/01/2011 155,000 160,037
Echostar DBS Corp. Senior Notes 9.125% 01/15/2009 225,000 251,437
Entercom Communications Corp. 7.625% 03/01/2014 50,000 54,750
Entravision Communications Corp. 8.125% 03/15/2009 565,000 589,012
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 USD 200,000 $ 213,000
Isle of Capri Casinos 8.750% 04/15/2009 260,000 278,200
John Q Hamons Hotels, Inc. Series B 8.875% 05/15/2012 350,000 369,687
Lamar Media Corp. 8.625% 09/15/2007 263,000 273,520
Mohegan Tribal Gaming Authority 8.750% 01/01/2009 50,000 53,250
Mohegan Tribal Gaming Authority Senior
Notes 8.375% 07/01/2011 770,000 831,600
Mohegan Tribal Gaming Authority Senior Sub
Notes 8.125% 01/01/2006 350,000 379,750
Moore North America Finance, Inc. 144A
Senior Notes 7.875% 01/15/2011 225,000 239,625
Panavision, Inc. Step Up Sub Notes(a) 9.625% 02/01/2006 400,000 200,000
Radio One, Inc. Series B 8.875% 07/01/2011 60,000 66,150
Regal Cinemas, Inc. Series B 9.375% 02/01/2012 415,000 456,500
Russell Corp. 9.250% 05/01/2010 125,000 136,875
Six Flags, Inc. Senior Notes 9.500% 02/01/2009 465,000 458,025
Six Flags, Inc. Senior Notes 9.750% 06/15/2007 225,000 222,750
Speedway Motorsports, Inc. 144A Senior Sub
Notes 6.750% 06/01/2013 395,000 406,850
Station Casinos, Inc. 8.375% 02/15/2008 200,000 216,000
Station Casinos, Inc. Senior Sub Notes 9.875% 07/01/2010 200,000 222,000
TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 310,000 337,900
Turning Stone Casino Resort Enterprise 9.125% 12/15/2010 250,000 267,500
United Components, Inc. 144A Senior Sub
Notes 9.375% 06/15/2013 80,000 84,200
-----------
10,500,083
-----------
CONSUMER NONCYCLICAL -- 10.5%
Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 75,000 81,563
Apogent Technologies, Inc. 144A Senior Sub
Notes 6.500% 05/15/2013 100,000 103,250
Ball Corp. 6.875% 12/15/2012 30,000 31,875
Chattem, Inc. 8.875% 04/01/2008 550,000 563,750
Columbia/HCA Healthcare 8.850% 01/01/2007 175,000 195,014
Constellation Brands, Inc. Series B 8.000% 02/15/2008 150,000 164,625
Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 515,000 557,488
Elizabeth Arden, Inc. 11.750% 02/01/2011 100,000 112,000
HCA - The Healthcare Co. 8.750% 09/01/2010 225,000 266,126
HCA - The Healthcare Co. Senior Notes 7.875% 02/01/2011 100,000 110,762
Ingles Markets, Inc. 8.875% 12/01/2011 350,000 353,500
Marsh Supermarket, Inc. Series B 8.875% 08/01/2007 300,000 273,000
Medex, Inc.144A Senior Sub Notes 8.875% 05/15/2013 35,000 36,400
Pathmark Stores 8.750% 02/01/2012 135,000 139,725
Province Healthcare Co. Senior Sub Notes 7.500% 06/01/2013 150,000 149,250
Rite Aid Corp. 12.500% 09/15/2006 500,000 560,000
Rite Aid Corp. 144A 8.125% 05/01/2010 310,000 323,950
Rite Aid Corp. 144A 9.500% 02/15/2011 135,000 146,138
Smithfield Foods, Inc. 144A 7.750% 05/15/2013 160,000 170,000
Stater Brothers Holdings Senior Notes 10.750% 08/15/2006 795,000 838,725
Tenet Healthcare Corp. Senior Notes 6.500% 06/01/2012 344,000 325,080
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
Tricon Global Restaurant, Inc. Senior Notes 7.650% 05/15/2008 USD 175,000 $ 194,250
Tricon Global Restaurant, Inc. Senior Notes 8.500% 04/15/2006 75,000 82,688
-----------
5,779,159
-----------
ENERGY -- 11.8%
Amerigas Partners Senior Notes 8.875% 05/20/2011 200,000 218,000
ANR Pipeline Co. 7.375% 02/15/2024 225,000 226,688
ANR Pipeline Co. Senior Notes 7.000% 06/01/2025 35,000 35,175
Calpine Corp. Senior Notes 8.500% 02/15/2011 325,000 243,750
CenterPoint Energy, Inc. 144A Notes 5.875% 06/01/2008 210,000 213,662
Chesapeake Energy Corp. 8.125% 04/01/2011 275,000 296,313
Citgo Petroleum Corp. 144A Senior Notes 11.375% 02/01/2011 320,000 358,400
CMS Energy Corp. Senior Notes 8.500% 04/15/2011 345,000 358,800
CMS Energy Corp. Senior Notes 9.875% 10/15/2007 400,000 428,000
Consumers Energy 6.250% 09/15/2006 150,000 165,253
El Paso Energy Partners 8.500% 06/01/2011 80,000 85,800
El Paso Natural Gas Co. 8.625% 01/15/2022 425,000 450,500
El Paso Natural Gas Co. 144A 8.375% 06/15/2032 140,000 147,700
El Paso Production Co. 144A Senior Notes 7.750% 06/01/2013 825,000 829,125
Frontier Escrow Corp. 144A Senior Notes 8.000% 04/15/2013 175,000 183,313
Houston Exploration Co. 144A Senior Sub
Notes 7.000% 06/15/2013 150,000 157,125
Newfield Exploration Co. Senior Sub Notes 8.375% 08/15/2012 225,000 254,250
Peabody Energy Corp. 144A Senior Notes 6.875% 03/15/2013 125,000 131,250
Pogo Producing Co. 144A 8.250% 04/15/2011 55,000 61,050
Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 250,000 276,250
Reliant Resources, Inc. 144A 9.250% 07/15/2010 80,000 80,504
Teco Energy, Inc. Senior Notes 7.500% 06/15/2010 70,000 72,100
Tennessee Gas Pipeline Co. 8.375% 06/15/2032 175,000 190,313
Tesoro Petroleum Corp. 144A 8.000% 04/15/2008 65,000 66,950
Transcontinental Gas Pipeline Corp. Senior
Notes 8.875% 07/15/2012 325,000 366,438
TXU Energy Co. 144A Notes 7.000% 03/15/2013 125,000 138,437
Vintage Petroleum, Inc. Senior Sub Notes 7.875% 05/15/2011 225,000 235,688
Westar Energy, Inc. 7.875% 05/01/2007 125,000 139,375
XTO Energy, Inc. Senior Notes 7.500% 04/15/2012 115,000 131,675
-----------
6,541,884
-----------
FINANCIAL -- 3.3%
Arch Western Finance LLC 144A Senior Notes 6.750% 07/01/2013 80,000 81,400
Felcor Lodging LP REIT 9.500% 09/15/2008 100,000 104,000
Leucadia National Corp. 144A Senior Notes 7.000% 08/15/2013 420,000 421,225
MeriStar Hospitality Corp. REIT 9.000% 01/15/2008 225,000 221,625
Meristar Hospitality Corp. REIT 10.500% 06/15/2009 330,000 337,425
RFS Partnership LP REIT 9.750% 03/01/2012 60,000 60,750
RH Donnelley Finance Corp. I 144A Senior
Notes 8.875% 12/15/2010 220,000 242,000
RH Donnelley Finance Corp. I 144A Senior
Sub Notes 10.875% 12/15/2012 320,000 371,200
-----------
1,839,625
-----------
PUBLIC UTILITY -- 6.1%
AES Corp. 144A 8.750% 05/15/2013 635,000 668,339
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
PUBLIC UTILITY (CONTINUED)
AES Corp. 144A 10.000% 07/15/2005 USD 530,000 $ 551,200
AES Corp. Senior Notes 8.875% 02/15/2011 100,000 97,500
Dynegy Holdings, Inc. Senior Notes 6.875% 04/01/2011 350,000 292,250
Ipalco Enterprises, Inc. 8.375% 11/14/2008 275,000 298,375
Northwest Pipeline Corp. 6.625% 12/01/2007 525,000 538,125
Southern Cal Edison Co. 144A 8.000% 02/15/2007 250,000 273,125
Southern Natural Gas Co. 7.350% 02/15/2031 575,000 585,063
Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 50,000 54,875
-----------
3,358,852
-----------
TECHNOLOGY -- 1.6%
L-3 Communications Corp. 144A Senior Sub
Notes 6.125% 07/15/2013 525,000 532,875
L-3 Communications Corp. 144A Senior Sub
Notes 7.625% 06/15/2012 296,000 325,600
-----------
858,475
-----------
TRANSPORTATION -- 0.5%
Delta Air Lines 7.900% 12/15/2009 325,000 261,625
-----------
Total Corporate (Cost $39,009,325) 41,210,726
-----------
SOVEREIGN BONDS -- 0.4%
Dominican Republic 144A 9.500% 09/27/2006 60,000 56,400
Ministry Finance Russia 3.000% 05/14/2008 50,000 45,750
Republic of Brazil 8.000% 04/15/2014 36,942 32,509
Republic of Brazil 10.250% 06/17/2013 95,000 89,443
-----------
Total Sovereign Bonds (Cost $237,701) 224,102
-----------
YANKEE BONDS -- 11.7%
Abitibi-Consolidated, Inc. 8.550% 08/01/2010 225,000 255,868
Biovail Corp. Senior Sub Notes 7.875% 04/01/2010 175,000 187,250
British Sky Broadcasting 8.200% 07/15/2009 425,000 496,580
British Sky Broadcasting 6.875% 02/23/2009 325,000 359,910
Colt Telecom Group PLC Senior Step Up
Notes(a) 12.000% 12/15/2006 65,000 65,325
Crown Euro Holdings SA 144A 9.500% 03/01/2011 275,000 298,375
Dominican Republic 144A 9.040% 01/23/2013 25,000 22,250
Dominican Republic Registered 9.040% 01/23/2013 25,000 22,250
GT Group Telecom, Inc. Senior Step Up
Notes{*}(a) 0.000% 02/01/2010 925,000 93
Ipsco, Inc. 144A Senior Notes 8.750% 06/01/2013 40,000 40,152
MDP Acquisitions PLC Senior Notes 9.625% 10/01/2012 150,000 165,750
Nigeria Promissory Notes Series RC 5.092% 01/05/2010 68,184 51,699
Norampac, Inc. 144A Senior Notes 6.750% 06/01/2013 80,000 83,200
Quebecor Media, Inc. Senior Notes 11.125% 07/15/2011 150,000 172,500
Republic of Brazil(c) 2.188% 04/15/2012 60,000 45,150
Republic of Brazil 10.000% 01/16/2007 80,000 81,800
Republic of Brazil 10.125% 05/15/2027 120,000 103,500
Republic of Colombia 7.625% 02/15/2007 60,000 64,350
Republic of Colombia 9.750% 04/23/2009 65,000 74,100
Republic of Colombia 10.000% 01/23/2012 70,000 78,400
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
YANKEE BONDS (CONTINUED)
Republic of Peru 9.125% 02/21/2012 USD 50,000 $ 53,300
Republic of Peru FLIRB(c) 4.500% 03/07/2017 50,000 39,125
Republic of Peru PDI(c) 5.000% 03/07/2017 62,400 53,040
Republic of Philippines 8.375% 03/12/2009 90,000 96,075
Republic of Uruguay 7.500% 03/15/2015 88,000 67,760
Republic of Uruguay 7.875% 01/15/2033 474 315
Republic of Uruguay 7.875% 01/15/2033 132,000 87,780
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 315,000 315,447
Royal Caribbean Cruises 7.500% 10/15/2027 175,000 152,250
Royal Caribbean Cruises Senior Notes 8.000% 05/15/2010 150,000 154,875
Royal Caribbean Cruises Senior Notes 8.125% 07/28/2004 100,000 103,000
Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 900,000 945,000
Russian Federation 5.000% 03/31/2030 158,950 153,983
Russian Federation 8.750% 07/24/2005 60,000 66,975
Stena AB Senior Notes 9.625% 12/01/2012 70,000 76,825
Tyco International Group SA 6.125% 01/15/2009 500,000 527,500
Tyco International Group SA 6.375% 10/15/2011 275,000 288,750
Ukraine Government 144A 7.650% 06/11/2013 150,000 148,875
Ukraine Government Senior Notes 11.000% 03/15/2007 93,334 102,784
United Mexican States 8.300% 08/15/2031 30,000 34,545
Vivendi Universal 144A Senior Notes 9.250% 04/15/2010 265,000 307,400
-----------
Total Yankee Bonds (Cost $6,501,472) 6,444,106
-----------
NON-AGENCY -- 0.5%
PASS THRU SECURITIES -- 0.5%
GMAC Commercial Mortgage Securities, Inc.
1996-C1 F Non-ERISA 7.860% 11/15/2006 250,000 265,371
-----------
Total Non-Agency (Cost $249,125) 265,371
-----------
FOREIGN DENOMINATED -- 2.8%
EURO -- 2.6%
Colt Telecom Europe PLC CVT 2.000% 12/16/2006 EUR 125,000 112,618
Fort James Corp. 4.750% 06/29/2004 100,000 113,048
Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 425,000 546,305
Remy Cointreau SA 144A Senior Notes 6.500% 07/01/2010 60,000 70,411
Tyco International Group SA 5.500% 11/19/2008 535,000 607,879
-----------
1,450,261
-----------
FRANCE -- 0.1%
Ivory Coast FLIRB{*}(c) 2.000% 03/29/2018 FRF 2,000,000 66,050
-----------
SOUTH AFRICA -- 0.1%
Republic of South Africa 13.000% 08/31/2010 ZAR 430,000 70,100
-----------
Total Foreign Denominated (Cost $1,164,588) 1,586,411
-----------
TOTAL BONDS AND NOTES (COST $48,965,559) 51,616,802
-----------
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
EQUITIES -- 0.0%
COMMON STOCKS -- 0.0%
GH Water Supply Holdings Ltd. (Hong Kong) 3,644 $ 0
Guangdong Alliance Ltd. 144A (Hong Kong)* 9,590 0
HK Property Co. (Hong Kong)* 9,590 0
-----------
0
-----------
TOTAL EQUITIES (COST $0) 0
-----------
PREFERRED STOCKS -- 3.6%
CONVERTIBLE PREFERRED STOCKS -- 2.9%
Equity Office Properties Trust 144A CVT Pfd 17,000 844,900
Ford Motor Co. Capital Trust II 6.50% CVT Pfd 4,000 173,800
General Motors Corp. Series B 5.25% CVT Pfd 800 17,920
General Motors Corp. Series C 6.25% CVT Pfd 4,300 107,070
Kansas City Southern 4.25% 144A CVT Pfd 290 150,510
Omnicare, Inc. 4.00% CVT Pfd 1,000 54,800
Tyco International Group SA 3.125% 144A CVT Pfd 240,000 264,852
-----------
Total Convertible Preferred Stocks (Cost $1,551,000) 1,613,852
-----------
NON-CONVERTIBLE PREFERRED STOCKS -- 0.7%
CSC Holdings, Inc. 11.125% Pfd 3,500 360,500
Global Crossing PIK 10.50% Pfd*{*} 4,210 42
Paxson Communications PIK 12.50% Pfd* 0 0
-----------
Total Non-Convertible Preferred Stocks (Cost $737,125) 360,542
-----------
TOTAL PREFERRED STOCKS (COST $2,288,125) 1,974,394
-----------
WARRANTS -- 0.0%
GOVERNMENT BACKED -- 0.0%
United Mexican States Series B, 6/30/2004 (USD) 250,000 2,500
United Mexican States Series C, 6/30/2005 (USD) 250,000 750
United Mexican States Series D, 6/30/2006 (USD) 250,000 250
United Mexican States Series E, 6/30/2007 (USD) 250,000 125
-----------
3,625
-----------
COMMUNICATIONS -- 0.0%
GT Group Telecom, Inc., 02/01/2010* 925 9
McLeod USA, Inc., 04/16/2007* 3,379 1,386
-----------
1,395
-----------
TOTAL WARRANTS (COST $60,043) 5,020
-----------
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE/SHARES (NOTE 1A)
- --------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 12.0%
CASH EQUIVALENTS -- 10.3%
Bank of Montreal Eurodollar Time Deposit(d) 1.150% 07/09/2003 $ 707,622 $ 707,622
Credit Agricole Indosuez Eurodollar Time
Deposit(d) 1.050% 08/26/2003 776,618 776,618
Den Danske Bank Eurodollar Time Deposit(d) 1.040% 07/24/2003 621,295 621,295
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(d) 776,619 776,619
Royal Bank of Canada Eurodollar Time Deposit(d) 1.300% 07/01/2003 1,397,913 1,397,913
Royal Bank of Scotland Eurodollar Time Deposit(d) 1.125% 07/01/2003 1,397,913 1,397,913
------------
5,677,980
------------
REPURCHASE AGREEMENTS -- 1.7%
Tri-party repurchase agreement dated 06/30/03 with Salomon Smith
Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with
a maturity value of $968,575 and an effective yield of 0.75%,
collateralized by a U.S. Government Obligation with a rate of 8.75%, a
maturity date of 08/15/20 and an aggregated market value of $996,036. 968,555
------------
TOTAL SHORT-TERM INVESTMENTS (COST $6,646,534) 6,646,535
------------
TOTAL INVESTMENTS -- 109.0% (COST $57,960,261) $ 60,242,751
OTHER ASSETS, LESS LIABILITIES -- (9.0%) (4,972,132)
-------------
NET ASSETS -- 100.0% $ 55,270,619
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration
to qualified buyers.
CVT - Convertible
EUR - Euro
FLIRB - Front Loaded Interest Reduction Bond
FRF - French Franc
PDI - Past Due Interest Bonds
PIK - Payment-in-kind
REIT - Real Estate Investment Trust
Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as
of June 30, 2003. Maturity date disclosed is the ultimate maturity.
USD - United States Dollar
ZAR - South African Rand
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Zero coupon security.
(c) Variable Rate Security; rate indicated is as of 6/30/03.
(d) Represents investments of security lending collateral (Note 6).
{*} Defaulted security.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- ------------------------------------------------------------------------
Financial 22.9%
Consumer Cyclical 20.8%
Basic Industry 16.4%
Consumer Non-cyclical 11.4%
Capital Goods 10.3%
Energy 9.4%
Public Utility 6.9%
Communications 5.4%
Foreign Government 3.3%
Technology 1.6%
Transportation 0.6%
-------
109.0%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- ------------------------------------------------------------------------
United States 85.6%
Canada 5.4%
Luxembourg 3.1%
France 2.8%
Scotland 2.5%
Liberia 2.5%
Germany 2.1%
United Kingdom 1.9%
Brazil 0.6%
Russia 0.5%
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $5,529,223 (Note 6))
(identified cost, $57,960,261) $60,242,751
Cash 1,374
Receivable for investments sold 172,227
Interest and dividends receivable 1,053,911
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 59,533
Prepaid expenses 5,206
-----------
Total assets 61,535,002
LIABILITIES
Payable for investments purchased $ 526,364
Unrealized depreciation on forward foreign currency
exchange contracts (Note 5) 6,816
Payable for closed forward foreign currency exchange
contracts (Note 5) 7,730
Interest payable on open swap contracts (Note 5) 141
Payable for open swap contracts (Note 5) 3,000
Payable upon return of securities loaned (Note 6) 5,677,980
Accrued accounting and custody fees 20,079
Accrued trustees' fees and expenses (Note 2) 1,306
Accrued expenses and other liabilities 20,967
---------
Total liabilities 6,264,383
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $55,270,619
===========
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$7,754 (Note 6)) $2,058,441
Dividend income 60,965
----------
Total income 2,119,406
EXPENSES
Investment advisory fee (Note 2) $ 123,386
Accounting and custody fees 60,075
Legal and audit services 19,932
Insurance expense 4,270
Trustees' fees and expenses (Note 2) 2,427
Miscellaneous 941
---------
Total expenses 211,031
Deduct:
Waiver of investment advisory fee (87,727)
---------
Net expenses 123,304
----------
Net investment income 1,996,102
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 1,428,080
Written options transactions 120
Swap Contracts (25,367)
Foreign currency transactions and forward foreign
currency exchange contracts (350,666)
---------
Net realized gain 1,052,167
Change in unrealized appreciation (depreciation)
Investment securities 3,250,564
Written options (765)
Swap Contracts 15,100
Foreign currency and forward foreign currency exchange
contracts 148,099
---------
Change in net unrealized appreciation (depreciation) 3,412,998
----------
Net realized and unrealized gain 4,465,165
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $6,461,267
==========
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,996,102 $ 3,785,085
Net realized gain (loss) 1,052,167 (3,642,626)
Change in net unrealized appreciation (depreciation) 3,412,998 2,085,034
----------- ------------
Net increase in net assets from investment operations 6,461,267 2,227,493
----------- ------------
CAPITAL TRANSACTIONS
Contributions 8,858,959 17,254,281
Withdrawals (4,193,656) (22,385,787)
----------- ------------
Net increase (decrease) in net assets from capital
transactions 4,665,303 (5,131,506)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,126,570 (2,904,013)
NET ASSETS
At beginning of period 44,144,049 47,048,062
----------- ------------
At end of period $55,270,619 $ 44,144,049
=========== ============
The accompanying notes are an integral part of the financial statements.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2003 ----------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- --------- -------- ------- ------- -------
TOTAL RETURN+++ 13.94%++ 4.71% 1.54% 2.84% 2.20% 0.86%
RATIOS:
Expenses (to average daily net assets)* 0.50%+ 0.50% 0.50% 0.37% 0.00% 0.00%
Net Investment Income (to average daily net
assets)* 8.08%+ 8.66% 8.87% 10.37% 9.83% 8.40%
Portfolio Turnover 42%++ 130% 117% 148% 137% 145%
Net Assets, End of Period (000's omitted) $55,271 $44,144 $47,048 $31,818 $31,144 $41,641
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed
the Portfolio for a portion of its operating expenses. If this voluntary
action had not been taken, the ratios would have been:
Ratios (to average daily net assets):
Expenses 0.85%+ 0.82% 0.81% 0.89% 0.86% 0.75%
Net investment income 7.73%+ 8.34% 8.56% 9.85% 8.97% 7.65%
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease the ratio of net investment income to
average net assets from 9.20% to 8.87%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
The accompanying notes are an integral part of the financial statements.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon High Yield Bond Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
The objective of the Portfolio is to maximize total return, consisting
primarily of a high level of income by investing, under normal
circumstances, at least 80% of net assets in fixed income securities
issued by U.S. and foreign governments, companies and banks, as well as
tax-exempt securities, preferreds and warrants.
At June 30, 2003, there was one fund, Standish Mellon High Yield Bond Fund
(the "Fund"), invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at
June 30, 2003 was approximately 100%.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish High Yield Bond Portfolio was changed to Standish Mellon High
Yield Bond Portfolio. In addition, the name of the Standish, Ayer & Wood
Master Portfolio was changed to Mellon Institutional Funds Master
Portfolio. The name changes for the Portfolio and the Portfolio Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized value based upon the value on such
date unless the Trustees determine during such sixty-day period that
amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Portfolio to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the
Portfolio and the counterparty. Additionally, procedures have been
established by the Portfolio to monitor on a daily basis, the market value
and accrued interest of the repurchase agreement's underlying investments
to ensure the existence of a proper level of collateral.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for discount or
amortization of premium using the yield-to-maturity method on long-term
debt securities. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities sold are recorded on the
identified cost basis. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio allocates at least annually among its investors each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss deduction or
credit.
E. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks of
loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon") for overall investment advisory and
administrative services is paid monthly at the annual rate of 0.50% of the
Portfolio's
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
average daily net assets. Standish Mellon voluntarily agreed to limit the
Portfolio's total annual operating expenses (excluding brokerage
commissions, taxes and extraordinary expenses) to 0.50% of the Portfolio's
average daily net assets for the six months ended June 30, 2003. Pursuant
to this agreement, for the six months ended June 30, 2003, Standish Mellon
voluntarily did not impose $87,727 of its investment advisory fees. This
agreement is voluntary and temporary and may be discontinued or revised by
Standish Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Portfolio for serving as
an officer or Trustee of the Trust. The Trust pays each Trustee who is not
a director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Portfolio Trust pays the legal
fees for the independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were $27,411,276 and
$20,194,813, respectively. For the six months ended June 30, 2003, the
Portfolio did not purchase or sell any long-term U.S. government
securities.
(4) FEDERAL TAXES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $58,074,595
==========
Gross unrealized appreciation 3,688,806
Gross unrealized depreciation (1,520,650)
----------
Net unrealized appreciation $2,168,156
==========
(5) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in Parts A and B of the Portfolio Trust's registration statement.
The Portfolio trades the following financial instruments with off-balance
sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Portfolio's
exposure to the underlying instrument, or hedge other Portfolio
investments. Options, both held and written by the Portfolio, are
reflected in the accompanying Statement of Assets and Liabilities at
market value. The underlying face amount at value of any open purchased
options is shown in the Schedule of Investments. This amount reflects each
contract's exposure to the underlying instrument at period end. Losses may
arise from changes in the value of the underlying instruments if there is
an illiquid secondary market for the contract or if the counterparty does
not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
losses on investment securities, except purchased options on foreign
currency which are included in realized gains and losses on foreign
currency transactions. If a put option written by the Portfolio is
exercised, the premium reduces the cost basis of the securities purchased
by the Portfolio. The Portfolio, as a writer of an option, has no control
over whether the underlying securities may be sold (call) or purchased
(put) and as a result bears the market risk of an unfavorable change in
the price of the security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 1,845
Options expired (1) (1,845)
----------- -------
Outstanding, end of period 0 $ --
=========== =======
At June 30, 2003, the Portfolio held no written put option contracts.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 1,380
Options closed (1) (1,380)
----------- -------
Outstanding, end of period 0 $ --
=========== =======
At June 30, 2003, the Portfolio held no written call option contracts.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
-----------------------------------------------------------------------------------------------------------------
Euro 1,641,500 09/17/2003 $ 1,879,755 $ 1,937,760 $ 58,005
Japanese Yen 9,467,000 09/17/2003 79,159 80,687 1,528
South African Rand 530,000 08/29/2003 69,705 62,889 (6,816)
--------------- --------------- ------------
TOTAL $ 2,028,619 $ 2,081,336 $ 52,717
=============== =============== ============
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
SWAP AGREEMENTS
The Portfolio may invest in swap agreements. A swap is an agreement to
exchange the return generated by one instrument for the return generated
by another instrument. The Portfolio may enter into interest rate and
credit default swap agreements to manage its exposure to interest rates
and credit risk. Interest rate swap agreements involve the exchange by the
Portfolio with another party of their respective commitments to pay or
receive interest, e.g., an exchange of floating rate payments for fixed
rate payments with respect to a notional amount of principal. In a credit
default swap, one party makes a stream of payments to another party in
exchange for the right to receive a specified return in the event of a
default by a third party on its obligation. The Portfolio may use credit
default swaps to provide a measure of protection against defaults of
issuers (i.e., to reduce risk where the Portfolio owns or has exposure to
the corporate or sovereign issuer) or to take an active long or short
position with respect to the likelihood of a particular corporate or
sovereign issuer's default. In connection with these agreements, cash or
securities may be set aside as collateral in accordance with the terms of
the swap agreement. The Portfolio earns interest on cash set aside as
collateral. Swaps are marked to market daily based upon quotations from
market makers and change in value, if any, is recorded as unrealized gain
or loss in the Statement of Operations. These financial instruments are
not actively traded on financial markets. The values assigned to these
instruments are based upon the best available information and because of
the uncertainty of the valuation, these values may differ significantly
from the values that would have been realized had a ready market for these
instruments existed, and differences could be material. Payments received
or made from credit default swaps at the end of the measurement period are
recorded as realized gain or loss in the Statement of Operations. Net
payments of interest on interest rate swap agreements, if any, are
included as part of interest income. Entering into these agreements
involves, to varying degrees, elements of credit, market, and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will
be no liquid market for these agreements, that the counterparty to the
agreements may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, and that there may be
unfavorable changes in interest rates.
At June 30, 2003, the Portfolio held the following open credit default
swap contracts:
NOTIONAL AMOUNT EXPIRATION NET UNREALIZED
PORTFOLIO/COUNTERPARTY DATE DESCRIPTION DEPRECIATION
-----------------------------------------------------------------------------------------------------------
Agreement with Goldman Sachs Capital Market, dated
4/16/03 to pay 0.46% per year times the notional
amount. The Portfolio receives payment only upon a
default event by JP Morgan Chase & Co., the notional
amount times the difference between the par value and
the then-market value of JP Morgan Chase & Co., 5.25%
1,000,000 USD 6/20/08 due 5/30/07. $(3,000)
(6) SECURITIES LENDING:
The Portfolio may lend its securities, through its agent Investors Bank &
Trust Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Portfolio
on the next business day. For the duration of a loan, the Portfolio
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment
of the collateral. As with other extensions of credit, the Portfolio bears
the risk of delay in recovery or even loss of rights in its securities on
loan should the borrower of the securities fail financially or default on
its obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
25
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2003, the Portfolio loaned securities having a market value of
$5,529,223. The Portfolio received cash collateral of $5,677,980 which is
invested together with collateral of other Mellon Institutional funds in
high grade short-term investments.
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place
a month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income
on the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least
equal to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the
forward sale of other securities it owns. Income on the securities will
not be earned until settlement date. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of the
Portfolio's other assets. Unsettled TBA purchase commitments are valued at
the current market value of the underlying securities, according to the
procedures described under "Investment security valuations" above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the
sale of the securities based upon the unit price established at the date
the commitment was entered into.
At June 30, 2003, the Portfolio did not have any delayed delivery
transactions.
(8) CONCENTRATION OF RISK:
The Portfolio invests in low rated (non-investment grade) and comparable
quality unrated high yield securities. Investments in high yield
securities are accompanied by a greater degree of credit risk and the
value of high yield securities tends to be more sensitive to economic
conditions than higher rated securities. The risk of loss due to default
of an issuer may be significantly greater for holders of high yield
securities, because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.
There are certain additional considerations and risks associated with
investing in foreign securities and currency transactions that are not
inherent with investments of domestic origin. The Portfolio's investment
in emerging market countries may involve greater risks than investments in
more developed markets and the price of such investments may be volatile.
These risks of investing in foreign and emerging markets may include
foreign currency exchange rate fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
26
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(9) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a commitment fee, computed at an annual rate of .065 of
1% on the daily unused portion of the facility, is allocated ratably among
the participating portfolios/funds at the end of each quarter.
For the six months ended June 30, 2003, the expense related to the
commitment fee was $941 for the Portfolio.
During the six months ended June 30, 2003, the Portfolio had no borrowings
under the credit facility.
27
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. 1100 Executive Officer,
Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
28
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
29
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $2,836,659 (Note 7)) (identified cost,
$34,164,926) $35,728,854
Receivable for investments sold 197,779
Interest and dividends receivable 652,264
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 22,321
Prepaid expenses 8,735
-----------
Total assets 36,609,953
LIABILITIES
Payable for investments purchased $ 302,142
Interest payable on open swap contracts (Note 6) 141
Payable for open swap contracts (Note 6) 3,000
Payable upon return of securities loaned (Note 7) 2,910,940
Due to custodian 807,605
Accrued accounting, custody and transfer agent fees 16,286
Accrued trustees' fees and expenses (Note 2) 1,186
Accrued expenses and other liabilities 19,157
---------
Total liabilities 4,060,457
-----------
NET ASSETS $32,549,496
===========
NET ASSETS CONSIST OF:
Paid-in capital $49,875,584
Accumulated net realized loss (19,041,967)
Undistributed net investment income 133,312
Net unrealized appreciation 1,582,567
-----------
TOTAL NET ASSETS $32,549,496
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,887,224
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 17.25
===========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$4,094 (Note 7)) $1,327,681
Dividend income 34,592
----------
Total investment income 1,362,273
EXPENSES
Investment advisory fee (Note 2) $ 63,131
Accounting, custody, and transfer agent fees 55,587
Legal and audit services 18,604
Insurance expense 4,746
Registration fees 3,223
Trustees' fees and expenses (Note 2) 2,234
Miscellaneous 3,853
---------
Total expenses 151,378
Deduct:
Waiver of investment advisory fee (Note 2) (63,131)
Reimbursement of Fund operating expenses (Note 2) (72,464)
---------
Total expense deductions (135,595)
---------
Net expenses 15,783
----------
Net investment income 1,346,490
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 1,157,640
Swap Contracts (25,367)
Foreign currency transactions and forward foreign
currency exchange contracts (174,787)
---------
Net realized gain 957,486
Change in unrealized appreciation (depreciation)
Investment securities 1,630,580
Swap Contracts 15,100
Foreign currency and forward foreign currency exchange
contracts 70,608
---------
Change in net unrealized appreciation (depreciation) 1,716,288
----------
Net realized and unrealized gain 2,673,774
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $4,020,264
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,346,490 $ 4,194,742
Net realized gain (loss) 957,486 (2,028,022)
Change in net unrealized appreciation (depreciation) 1,716,288 222,184
------------ ------------
Net increase in net assets from investment operations 4,020,264 2,388,904
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (1,170,937) (4,225,040)
Return of capital -- (19,173)
------------ ------------
Total distributions to shareholders (1,170,937) (4,244,213)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 10,399,893 25,641,775
Value of shares issued to shareholders in payment of
distributions declared 1,093,800 4,167,850
Cost of shares redeemed (20,825,492) (35,115,590)
------------ ------------
Net decrease in net assets from Fund share transactions (9,331,799) (5,305,965)
------------ ------------
TOTAL DECREASE IN NET ASSETS (6,482,472) (7,161,274)
NET ASSETS
At beginning of period 39,031,968 46,193,242
------------ ------------
At end of period(including undistributed net investment
income of $133,312 and distributions in excess of net
investment income of $42,241, respectively) $ 32,549,496 $ 39,031,968
============ ============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS APRIL 2, 2001
ENDED (COMMENCEMENT OF
JUNE 30, 2003 YEAR ENDED OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 2002 DECEMBER 31, 2001
------------- ----------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.72 $ 16.36 $ 20.00
------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.70 1.41 1.34
Net realized and unrealized gain (loss) on
investments 1.43 (0.46) (1.93)
------- ------- -------
Total from investment operations 2.13 0.95 (0.59)
------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.60) (1.58) (2.98)
From tax return of capital -- (0.01) (0.07)
------- ------- -------
Total distributions to shareholders (0.60) (1.59) (3.05)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 17.25 $ 15.72 $ 16.36
======= ======= =======
TOTAL RETURN+++ 13.73%++ 6.07% (2.91)%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.10%+ 0.10% 0.10%+
Net Investment Income (to average daily net
assets)* 8.54%+ 8.78% 9.46%+
Portfolio Turnover 62%++ 121% 191%++
Net Assets, End of Period (000's omitted) $32,549 $39,032 $46,193
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose any of its investment advisory fee and reimbursed the Fund for a
portion of its operating expenses. If this voluntary action had not been
taken, the investment income per share and the ratios would have been:
Net investment income per share(1) $ 0.63 $ 1.31 $ 1.28
Ratios (to average daily net assets):
Expenses 0.96%+ 0.73% 0.54%+
Net investment income 7.68%+ 8.15% 9.02%+
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of fee waivers and
expense limitations.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 97.2%
ASSET BACKED -- 1.7%
Badger Tobacco Asset Securitization Corp. 6.125% 06/01/2027 USD 155,000 $ 144,245
Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 170,000 170,452
Louisiana Tobacco Settlement Funding Corp. 5.500% 05/15/2030 215,000 178,820
South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 50,000 45,965
-----------
Total Asset Backed (Cost $520,581) 539,482
-----------
CONVERTIBLE CORPORATE BONDS -- 2.0%
Davita, Inc. 7.000% 05/15/2009 200,000 208,000
Echostar DBS Corp. 4.875% 01/01/2007 200,000 200,484
Lamar Advertising Co. 5.250% 09/15/2006 75,000 77,058
Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 225,000 104,049
Xcel Energy, Inc. 144A 7.500% 11/21/2007 40,000 55,200
-----------
Total Convertible Corporate Bonds (Cost $593,593) 644,791
-----------
CORPORATE -- 79.7%
BASIC INDUSTRY -- 12.5%
Corn Products International, Inc. Senior Notes 8.250% 07/15/2007 75,000 82,125
Corrections Corp. of America Senior Notes 7.500% 05/01/2011 30,000 31,425
Crompton Corp. Senior Notes 8.500% 03/15/2005 140,000 147,700
CSC Holdings, Inc. 7.875% 12/15/2007 100,000 102,000
CSC Holdings, Inc. Senior Notes 8.125% 07/15/2009 400,000 413,000
Earle M. Jorgensen Co. 9.750% 06/01/2012 100,000 106,000
Equistar Chemical 10.125% 09/01/2008 55,000 57,200
Equistar Chemical/Funding 144A Senior Notes 10.625% 05/01/2011 15,000 15,375
Freeport-McMoRan Copper & Gold, Inc. 144A Senior
Notes 10.125% 02/01/2010 75,000 84,000
Georgia-Pacific Corp. 144A Senior Notes 7.375% 07/15/2008 220,000 223,850
Georgia-Pacific Corp. 144A Senior Notes 8.875% 02/01/2010 75,000 81,000
Great Lakes Dredge & Dock Co. 11.250% 08/15/2008 275,000 291,500
HMP Equity Holdings Corp. 144A(b) 0.000% 05/15/2008 70,000 35,700
Huntsman International LLC 9.875% 03/01/2009 125,000 130,625
IMC Global, Inc. 10.875% 06/01/2008 90,000 93,150
Kansas City Southern 7.500% 06/15/2009 100,000 103,500
National Waterworks, Inc. Series B 10.500% 12/01/2012 55,000 61,050
Owens-Brockway Glass Container, Inc. 144A 7.750% 05/15/2011 45,000 47,362
Owens-Illinois, Inc. 7.500% 05/15/2010 65,000 63,050
Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 250,000 257,500
Pioneer Natural Resources Co. 7.500% 04/15/2012 75,000 86,250
Pioneer Natural Resources Co. Senior Notes 8.250% 08/15/2007 125,000 142,500
Resolution Performance Products Senior Sub Notes 13.500% 11/15/2010 200,000 200,000
Steel Dynamics, Inc. 9.500% 03/15/2009 200,000 210,000
Texas Industries, Inc. 144A Senior Notes 10.250% 06/15/2011 235,000 244,400
US Steel Corp. Senior Notes 9.750% 05/15/2010 160,000 164,000
Williams Cos., Inc. 7.875% 09/01/2021 150,000 147,375
Williams Cos., Inc. 7.625% 07/15/2019 225,000 218,250
Williams Cos., Inc. Senior Notes 8.625% 06/01/2010 70,000 73,150
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY (CONTINUED)
Williams Cos., Inc. Series A 7.500% 01/15/2031 USD 100,000 $ 95,000
Xerox Corp. Senior Notes 7.125% 06/15/2010 50,000 50,375
-----------
4,058,412
-----------
CAPITAL GOODS -- 6.5%
Alliant Techsystems, Inc. 8.500% 05/15/2011 100,000 110,750
Allied Waste Industries 144A Notes 10.000% 08/01/2009 85,000 90,525
Allied Waste Industries Series B 8.500% 12/01/2008 400,000 431,000
Allied Waste Industries, Inc. 8.875% 04/01/2008 150,000 163,125
Allied Waste Industries, Inc. 9.250% 05/01/2021 200,000 214,000
Allied Waste North America Senior Notes 7.875% 04/15/2013 55,000 57,612
American Standard, Inc. 7.375% 02/01/2008 103,000 113,944
Esterline Technologies Corp. 144A Senior Sub
Notes 7.750% 06/15/2013 70,000 73,325
K&F Industries, Inc. Senior Sub Notes 9.625% 12/15/2010 65,000 71,500
Smurfit-Stone Container Corp. 8.250% 10/01/2012 150,000 162,750
SPX Corp. Senior Notes 7.500% 01/01/2013 475,000 510,625
Stone Container Corp. Senior Notes 8.375% 07/01/2012 125,000 134,375
-----------
2,133,531
-----------
COMMUNICATIONS -- 3.7%
Block Communications, Inc. 9.250% 04/15/2009 400,000 432,000
CBD Media LLC 144A Senior Sub Notes 8.625% 06/01/2011 230,000 238,050
Fairpoint Communications 144A Senior Notes 11.875% 03/01/2010 55,000 64,350
Nextel Communications, Inc. Step Up Senior
Discount Notes 9.750% 10/31/2007 80,000 82,800
Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 315,000 326,025
Triton PCS, Inc. 144A Senior Notes 8.500% 06/01/2013 50,000 53,875
-----------
1,197,100
-----------
CONSUMER CYCLICAL -- 21.2%
Advanced Accessory Systems LLC 144A Senior Notes 10.750% 06/15/2011 235,000 250,275
American Media Operations 10.250% 05/01/2009 125,000 135,000
Ameristar Casinos, Inc. 10.750% 02/15/2009 400,000 454,000
Argosy Gaming Co. 10.750% 06/01/2009 330,000 360,525
Chumash Casino & Resort 144A Senior Notes 9.000% 07/15/2010 270,000 291,600
Cinemark USA, Inc. 144A Senior Sub Notes 9.000% 02/01/2013 75,000 81,750
DirecTV Holdings/Finance 144A Senior Notes 8.375% 03/15/2013 175,000 195,562
Dominos, Inc. 144A Senior Sub Notes 8.250% 07/01/2011 105,000 108,412
Echostar DBS Corp. Senior Notes 9.125% 01/15/2009 200,000 223,500
Entercom Communications Corp. 7.625% 03/01/2014 50,000 54,750
Entravision Communications Corp. 8.125% 03/15/2009 250,000 260,625
Harrahs Operating Co., Inc. Senior Sub Notes 7.875% 12/15/2005 60,000 65,100
Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 370,000 394,050
Isle of Capri Casinos 8.750% 04/15/2009 195,000 208,650
John Q Hamons Hotels, Inc. Series B 8.875% 05/15/2012 235,000 248,219
Lamar Media Corp. 8.625% 09/15/2007 69,000 71,760
Mohegan Tribal Gaming Authority 8.750% 01/01/2009 25,000 26,625
Mohegan Tribal Gaming Authority Senior Notes 8.375% 07/01/2011 460,000 496,800
Mohegan Tribal Gaming Authority Senior Sub Notes 8.125% 01/01/2006 630,000 683,550
Moore North America Finance, Inc. 144A Senior
Notes 7.875% 01/15/2011 165,000 175,725
Panavision, Inc. Step Up Sub Notes(a) 9.625% 02/01/2006 330,000 165,000
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Radio One, Inc. Series B 8.875% 07/01/2011 USD 75,000 $ 82,687
Regal Cinemas, Inc. Series B 9.375% 02/01/2012 250,000 275,000
Russell Corp. 9.250% 05/01/2010 125,000 136,875
Scotts Co. 8.625% 01/15/2009 275,000 294,250
Six Flags, Inc. Senior Notes 9.500% 02/01/2009 350,000 344,750
Speedway Motorsports, Inc. 144A Senior Sub Notes 6.750% 06/01/2013 250,000 257,500
Station Casinos, Inc. 8.375% 02/15/2008 65,000 70,200
Station Casinos, Inc. Senior Sub Notes 9.875% 07/01/2010 55,000 61,050
TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 170,000 185,300
Turning Stone Casino Resort Enterprise 9.125% 12/15/2010 190,000 203,300
United Components, Inc. 144A Senior Sub Notes 9.375% 06/15/2013 50,000 52,625
-----------
6,915,015
-----------
CONSUMER NONCYCLICAL -- 12.2%
Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 20,000 21,750
Amerisourcebergen Corp. Senior Notes 8.125% 09/01/2008 265,000 292,162
Apogent Technologies, Inc. 144A Senior Sub Notes 6.500% 05/15/2013 50,000 51,625
Ball Corp. 6.875% 12/15/2012 100,000 106,250
Chattem, Inc. 8.875% 04/01/2008 330,000 338,250
Columbia/HCA Healthcare 8.360% 04/15/2024 275,000 300,707
Constellation Brands, Inc. Series B 8.000% 02/15/2008 150,000 164,625
Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 300,000 324,750
Elizabeth Arden, Inc. 11.750% 02/01/2011 125,000 140,000
Ingles Markets, Inc. 8.875% 12/01/2011 200,000 202,000
Medex, Inc.144A Senior Sub Notes 8.875% 05/15/2013 20,000 20,800
Pathmark Stores 8.750% 02/01/2012 140,000 144,900
Province Healthcare Co. Senior Sub Notes 7.500% 06/01/2013 85,000 84,575
Rite Aid Corp. 12.500% 09/15/2006 215,000 240,800
Rite Aid Corp. 144A 8.125% 05/01/2010 190,000 198,550
Rite Aid Corp. 144A 9.500% 02/15/2011 75,000 81,187
Smithfield Foods, Inc. 144A 7.750% 05/15/2013 70,000 74,375
Stater Brothers Holdings Senior Notes 10.750% 08/15/2006 445,000 469,475
Tenet Healthcare Corp. Senior Notes 6.500% 06/01/2012 225,000 212,625
Tricon Global Restaurant, Inc. Senior Notes 7.650% 05/15/2008 125,000 138,750
Tricon Global Restaurant, Inc. Senior Notes 8.500% 04/15/2006 15,000 16,537
Tricon Global Restaurant, Inc. Senior Notes 8.875% 04/15/2011 300,000 351,000
-----------
3,975,693
-----------
ENERGY -- 13.2%
Amerigas Partners Senior Notes 8.875% 05/20/2011 200,000 218,000
ANR Pipeline Co. 7.375% 02/15/2024 160,000 161,200
ANR Pipeline Co. Senior Notes 7.000% 06/01/2025 25,000 25,125
Calpine Corp. Senior Notes 8.500% 02/15/2011 150,000 112,500
CenterPoint Energy, Inc. 144A Notes 5.875% 06/01/2008 115,000 117,005
Chesapeake Energy Corp. 8.125% 04/01/2011 30,000 32,325
Chesapeake Energy Corp. 8.375% 11/01/2008 150,000 162,000
Citgo Petroleum Corp. 144A Senior Notes 11.375% 02/01/2011 170,000 190,400
CMS Energy Corp. Senior Notes 8.500% 04/15/2011 500,000 520,000
Consumers Energy 6.250% 09/15/2006 125,000 137,711
El Paso Energy Partners 8.500% 06/01/2011 160,000 171,600
El Paso Natural Gas Co. 8.625% 01/15/2022 200,000 212,000
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
ENERGY (CONTINUED)
El Paso Natural Gas Co. 144A 8.375% 06/15/2032 USD 230,000 $ 242,650
El Paso Production Co. 144A Senior Notes 7.750% 06/01/2013 350,000 351,750
Frontier Escrow Corp. 144A Senior Notes 8.000% 04/15/2013 100,000 104,750
Houston Exploration Co. 144A Senior Sub Notes 7.000% 06/15/2013 100,000 104,750
Newfield Exploration Co. Senior Sub Notes 8.375% 08/15/2012 100,000 113,000
Peabody Energy Corp. 144A Senior Notes 6.875% 03/15/2013 80,000 84,000
Pogo Producing Co. 144A 8.250% 04/15/2011 75,000 83,250
Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 140,000 154,700
Reliant Resources, Inc. 144A 9.250% 07/15/2010 55,000 55,347
Teco Energy, Inc. Senior Notes 7.500% 06/15/2010 50,000 51,500
Tennessee Gas Pipeline Co. 8.375% 06/15/2032 100,000 108,750
Tesoro Petroleum Corp. 144A 8.000% 04/15/2008 35,000 36,050
Transcontinental Gas Pipeline Corp. Senior Notes 8.875% 07/15/2012 200,000 225,500
TXU Energy Co. 144A Notes 7.000% 03/15/2013 75,000 83,062
Vintage Petroleum, Inc. Senior Sub Notes 7.875% 05/15/2011 125,000 130,938
Westar Energy, Inc. 7.875% 05/01/2007 100,000 111,500
XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 25,000 26,625
XTO Energy, Inc. Senior Notes 7.500% 04/15/2012 150,000 171,750
-----------
4,299,738
-----------
FINANCIAL -- 4.0%
Arch Western Finance LLC 144A Senior Notes 6.750% 07/01/2013 55,000 55,963
Felcor Lodging LP REIT 9.500% 09/15/2008 100,000 104,000
Leucadia National Corp. 144A Senior Notes 7.000% 08/15/2013 250,000 250,729
Meristar Hospitality Corp. REIT 10.500% 06/15/2009 355,000 362,988
RFS Partnership LP REIT 9.750% 03/01/2012 210,000 212,625
RH Donnelley Finance Corp. I 144A Senior Notes 8.875% 12/15/2010 140,000 154,000
RH Donnelley Finance Corp. I 144A Senior Sub
Notes 10.875% 12/15/2012 135,000 156,600
-----------
1,296,905
-----------
PUBLIC UTILITY -- 4.5%
AES Corp. 144A 8.750% 05/15/2013 500,000 526,250
AES Corp. 144A 10.000% 07/15/2005 60,000 62,400
AES Corp. Senior Notes 8.875% 02/15/2011 123,000 119,925
Ipalco Enterprises, Inc. 8.375% 11/14/2008 155,000 168,175
Northwest Pipeline Corp. 6.625% 12/01/2007 325,000 333,125
Southern Natural Gas Co. 6.700% 10/01/2007 35,000 34,650
Southern Natural Gas Co. 7.350% 02/15/2031 200,000 203,500
Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 25,000 27,438
-----------
1,475,463
-----------
TECHNOLOGY -- 1.4%
L-3 Communications Corp. 144A Senior Sub Notes 7.625% 06/15/2012 405,000 445,500
-----------
TRANSPORTATION -- 0.5%
Delta Air Lines 7.900% 12/15/2009 190,000 152,950
-----------
Total Corporate (Cost $24,568,784) 25,950,307
-----------
YANKEE BONDS -- 10.1%
Biovail Corp. Senior Sub Notes 7.875% 04/01/2010 80,000 85,600
British Sky Broadcasting 8.200% 07/15/2009 570,000 666,001
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------
YANKEE BONDS (CONTINUED)
British Sky Broadcasting 6.875% 02/23/2009 USD 150,000 $ 166,113
Colt Telecom Group PLC Senior Step Up Notes(a) 12.000% 12/15/2006 155,000 155,775
Crown Euro Holdings SA 144A 9.500% 03/01/2011 125,000 135,625
Donohue Forest Products 7.625% 05/15/2007 245,000 263,539
GT Group Telecom, Inc. Senior Step Up
Notes{*}(a) 0.000% 02/01/2010 900,000 90
Ipsco, Inc. 144A Senior Notes 8.750% 06/01/2013 25,000 25,095
MDP Acquisitions PLC Senior Notes 9.625% 10/01/2012 100,000 110,500
Norampac, Inc. 144A Senior Notes 6.750% 06/01/2013 45,000 46,800
Quebecor Media, Inc. Senior Notes 11.125% 07/15/2011 95,000 109,250
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 205,000 205,291
Royal Caribbean Cruises 8.250% 04/01/2005 200,000 207,000
Royal Caribbean Cruises 7.500% 10/15/2027 200,000 174,000
Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 510,000 535,500
Tyco International Group SA 6.750% 02/15/2011 35,000 37,713
Tyco International Group SA 6.375% 10/15/2011 200,000 210,000
Vivendi Universal 144A Senior Notes 9.250% 04/15/2010 150,000 174,000
-----------
Total Yankee Bonds (Cost $3,494,936) 3,307,892
-----------
NON-AGENCY -- 0.8%
PASS THRU SECURITIES -- 0.8%
GMAC Commercial Mortgage Securities, Inc.
1996-C1 F Non-ERISA 7.860% 11/15/2006 250,000 265,371
-----------
Total Non-Agency (Cost $249,125) 265,371
-----------
FOREIGN DENOMINATED -- 2.9%
EURO -- 2.9%
Fort James Corp. 4.750% 06/29/2004 EUR 75,000 84,786
Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 200,000 257,085
Remy Cointreau SA 144A Senior Notes 6.500% 07/01/2010 40,000 46,941
Tyco International Group SA 5.500% 11/19/2008 480,000 545,387
-----------
934,199
-----------
Total Foreign Denominated (Cost $640,340) 934,199
-----------
TOTAL BONDS AND NOTES (COST $30,067,359) 31,642,042
-----------
SHARES
-------
PREFERRED STOCKS -- 3.6%
CONVERTIBLE PREFERRED STOCKS -- 3.0%
Equity Office Properties Trust 5.25% CVT Pfd REIT 8,800 437,360
Ford Motor Co. Capital Trust II 6.50% CVT Pfd 2,250 97,763
General Motors Corp. Series B 5.25% CVT Pfd 525 11,760
General Motors Corp. Series C 6.25% CVT Pfd 2,750 68,475
Kansas City Southern 4.25% 144A CVT Pfd 160 83,040
Omnicare, Inc. 4.00% CVT Pfd 700 38,360
Tyco International Group SA 3.125% 144A CVT Pfd 210,000 231,745
-----------
Total Convertible Preferred Stocks (Cost $888,265) 968,503
-----------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------------------------
NON-CONVERTIBLE PREFERRED STOCKS -- 0.6%
CSC Holdings, Inc. 11.125% Pfd 2,000 $ 206,000
-----------
Total Non-Convertible Preferred Stocks (Cost $210,500) 206,000
-----------
TOTAL PREFERRED STOCKS (COST $1,098,765) 1,174,503
-----------
WARRANTS -- 0.0%
COMMUNICATIONS -- 0.0%
GT Group Telecom, Inc., 02/01/2010* 1,900 19
McLeod USA, Inc., 04/16/2007* 3,291 1,350
-----------
1,369
-----------
TOTAL WARRANTS (COST $87,862) 1,369
-----------
PAR
RATE MATURITY VALUE/SHARES
------- ---------- ------------
SHORT-TERM INVESTMENTS -- 9.0%
CASH EQUIVALENTS -- 9.0%
Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 362,778 362,778
Credit Agricole Indosuez Eurodollar Time
Deposit(c) 1.050% 08/26/2003 398,150 398,150
Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 318,520 318,520
Goldman Sachs Financial Square Funds -
Prime Obligations Fund(c) 398,150 398,150
Royal Bank of Canada Eurodollar Time
Deposit(c) 1.300% 07/01/2003 716,671 716,671
Royal Bank of Scotland Eurodollar Time
Deposit(c) 1.125% 07/01/2003 716,671 716,671
-------------
2,910,940
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $2,910,940) 2,910,940
-------------
TOTAL INVESTMENTS -- 109.8% (COST
$34,164,926) $ 35,728,854
OTHER ASSETS, LESS LIABILITIES -- (9.8%) (3,179,358)
-------------
NET ASSETS -- 100.0% $ 32,549,496
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
CVT - Convertible
EUR - Euro
REIT - Real Estate Investment Trust
Step Up - Coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 2003.
Maturity date disclosed is the ultimate maturity.
USD - United States Dollar
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Zero coupon security.
(c) Represents investments of security lending collateral (Note 7).
{*} Defaulted security.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Opportunistic High Yield Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal, primarily through the generation of current income
and, to a lesser extent, capital appreciation by investing, under normal
circumstances, at least 80% of net assets in below investment grade fixed
income securities.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Opportunistic High Yield Fund was changed to Standish Mellon
Opportunistic High Yield Fund. In addition, the name of the Standish,
Ayer & Wood Investment Trust was changed to Mellon Institutional Funds
Investment Trust. The name changes for the Fund and the Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Fund does not isolate that portion of the
results of operations resulting from
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or
loss from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts usually received or paid.
D. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless the shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for losses
deferred due to wash sales, capital loss carryforwards, foreign currency,
and amortization and/or accretion of premiums and discounts on certain
securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory and administrative
services, and
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
general office facilities, is paid monthly at the annual rate of 0.40% of
the Fund's average daily net assets. Standish Mellon voluntarily agreed to
limit total Fund operating expenses (excluding brokerage commissions,
taxes and extraordinary expenses) to 0.10% of the Fund's average daily net
assets for the six months ended June 30, 2003. Pursuant to this agreement,
for the six months ended June 30, 2003, Standish Mellon voluntarily did
not impose $63,131 of its investment advisory fee and reimbursed the Fund
for $72,464 of its operating expenses. This agreement is voluntary and
temporary and may be discontinued or revised by Standish Mellon at any
time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were $19,269,095 and
$27,110,198, respectively. For the six months ended June 30, 2003, the
Fund did not purchase or sell any long-term U.S. government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 602,886 1,619,440
Shares issued to shareholders in payment of
distributions declared 65,702 263,456
Shares redeemed (1,265,019) (2,223,499)
------------- ---------------
Net decrease (596,431) (340,603)
============= ===============
At June 30, 2003, 4 shareholders held of record approximately 27%, 19%,
17% and 11% of the total outstanding shares of the Fund. All of the Fund's
shares are beneficially owned by fiduciary accounts over which Standish
Mellon and its affiliates have either sole or joint investment discretion.
Investment activity of these shareholders could have a material impact on
the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $34,340,088
===========
Gross unrealized appreciation 2,068,170
Gross unrealized depreciation (679,404)
-----------
Net unrealized appreciation $ 1,388,766
===========
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Fund may use options to seek to hedge against risks
of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. Options, both held
and written by the Fund, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at
value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2003, the Fund held the following forward foreign currency or
cross currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
-------------------------------------------------------------------------------------------
Euro 674,500 09/17/2003 $772,400 $794,721 $22,321
-------- -------- -------
SWAP AGREEMENTS
The Fund may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with
another party of their respective commitments to pay or receive interest,
e.g., an exchange of floating rate payments for fixed rate payments with
respect to a notional amount of principal. In a credit default swap, one
party makes a stream of payments to another party in exchange for the
right to receive a specified return in the event of a default by a third
party on its obligation. The Fund may use credit default swaps to provide
a measure of protection against defaults of issuers (i.e., to reduce risk
where the Fund owns or has exposure to the corporate or sovereign issuer)
or to take an active long or short position with respect to the likelihood
of a particular corporate or sovereign issuer's default. In connection
with these agreements, cash or securities may be set aside as collateral
in accordance with the terms of the swap agreement. The Fund earns
interest on cash set aside as collateral. Swaps are marked to market daily
based upon quotations from market makers and change in value, if any, is
recorded as unrealized gain or loss in the Statement of Operations. These
financial instruments are not actively traded on financial markets. The
values assigned to these instruments are based upon the best available
information and because of the uncertainty of the valuation, these values
may differ significantly from the values that would have been realized had
a ready market for these instruments existed, and differences could be
material. Payments received or made from credit default swaps at the end
of the measurement period are recorded as realized gain or loss in the
Statement of Operations. Net payments of interest on interest rate swap
agreements are included as part of interest income. Entering into these
agreements, if any, involves, to varying degrees, elements of credit,
market, and documentation risk in excess of the amounts recognized on the
Statement of Assets and Liabilities. Such risks involve the possibility
that there will be no liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform or
disagree as to the meaning of contractual terms in the agreements, and
that there may be unfavorable changes in interest rates.
At June 30, 2003, the Fund held the following credit default swap
contracts:
NOTIONAL
AMOUNT EXPIRATION NET UNREALIZED
FUND/COUNTERPARTY DATE DESCRIPTION (DEPRECIATION)
--------------------- ---------- ---------------------------------------------------- --------------
1,000,000 USD 6/28/08 Agreement with Goldman Sachs Capital Market, dated $(3,000)
04/16/03 to pay 0.46% per year times the notional
amount. The Fund receives payment only upon a
default event by JP Morgan Chase & Co., the notional
amount times the difference between the par value
and the then-market value of JP Morgan Chase & Co.,
5.25% due 05/30/07.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
financial statement purposes as unrealized gains or losses by the Fund.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments or indices,
which may not correlate with changes in the value of hedged investments.
Buying futures tends to increase the Fund's exposure to the underlying
instrument, while selling futures tends to decrease the Fund's exposure to
the underlying instrument or hedge other Fund investments. In addition,
there is the risk that the Fund may not be able to enter into a closing
transaction because of an illiquid secondary market. Losses may arise if
there is an illiquid secondary market or if the counterparties do not
perform under the contract's terms. The Fund enters into financial futures
transactions primarily to manage its exposure to certain markets and to
changes in securities prices and foreign currencies. Gains and losses are
realized upon the expiration or closing of the futures contracts. Futures
contracts are valued at the quoted daily settlement prices established by
the exchange on which they trade.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(7) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on
the next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the
risk of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears
the risk in the event that the interest and/or dividends received on
invested collateral is not sufficient to meet the Fund's obligations due
on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$2,836,659. The Fund received cash collateral of $2,910,940 which is
invested, together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. This Fund segregates securities
having a value at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or
the Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market'
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund realizes a gain
or loss from the sale of the securities based upon the unit price
established at the date the commitment was entered into.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(9) CONCENTRATION OF RISK:
The Fund invests in low rated (non-investment grade) and comparable
quality unrated high yield securities. Investments in high yield
securities are accompanied by a greater degree of credit risk and the
value of high yield securities tends to be more sensitive to economic
conditions than higher rated securities. The risk of loss due to default
of an issuer may be significantly greater for holders of high yield
securities, because such securities are generally unsecured and are often
subordinated to other creditors of the issuer.
17
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
18
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
19
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon Global Fixed Income
Portfolio ("Portfolio"), at value (Note 1A) $158,383,945
Prepaid expenses 9,855
------------
Total assets 158,393,800
LIABILITIES
Accrued accounting, custody and transfer agent fees $2,783
Accrued trustees' fees and expenses (Note 2) 492
Accrued expenses and other liabilities 15,091
------
Total liabilities 18,366
------------
NET ASSETS $158,375,434
============
NET ASSETS CONSIST OF:
Paid-in capital $175,289,204
Accumulated net realized loss (34,456,547)
Undistributed net investment income 1,107,109
Net unrealized appreciation 16,435,668
------------
TOTAL NET ASSETS $158,375,434
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 7,753,393
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 20.43
============
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $3,596,160
Dividend income allocated from Portfolio 63,503
Expenses allocated from Portfolio (508,628)
----------
Net investment income allocated from Portfolio 3,151,035
EXPENSES
Accounting, custody, and transfer agent fees $ 17,892
Legal and audit services 13,523
Registration fees 10,835
Insurance expense 886
Trustees' fees and expenses (Note 2) 515
Miscellaneous 7,870
-----------
Total expenses 51,521
Deduct:
Reimbursement of Fund operating expenses (Note 2) (37,744)
-----------
Net expenses 13,777
----------
Net investment income 3,137,258
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 12,652,193
Financial futures contracts (519,711)
Written options transactions 80,351
Foreign currency transactions and forward foreign
currency exchange contracts (13,662,722)
-----------
Net realized loss (1,449,889)
Change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investment securities 275,921
Financial futures contracts 416,107
Written options (42,045)
Foreign currency and forward foreign currency exchange
contracts 5,660,256
-----------
Change in net unrealized appreciation (depreciation) 6,310,239
----------
Net realized and unrealized gain on investments 4,860,350
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $7,997,608
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 3,137,258 $ 11,853,212
Net realized loss (1,449,889) (16,266,885)
Change in net unrealized appreciation (depreciation) 6,310,239 20,302,604
------------ -------------
Net increase in net assets from investment operations 7,997,608 15,888,931
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income -- (5,079,763)
Return of capital -- (106,692)
------------ -------------
Total distributions to shareholders -- (5,186,455)
------------ -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 2,503,072 16,933,516
Value of shares issued to shareholders in payment of
distributions declared -- 3,839,481
Cost of shares redeemed (16,707,239) (226,251,292)
------------ -------------
Net decrease in net assets from Fund share transactions (14,204,167) (205,478,295)
------------ -------------
TOTAL DECREASE IN NET ASSETS (6,206,559) (194,775,819)
NET ASSETS
At beginning of period 164,581,993 359,357,812
------------ -------------
At end of period (including undistributed net investment
income of $1,107,109 and distributions in excess of net
investment income of $2,030,149, respectively) $158,375,434 $ 164,581,993
============ =============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ----------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.43 $ 18.45 $ 18.53 $ 18.76 $ 20.28 $ 20.39
-------- -------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.39 0.82 0.84 1.06 1.26 1.28
Net realized and unrealized gain (loss) on
investments 0.61 0.44 (0.01)(2) 0.71 (1.38) 0.12
-------- -------- -------- -------- -------- --------
Total from investment operations 1.00 1.26 0.83 1.77 (0.12) 1.40
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.27) (0.91) (2.00) (1.40) (1.21)
From net realized gain on investments -- -- -- -- -- (0.30)
From tax return of capital -- (0.01) -- -- -- --
-------- -------- -------- -------- -------- --------
Total distributions to shareholders -- (0.28) (0.91) (2.00) (1.40) (1.51)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 20.43 $ 19.43 $ 18.45 $ 18.53 $ 18.76 $ 20.28
======== ======== ======== ======== ======== ========
TOTAL RETURN 5.15%++ 6.94% 4.51% 9.79% (0.64)% 6.98%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.65%+ 0.60% 0.56% 0.56% 0.54% 0.56%
Net Investment Income (to average daily
net assets)* 3.90%+ 4.43% 4.46% 5.59% 6.31% 6.18%
Net Assets, End of Period (000's omitted) $158,375 $164,582 $359,358 $373,739 $379,246 $458,526
- -----------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee payable to the Portfolio
and/or reimbursed the Fund for a portion of its operating expenses. If this
voluntary action had not been taken, the investment income per share and
ratios would have been:
Net investment income per share $ 0.38 N/A N/A N/A N/A N/A
Ratios (to average daily net assets):
Expenses 0.70%+ N/A N/A N/A N/A N/A
Net investment income 3.85%+ N/A N/A N/A N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to decrease net
investment income per share by $0.007, to increase net realized and
unrealized gains and losses per share by $0.007 and decrease the ratio of
net investment income to average net assets from 4.50% to 4.46%. Per share
data and ratios/supplemental data for periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
(2) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemptions of Fund shares in relation to the
fluctuating market values of the Fund.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Global Fixed Income Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity.
The Fund invests all of its investable assets in an interest of Standish
Mellon Global Fixed Income Portfolio (the "Portfolio"), a subtrust Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust and which has the same investment objective
as the Fund. The Portfolio Trust seeks to achieve its investment objective
by investing, under normal circumstances, at least 80% of its net assets
in U.S. and non-U.S. dollar denominated fixed income securities of U.S.
and foreign governments and companies located in the U.S. and various
countries, including emerging markets. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio (approximately 100% at June 30, 2003). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio are included
elsewhere in this report and should be read in conjunction with the Fund's
financial statements.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Global Fixed Income Fund was changed to Standish Mellon Global
Fixed Income Fund. In addition, the name of the Standish, Ayer & Wood
Investment Trust was changed to Mellon Institutional Funds Investment
Trust. The name changes for the Fund and the Trust are effective July 1,
2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with accounting principles
generally accepted in the United States of America. All realized and
unrealized gains and losses of the Portfolio are allocated pro rata among
the investors in the Portfolio. The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
C. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. In determining the amounts of its
dividends, the Fund will take into account its share of the income, gains
or losses, expenses, and any other tax items of the Portfolio.
Distributions to shareholders are recorded on ex-dividend date. Dividends
from net investment income and distributions from capital gains, if any,
are reinvested in additional shares of the Fund unless a shareholder
elects to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
States of America. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, options, futures, amortization and/or accretion of
premiums and discounts on certain securities, capital loss carryforwards
and losses deferred due to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
E. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish Mellon Asset Management Company LLC ("Standish
Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. Standish Mellon voluntarily
agreed to limit the total operating expenses of the Fund and its pro rata
share of the Portfolio expenses (excluding brokerage commissions, taxes
and extraordinary expenses) to 0.65% of the Fund's average daily net
assets for the six months ended June 30, 2003. Pursuant to this agreement,
for the six months ended June 30, 2003, Standish Mellon voluntarily
reimbursed the Fund for $37,744 of its operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by Standish
Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 2003, aggregated $2,503,072 and $16,720,305,
respectively.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 126,308 931,692
Shares issued to shareholders in payment of
distributions declared -- 212,596
Shares redeemed (843,241) (12,149,438)
------------ ----------------
Net decrease (716,933) (11,005,150)
============ ================
At June 30, 2003, four shareholders held of record approximately 29%,
17%,13% and 11% of the total outstanding shares of the Fund, respectively.
Investment activity of these shareholders could have a material impact on
the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 94.5%
ASSET BACKED -- 1.7%
First USA Credit Card Master Trust
1996-6 A(a) 1.414% 07/10/2006 USD 1,570,000 $ 1,570,602
Golden State Tobacco Securitization
Corp. 5.000% 06/01/2021 190,000 185,360
Golden State Tobacco Securitization
Corp. 7.875% 06/01/2042 500,000 501,330
South Carolina Tobacco Settlement
Authority 6.000% 05/15/2022 430,000 395,299
-------------
Total Asset Backed (Cost $2,624,907) 2,652,591
-------------
CORPORATE -- 11.3%
BANKING -- 0.5%
FleetBoston Financial Corp. Sub
Notes 7.375% 12/01/2009 210,000 251,726
Union Planters Bank 5.125% 06/15/2007 455,000 493,894
-------------
745,620
-------------
BASIC INDUSTRY -- 1.2%
Alcoa, Inc. 4.250% 08/15/2007 85,000 90,145
Crompton Corp. Senior Notes 8.500% 03/15/2005 395,000 416,725
CSC Holdings, Inc. 7.875% 12/15/2007 155,000 158,100
Equistar Chemical 10.125% 09/01/2008 180,000 187,200
Freeport-McMoRan Copper & Gold, Inc.
144A Senior Notes 10.125% 02/01/2010 130,000 145,600
Huntsman International LLC 9.875% 03/01/2009 165,000 172,425
Pinnacle Partners 144A Senior Notes 8.830% 08/15/2004 615,000 633,450
Republic Services, Inc. Senior Notes 6.750% 08/15/2011 150,000 172,395
-------------
1,976,040
-------------
CAPITAL GOODS -- 0.8%
Allied Waste Industries Series B 7.375% 01/01/2004 170,000 173,400
American Standard, Inc. 7.375% 02/01/2008 145,000 160,406
Raytheon Corp. 6.500% 07/15/2005 480,000 522,599
Smurfit-Stone Container Corp. 8.250% 10/01/2012 15,000 16,275
SPX Corp. Senior Notes 7.500% 01/01/2013 155,000 166,625
Stone Container Corp. Senior Notes 8.375% 07/01/2012 150,000 161,250
-------------
1,200,555
-------------
COMMUNICATIONS -- 1.2%
AOL Time Warner, Inc. 7.700% 05/01/2032 350,000 407,632
Comcast Cable Communication Senior
Notes NCL 6.750% 01/30/2011 75,000 86,089
Salem Communciations Corp. Senior
Sub Notes 7.750% 12/15/2010 90,000 93,150
Sprint Capital Corp. 6.125% 11/15/2008 435,000 473,173
Sprint Capital Corp. 6.900% 05/01/2019 435,000 457,913
Sprint Capital Corp. 8.750% 03/15/2032 340,000 406,091
-------------
1,924,048
-------------
CONSUMER CYCLICAL -- 1.7%
Argosy Gaming Co. 10.750% 06/01/2009 130,000 142,025
Cox Communications, Inc. 7.125% 10/01/2012 200,000 238,489
ERAC USA Finance Company 144A 7.350% 06/15/2008 155,000 180,171
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
General Motors Corp. 7.125% 07/15/2013 USD 280,000 $ 278,113
General Motors Corp. 8.375% 07/15/2033 425,000 417,911
Harrahs Operating Co., Inc. 7.125% 06/01/2007 160,000 179,518
HMH Properties, Inc. 7.875% 08/01/2008 175,000 178,062
Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 135,000 143,775
Mohegan Tribal Gaming Authority
Senior Notes 8.375% 07/01/2011 155,000 167,400
Moore North America Finance, Inc.
144A Senior Notes 7.875% 01/15/2011 125,000 133,125
News America Holdings Corp. 9.250% 02/01/2013 180,000 238,781
TRW Automotive, Inc. 144A Senior
Notes 9.375% 02/15/2013 140,000 152,600
TRW Automotive, Inc. 144A Senior Sub
Notes 11.000% 02/15/2013 65,000 71,500
Univision Communications, Inc. 7.850% 07/15/2011 200,000 236,597
-------------
2,758,067
-------------
CONSUMER NONCYCLICAL -- 0.5%
Del Monte Corp. 144A Senior Sub
Notes 8.625% 12/15/2012 140,000 151,550
HCA - The Healthcare Co. Senior
Notes 7.875% 02/01/2011 140,000 155,066
Kroger Co. 6.800% 04/01/2011 155,000 175,909
Stater Brothers Holdings Senior
Notes 10.750% 08/15/2006 165,000 174,075
Tricon Global Restaurant, Inc.
Senior Notes 8.875% 04/15/2011 145,000 169,650
-------------
826,250
-------------
ELECTRIC -- 0.9%
Niagara Mohawk Power 7.375% 07/01/2003 907,317 907,438
Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 425,000 510,230
-------------
1,417,668
-------------
ENERGY -- 2.4%
ANR Pipeline Co. 7.375% 02/15/2024 95,000 95,712
Chesapeake Energy Corp. 8.125% 04/01/2011 250,000 269,375
Premcor Refining Group 144A Senior
Notes 9.500% 02/01/2013 165,000 182,325
Progress Energy, Inc. 7.000% 10/30/2031 230,000 255,519
TXU Energy Co. 144A Notes 7.000% 03/15/2013 270,000 299,024
Waste Management, Inc. 6.375% 12/01/2003 2,370,000 2,415,773
Waste Management, Inc. 7.375% 05/15/2029 225,000 266,507
XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 30,000 31,950
-------------
3,816,185
-------------
FINANCIAL -- 1.4%
Boston Properties, Inc. REIT Senior
Notes 6.250% 01/15/2013 370,000 399,689
EOP Operating LP 7.875% 07/15/2031 155,000 187,741
Fifth Third Bank Sub Notes 4.500% 06/01/2018 565,000 556,510
Goldman Sachs Group, Inc. 5.700% 09/01/2012 215,000 236,968
Morgan Stanley Dean Witter 6.600% 04/01/2012 205,000 239,206
Petronas Capital Ltd. 144A 7.875% 05/22/2022 160,000 189,649
RH Donnelley Finance Corp. I 144A
Senior Notes 8.875% 12/15/2010 50,000 55,000
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
RH Donnelley Finance Corp. I 144A
Senior Sub Notes 10.875% 12/15/2012 USD 90,000 $ 104,400
Travelers Property Casualty Corp.
Senior Notes 5.000% 03/15/2013 190,000 200,105
-------------
2,169,268
-------------
PUBLIC UTILITY -- 0.7%
AES Corp. 144A 8.750% 05/15/2013 200,000 210,500
AES Corp. 144A 10.000% 07/15/2005 90,000 93,600
Northern States Power Co. 8.000% 08/28/2012 195,000 246,142
Public Service Co. of CO 7.875% 10/01/2012 355,000 446,902
Southern Natural Gas Co. 144A Senior
Notes 8.875% 03/15/2010 100,000 109,750
-------------
1,106,894
-------------
Total Corporate (Cost $17,091,568) 17,940,595
-------------
YANKEE BONDS -- 4.2%
Abitibi-Consolidated, Inc. 6.000% 06/20/2013 340,000 326,162
Banque Centrale de Tunisie 7.375% 04/25/2012 210,000 241,500
British Sky Broadcasting 8.200% 07/15/2009 500,000 584,211
Carnival Corp. 6.150% 04/15/2008 95,000 104,168
Dominican Republic 144A 9.500% 09/27/2006 135,000 126,900
Dominican Republic Euro Registered 9.500% 09/27/2006 115,000 108,100
France Telecom 8.500% 03/01/2031 180,000 249,072
Inco Ltd. 7.750% 05/15/2012 205,000 244,471
Merita Bank FLIRB 144A 7.500% 12/29/2049 445,000 495,303
Republic of Brazil(a) 2.188% 04/15/2012 190,000 142,975
Republic of Brazil 8.875% 04/15/2024 210,000 161,700
Republic of Brazil 10.000% 01/16/2007 270,000 276,075
Republic of Brazil 10.250% 06/17/2013 150,000 141,225
Republic of Colombia 10.750% 01/15/2013 260,000 304,460
Republic of El Salvador 8.500% 07/25/2011 160,000 171,600
Republic of Peru 9.125% 02/21/2012 145,000 153,337
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 200,000 200,284
Royal Caribbean Cruises 8.250% 04/01/2005 100,000 103,500
Russian Federation 5.000% 03/31/2030 315,000 305,156
Russian Federation 11.000% 07/24/2018 115,000 164,450
Teck Cominico Ltd. 7.000% 09/15/2012 340,000 367,658
Telus Corp. 8.000% 06/01/2011 155,000 181,350
Tyco International Group SA 6.750% 02/15/2011 410,000 441,775
Ukraine Government 144A 7.650% 06/11/2013 135,000 133,987
Ukraine Government Senior Notes 11.000% 03/15/2007 149,334 164,454
United Mexican States 8.300% 08/15/2031 380,000 437,570
United Mexican States 9.875% 02/01/2010 270,000 347,625
-------------
Total Yankee Bonds (Cost $6,247,164) 6,679,068
-------------
U.S. GOVERNMENT AGENCY -- 8.8%
PASS THRU SECURITIES -- 8.8%
FNMA 6.500% 09/01/2032 - 10/01/2032 1,067,151 1,112,859
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
PASS THRU SECURITIES (CONTINUED)
FNMA (TBA) 5.500% 07/01/2033 USD 1,650,000 $ 1,705,173
FNMA (TBA) 6.000% 07/01/2033 10,650,000 11,066,010
-------------
13,884,042
-------------
Total U.S. Government Agency (Cost $13,866,432) 13,884,042
-------------
U.S. TREASURY OBLIGATIONS -- 2.7%
TREASURY BONDS -- 1.2%
U.S. Treasury Bond+ 6.250% 05/15/2030 1,545,000 1,923,404
-------------
TREASURY NOTES -- 1.5%
U.S. Treasury Note 1.625% 03/31/2005 1,255,000 1,263,628
U.S. Treasury Note 3.000% 01/31/2004 250,000 252,920
U.S. Treasury Note 4.625% 05/15/2006 750,000 813,017
-------------
2,329,565
-------------
Total U.S. Treasury Obligations (Cost $4,113,711) 4,252,969
-------------
FOREIGN DENOMINATED -- 65.8%
AUSTRALIA -- 1.0%
Australian Government 6.500% 05/15/2013 AUD 2,055,000 1,542,653
-------------
CANADA -- 0.3%
Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 620,000 455,602
-------------
DENMARK -- 4.6%
Denmark Realkredit 4.000% 01/01/2006 DKK 5,140,000 820,519
Denmark Realkredit 6.000% 10/01/2032 41,227,899 6,547,601
Denmark Realkredit 8.000% 10/01/2026 373 63
-------------
7,368,183
-------------
EURO -- 46.2%
Allied Domecq PLC 5.875% 06/12/2009 EUR 145,000 180,659
Allied Irish Banks Ltd.(a) 7.500% 02/28/2011 135,000 182,114
Bank of Ireland Holdings(a) 7.400% 12/29/2049 135,000 182,799
Barclays Bank PLC(a) 7.500% 12/15/2010 135,000 183,467
British Telecom PLC 6.125% 02/15/2006 150,000 186,186
Bundes Obligation Series 135 5.000% 05/20/2005 5,040,000 6,082,016
Bundes Obligation Series 136 5.000% 08/19/2005 4,570,000 5,542,118
Bundes Obligation Series 140 4.500% 08/17/2007 8,075,000 9,876,749
Daimlerchrysler International
Finance 6.125% 03/21/2006 410,000 502,956
DePfa ACS Bank 144A 3.875% 07/15/2013 2,800,000 3,182,006
Deutsche Telekom International
Finance BV 8.125% 05/29/2012 580,000 819,102
Deutschland Republic 4.000% 07/04/2009 1,615,000 1,932,718
Deutschland Republic 4.125% 07/04/2008 800,000 966,758
Deutschland Republic 5.000% 07/04/2011 780,000 980,806
Deutschland Republic 5.250% 01/04/2011 625,000 797,960
Deutschland Republic 5.625% 01/04/2028 710,000 923,529
Deutschland Republic 6.250% 01/04/2030 1,045,000 1,475,736
Dexia Municipal Agency 5.375% 04/26/2007 1,305,000 1,632,029
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Eurohypo AG 4.500% 01/21/2013 EUR 390,000 $ 464,343
European Investment Bank 3.625% 10/15/2013 360,000 399,329
FBG Treasury BV 5.750% 03/17/2005 295,000 355,727
Fort James Corp. 4.750% 06/29/2004 1,060,000 1,198,314
France Telecom 7.250% 01/28/2013 610,000 818,063
France Telecom 8.250% 03/14/2008 345,000 457,132
France Telecom CDS CLN 5.549% 02/13/2004 840,000 975,637
French Government 3.150% 07/25/2032 1,637,352 2,038,544
French Treasury Note 5.000% 01/12/2006 2,720,000 3,310,051
HBOS PLC(a) 6.050% 11/23/2049 145,000 184,278
Heinz BV 5.125% 04/10/2006 200,000 243,599
Hilton Group Finance PLC 6.500% 07/17/2009 225,000 287,388
Honeywell Holding BV 5.250% 12/20/2006 135,000 162,295
Household Finance Corp. Senior
Unsubordinated Notes 6.500% 05/05/2009 300,000 391,962
Inco, Ltd. 15.750% 07/15/2006 200,000 410,345
International Paper Co. 5.375% 08/11/2006 135,000 163,881
Italian Government 4.750% 07/01/2005 3,945,000 4,753,608
Italian Government 7.750% 11/01/2006 2,025,000 2,705,244
Kappa Beheer BV 10.625% 07/15/2009 135,000 166,560
Kingdom of Belgium Series 41 4.250% 09/28/2013 1,580,000 1,860,876
Lear Corp. Senior Notes 8.125% 04/01/2008 135,000 167,335
MBNA Corp. Series 6 4.375% 08/19/2004 1,100,000 1,291,949
Messer Greisheim Holdings AG Senior
Notes 10.375% 06/01/2011 135,000 173,532
National Westminister Bank(a) 6.625% 10/29/2049 280,000 363,868
Netherland Government Notes 5.500% 07/15/2010 3,165,000 4,096,337
NGG Finance PLC 5.250% 08/23/2006 485,000 590,610
Nordbanken(a) 6.000% 12/13/2010 140,000 172,753
Parker-Hannifin Corp. 6.250% 11/21/2005 75,000 91,540
Pemex Project Funding Master Trust
144A 6.625% 04/04/2010 180,000 217,173
Republic of Bulgaria 144A 7.500% 01/15/2013 195,000 246,548
Republic of South Africa 5.250% 05/16/2013 110,000 121,765
Sara Lee Corp. 6.125% 07/27/2007 215,000 273,541
Sogerim 7.000% 04/20/2011 210,000 276,808
Spanish Government 4.250% 10/31/2007 3,130,000 3,786,885
Spanish Government 5.000% 07/30/2012 1,555,000 1,939,048
Svenska Handelsbanken(a) 5.500% 03/07/2011 100,000 122,301
Telelfonica Europe BV 5.125% 02/14/2013 485,000 583,075
ThyssenKrupp 7.000% 03/19/2009 160,000 200,618
Tyco International Group SA 5.500% 11/19/2008 880,000 999,876
Vivendi Environnement Senior Notes 5.875% 06/27/2008 330,000 414,206
-------------
73,106,652
-------------
NEW ZEALAND -- 3.9%
New Zealand Government 7.000% 07/15/2009 NZD 5,235,000 3,359,764
New Zealand Government 8.000% 11/15/2006 4,465,000 2,861,528
-------------
6,221,292
-------------
SINGAPORE -- 3.3%
Singapore Government 5.625% 07/01/2008 SGD 7,680,000 5,231,782
-------------
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
SOUTH AFRICA -- 0.2%
Republic of South Africa 13.000% 08/31/2010 ZAR 1,680,000 $ 273,880
-------------
SWEDEN -- 2.5%
Swedish Government Series 1037 8.000% 08/15/2007 SEK 27,600,000 4,039,034
-------------
UNITED KINGDOM -- 3.8%
UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 3,455,000 6,010,162
-------------
Total Foreign Denominated (Cost $92,190,498) 104,249,240
-------------
TOTAL BONDS AND NOTES (COST $136,134,280) 149,658,505
-------------
SHARES
------------
PREFERRED STOCKS -- 0.1%
CONVERTIBLE PREFERRED STOCKS -- 0.1%
Tyco International Group SA 3.125%
144A CVT Pfd 195,000 215,192
-------------
Total Convertible Preferred Stocks (Cost $195,000) 215,192
-------------
TOTAL PREFERRED STOCKS (COST $195,000) 215,192
-------------
CONTRACT
SIZE
------------
PURCHASED OPTIONS -- 0.3%
JPY Put/USD Call, Strike Price 119.35, 10/17/2003 (USD) 760,000 14,455
JPY Put/USD Call, Strike Price 130.00, 05/13/2004 (USD) 6,985,000 33,941
JPY Put/USD Call, Strike Price 130.00, 09/23/2003 (USD) 8,150,000 2,599
USD Put/AUD Call, Strike Price 0.61, 10/21/2003 (USD) 1,615,000 134,530
USD Put/CAD Call, Strike Price 1.36, 11/19/2003 (USD) 3,200,000 60,480
USD Put/EUR Call, Strike Price 1.16, 08/13/2003 (USD) 1,690,000 14,872
USD Put/JPY Call, Strike Price 119.35, 10/17/2003 (USD) 760,000 13,490
USD Put/NZD Call, Strike Price 0.55, 07/21/2003 (USD) 3,340,000 216,098
-------------
TOTAL PURCHASED OPTIONS (COST $498,392) 490,465
-------------
PAR
VALUE/SHARES
------------
SHORT-TERM INVESTMENTS -- 11.1%
CASH EQUIVALENTS -- 1.6%
Bank of Montreal Eurodollar Time
Deposit(b) 1.150% 07/09/2003 309,414 309,414
Credit Agricole Indosuez Eurodollar
Time Deposit(b) 1.050% 08/26/2003 339,584 339,584
Den Danske Bank Eurodollar Time
Deposit(b) 1.040% 07/24/2003 271,667 271,667
Goldman Sachs Financial Square Funds
- Prime Obligations Fund(b) 339,584 339,584
Royal Bank of Canada Eurodollar Time
Deposit(b) 1.300% 07/01/2003 611,251 611,251
Royal Bank of Scotland Eurodollar
Time Deposit(b) 1.125% 07/01/2003 611,250 611,250
-------------
2,482,750
-------------
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT -- 4.9%
U.S. Treasury Bill=/= 1.025% 07/17/2003 USD 1,539,000 $ 1,538,300
U.S. Treasury Bill=/= 1.062% 07/10/2003 6,265,000 6,263,120
-------------
7,801,420
-------------
U.S. GOVERNMENT AGENCY -- 4.2%
FNMA Discount Note=/= 1.150% 07/14/2003 6,680,000 6,677,226
-------------
REPURCHASE AGREEMENTS -- 0.4%
Tri-party repurchase agreement dated
06/30/03 with Salomon Smith Barney,
Inc. and Investors Bank and Trust
Company, due 07/01/03, with a
maturity value of $550,921 and an
effective yield of 0.75%,
collateralized by a U.S. Government
Obligation with a rate of 8.75%, a
maturity date of 08/15/20 and an
aggregated market value of $566,974. 550,909
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $17,512,518) 17,512,305
-------------
TOTAL INVESTMENTS -- 106.0% (COST
$154,340,190) $ 167,876,467
OTHER ASSETS, LESS LIABILITIES -- (6.0%) (9,492,351)
-------------
NET ASSETS -- 100.0% $ 158,384,116
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
AUD - Australian Dollar
CAD - Canadian Dollar
CDS - Credit Default Swap
CLN - Credit-Linked Notes
CVT - Convertible
DKK - Danish Krone
EUR - Euro
FLIRB - Front Loaded Interest Reduction Bond
FNMA - Federal National Mortgage Association
GBP - Great British Pound
JPY - Japanese Yen
NCL - Non-callable
NZD - New Zealand Dollar
REIT - Real Estate Investment Trust
SEK - Swedish Krona
SGD - Singapore Dollar
TBA - To Be Announced
USD - United States Dollar
ZAR - South African Rand
(a) Variable Rate Security; rate indicated is as of 6/30/03.
(b) Represents investments of security lending collateral (Note 6).
+ Denotes all or part of security segregated as collateral.
=/= Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- ------------------------------------------------------------------------
Foreign Government 46.4%
Financial 24.7%
U.S. Government 16.4%
Communications 4.4%
Basic Industry 2.9%
Capital Goods 2.5%
Energy 2.4%
Consumer Cyclical 1.8%
Banking 1.2%
Consumer Noncyclical 1.0%
Electric 0.9%
Public Utility 0.8%
Transportation 0.4%
Technology 0.2%
-------
106.0%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- ------------------------------------------------------------------------
United States 36.0%
Germany 18.6%
France 6.7%
United Kingdom 5.8%
Italy 4.7%
Denmark 4.6%
Netherlands 4.3%
New Zealand 4.1%
Spain 3.6%
Singapore 3.3%
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $2,419,765 (Note 6))(identified cost,
$154,340,190) $167,876,467
Cash 859
Foreign currency, at value (identified cost, $22,154) 22,251
Receivable for investments sold 1,870,416
Interest receivable 3,353,623
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 2,764,860
Prepaid expenses 9,569
------------
Total assets 175,898,045
LIABILITIES
Payable for investments purchased $14,750,947
Payable for variation margin on open financial futures
contracts (Note 5) 28,672
Unrealized depreciation on forward foreign currency
exchange contracts (Note 5) 95,058
Payable for closed forward foreign currency exchange
contracts (Note 5) 57,617
Payable upon return of securities loaned (Note 6) 2,482,750
Options written, at value (Note 5) (premiums received,
$39,645) 23,281
Accrued accounting and custody fees 25,846
Accrued trustees' fees and expenses (Note 2) 6,547
Accrued expenses and other liabilities 43,211
----------
Total liabilities 17,513,929
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $158,384,116
============
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$3,452 (Note 6)) $3,596,160
Dividend income 63,503
----------
Total income 3,659,663
EXPENSES
Investment advisory fee (Note 2) $ 321,483
Accounting and custody fees 129,366
Legal and audit services 28,445
Trustees' fees and expenses (Note 2) 11,473
Licensing fees 9,918
Insurance expense 7,943
-----------
Total expenses 508,628
----------
Net investment income 3,151,035
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 12,652,207
Financial futures contracts (519,711)
Written options transactions 80,351
Foreign currency transactions and forward foreign
currency exchange contracts (13,662,735)
-----------
Net realized loss (1,449,888)
Change in unrealized appreciation (depreciation)
Investment securities 275,921
Financial futures contracts 416,107
Written options (42,046)
Foreign currency and forward foreign currency exchange
contracts 5,660,263
-----------
Change in net unrealized appreciation (depreciation) 6,310,245
----------
Net realized and unrealized gain 4,860,357
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,011,392
==========
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 3,151,035 $ 11,973,451
Net realized loss (1,449,888) (16,266,897)
Change in net unrealized appreciation (depreciation) 6,310,245 20,302,620
------------ -------------
Net increase in net assets from investment operations 8,011,392 16,009,174
------------ -------------
CAPITAL TRANSACTIONS
Contributions 2,503,072 21,983,740
Withdrawals (16,720,305) (237,470,874)
------------ -------------
Net decrease in net assets from capital transactions (14,217,233) (215,487,134)
------------ -------------
TOTAL DECREASE IN NET ASSETS (6,205,841) (199,477,960)
NET ASSETS
At beginning of period 164,589,957 364,067,917
------------ -------------
At end of period $158,384,116 $ 164,589,957
============ =============
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 -------------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ------------- ---------- ---------- ----------
TOTAL RETURN+++ 5.17%++ 6.98% 4.54% 9.82% (0.62)% 7.03%
RATIOS:
Expenses (to average daily net assets) 0.63%+ 0.56% 0.53% 0.53% 0.52% 0.51%
Net Investment Income (to average daily
net assets) 3.92%+ 4.47% 4.49% 5.61% 6.33% 6.22%
Portfolio Turnover 128%++ 205% 251% 236% 172% 162%
Net Assets, End of Period (000's
omitted) $158,384 $164,590 $364,068 $375,348 $379,604 $461,588
- -----------------
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease the ratio of net investment income to
average net assets from 4.53% to 4.49%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements.
The accompanying notes are an integral part of the financial statements.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Global Fixed Income Portfolio (the "Portfolio") is a separate
non-diversified investment series of the Portfolio Trust.
The objective of the Portfolio is to maximize total return while realizing
a market level of income consistent with preserving principal and
liquidity by investing, under normal circumstances, at least 80% of its
net assets in U.S. and non-U.S. dollar denominated fixed income securities
of U.S. and foreign governments and companies located in the U.S. and
various countries, including emerging markets.
At June 30, 2003 there was one fund, Standish Mellon Global Fixed Income
Fund (the "Fund"), invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at
June 30, 2003 was approximately 100%.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Global Fixed Income Portfolio was changed to Standish Mellon
Global Fixed Income Portfolio. In addition, the name of the Standish,
Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds
Master Portfolio. The name changes for the Portfolio and the Master
Portfolio are effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized value based upon the value on such
date unless the Trustees determine during such sixty-day period that
amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Portfolio to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the
Portfolio and the counterparty. Additionally, procedures have been
established by the Portfolio to monitor on a daily basis, the market value
and accrued interest of the repurchase agreement's underlying investments
to ensure the existence of a proper level of collateral.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis. The Portfolio does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts usually required or paid.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio allocates at least annually among its investors each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss deduction or
credit.
E. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks of
loss to be remote.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon") for overall investment advisory and
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.40% of the Portfolio's average daily net assets.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Portfolio for serving as
an officer or Trustee of the Trust. The Trust pays each Trustee who is not
a director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Portfolio Trust pays the legal
fees for the independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
------------ ------------
U.S. Government Securities $ 66,617,486 $ 71,771,448
============ ============
Investments (non-U.S.Government Securities) $125,995,971 $129,649,486
============ ============
(4) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $154,393,033
===========
Gross unrealized appreciation 14,003,861
Gross unrealized depreciation (520,427)
-----------
Net unrealized appreciation $13,483,434
===========
(5) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in Parts A and B of the Portfolio Trust's registration statement.
The Portfolio trades the following financial instruments with off-balance
sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Portfolio's
exposure to the underlying instrument, or hedge other Portfolio
investments. Options, both held and written by the Portfolio, are
reflected in the accompanying Statement of Assets and Liabilities at
market value. The underlying face amount at value of any open purchased
options is shown in the Schedule of Investments. This amount
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------------
Outstanding, beginning of period 2 $ 45,729
Options expired (2) (45,729)
----------- --------
Outstanding, end of period 0 $ --
=========== ========
At June 30, 2003, the Fund held no written put options.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 2,576
Options closed (1) (2,576)
----------- -------
Outstanding, end of period 0 $ --
=========== =======
At June 30, 2003, the Fund held no written call options.
A summary of the written currency options for the six months ended
June 30, 2003 is as follows:
WRITTEN CURRENCY OPTION TRANSACTIONS
---------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------------
Outstanding, beginning of period 1 $ 18,009
Options written 5 113,712
Options closed (4) (92,076)
----------- --------
Outstanding, end of period 2 $ 39,645
=========== ========
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2003, the Portfolio held the following written currency option
contracts:
SECURITY CONTRACTS VALUE
------------------------------------------------------------------------------
CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $21,760
USD Put/EUR Call, Strike Price 1.22, 08/13/2003 1 1,521
-------
Total (premiums received $39,645) $23,281
=======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
At June 30, 2003, the Portfolio held the following forward foreign
currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
-------------------------------------------------------------------------------------------------------------
Australian Dollar 2,340,000 09/17/2003 $ 1,559,411 $ 1,556,919 $ (2,492)
British Pound Sterling 3,905,000 09/17/2003 6,430,364 6,467,687 37,323
Canadian Dollar 620,000 09/17/2003 457,075 456,352 (723)
Danish Krone 51,210,000 09/17/2003 7,898,755 8,031,177 132,422
Euro 63,323,000 09/17/2003 72,514,014 74,871,933 2,357,919
Japanese Yen 2,090 10/17/2003 17 18 1
New Zealand Dollar 10,510,000 09/17/2003 6,110,934 6,045,713 (65,221)
Singapore Dollar 8,810,000 09/17/2003 5,010,664 5,092,486 81,822
South African Rand 2,070,000 08/29/2003 272,245 245,623 (26,622)
Swedish Krona 29,780,000 09/17/2003 3,703,819 3,795,565 91,746
----------------- ----------------- ---------------
TOTAL $ 103,957,298 $ 106,563,473 $ 2,606,175
================= ================= ===============
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET IN EXCHANGE MARKET CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE FOR VALUE VALUE DATE GAIN
-----------------------------------------------------------------------------------------------------
New Zealand Dollar $ 3,666,211 Australian Dollar $ 3,729,838 09/04/2003 $ 63,627
--------------- --------------- ------------
TOTAL $ 3,666,211 $ 3,729,838 $ 63,627
=============== =============== ============
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at
a fixed price on a future date. Pursuant to margin requirements the
Portfolio deposits either cash or securities in an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
received by the Portfolio each day, depending on the daily fluctuations in
the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Portfolio. There
are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments or indices,
which may not correlate with changes in the value of hedged investments.
Buying futures tends to increase the Portfolio's exposure to the
underlying instrument, while selling futures tends to decrease the
Portfolio's exposure to the underlying instrument or hedge other
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market. Losses may arise if there is an illiquid secondary market or if
the counterparty does not perform under the contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in securities prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at the
quoted daily settlement prices established by the exchange on which they
trade.
At June 30, 2003, the Portfolio held the following financials futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
----------------------------------------------------------------------------------------------
U.S. 5 Year Note (43 Contracts) Short 9/30/2003 $4,950,375 $36,301
U.S. 10 Year Note (46 Contracts) Short 9/30/2003 5,402,125 56,106
-------
$92,407
=======
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Portfolio with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. Credit and market risk exist with respect
to these instruments. If forecasts of interest rates and other market
factors are incorrect, investment performance will be diminished compared
to what performance would have been if these investment techniques were
not used. Even if the forecasts are correct, there are risks that the
positions may correlate imperfectly with the asset or liability being
hedged, a liquid secondary market may not always exist, or a counterparty
to a transaction may not perform. The Portfolio expects to enter into
these transactions primarily for hedging purposes including, but not
limited to, preserving a return or spread on a particular investment or
portion of its portfolio, protecting against currency fluctuations,
managing duration or protecting against an increase in the price of
securities the Portfolio anticipates purchasing at a later date. Interest
rate swaps are marked to market daily based upon quotations from market
makers and the change, if any, is recorded as unrealized gain or loss.
Payments made or received are included as part of interest income. Gains
and losses are realized upon the expiration or closing of the swap
contracts.
The Portfolio entered into no such transactions during the six months
ended June 30, 2003.
(6) SECURITIES LENDING:
The Portfolio may lend its securities, through its agent Investors Bank &
Trust Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Portfolio
on the next business day. For the duration of a loan, the Portfolio
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment
of the collateral. As with other extensions of credit, the Portfolio bears
the risk of delay in recovery or even loss of rights in its securities on
loan should the borrower of the securities fail financially or default on
its obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
25
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
At June 30, 2003, the Portfolio loaned securities having a market value of
$2,419,765. The Portfolio received cash collateral of $2,482,750 which is
invested, together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place
a month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income
on the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least
equal to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the
forward sale of other securities it owns. Income on the securities will
not be earned until settlement date. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of the
Portfolio's other assets. Unsettled TBA purchase commitments are valued at
the current market value of the underlying securities, according to the
procedures described under "Investment security valuations" above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the
sale of the securities based upon the unit price established at the date
the commitment was entered into.
The Portfolio entered into no such transactions during the six months
ended June 30, 2003.
26
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Trustee Trustee since William Joseph 29 None
Benjamin M. Friedman 9/13/1986 Maier, Professor of
c/o Harvard University Political Economy,
Cambridge, MA 02138 8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
27
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
28
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $859,805 (Note 8)) (identified cost,
$413,008,945) $449,201,453
Cash 551
Foreign currency, at value (cost $63,151) 63,427
Receivable for investments sold 3,621,542
Receivable for Fund shares sold 14,264
Interest receivable 10,476,778
Unrealized appreciation on forward foreign currency
exchange contracts (Note 7) 10,754,560
Receivable for closed forward foreign currency exchange
contracts (Note 7) 754,139
Prepaid expenses 44,067
------------
Total assets 474,930,781
LIABILITIES
Payable for investments purchased $12,762,472
Payable for Fund shares redeemed 395,019
Payable for variation margin on open financial futures
contracts (Note 7) 111,811
Unrealized depreciation on forward foreign currency
exchange contracts (Note 7) 254,905
Payable upon return of securities loaned (Note 8) 885,100
Options written, at value (Note 7) (premiums received,
$116,490) 69,861
Accrued accounting, custody and transfer agent fees 64,002
Accrued trustees' fees and expenses (Note 2) 9,010
Accrued expenses and other liabilities 47,616
----------
Total liabilities 14,599,796
------------
NET ASSETS $460,330,985
============
NET ASSETS CONSIST OF:
Paid-in capital $495,360,184
Accumulated net realized loss (86,072,562)
Undistributed net investment income 3,899,745
Net unrealized appreciation 47,143,618
------------
TOTAL NET ASSETS $460,330,985
============
NET ASSETS ATTRIBUTABLE TO:
Institutional Class $460,173,811
============
Service Class $ 157,174
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING
Institutional Class 22,004,548
============
Service Class 7,591
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding)
Institutional Class $ 20.91
============
Service Class $ 20.70
============
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$1,736 (Note 8)) $ 9,040,552
Dividend income 67,482
-----------
Total investment income 9,108,034
EXPENSES
Investment advisory fee (Note 2) $ 874,556
Accounting and custody fees 273,944
Legal and audit services 46,717
Registration fees 27,718
Trustees' fees and expenses (Note 2) 17,039
Insurance expense 10,163
Transfer agent fees - Institutional Class 7,762
Service fees - Service Class (Note 3) 5,225
Transfer agent fees - Service Class 5,111
Miscellaneous 11,813
-----------
Total expenses 1,280,048
Deduct:
Reimbursement of operating expenses - Service Class (Note
2) (6,569)
-----------
Net expenses 1,273,479
-----------
Net investment income 7,834,555
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 41,846,858
Financial futures contracts (2,031,574)
Written options transactions (137,222)
Foreign currency transactions and forward foreign
currency exchange contracts (50,232,229)
-----------
Net realized loss (10,554,167)
Change in unrealized appreciation (depreciation)
Investment securities (282,865)
Financial futures contracts 952,251
Written options 14,391
Foreign currency and forward foreign currency exchange
contracts 20,558,953
-----------
Change in net unrealized appreciation (depreciation) 21,242,730
-----------
Net realized and unrealized gain 10,688,563
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $18,523,118
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 7,834,555 $ 14,070,865
Net realized loss (10,554,167) (35,294,689)
Change in net unrealized appreciation (depreciation) 21,242,730 43,416,019
------------- -------------
Net increase in net assets from investment operations 18,523,118 22,192,195
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income
Institutional Class -- (8,973,023)
Service Class -- (50,553)
Return of capital
Institutional Class -- (2,482,598)
Service Class -- (13,987)
------------- -------------
Total distributions to shareholders -- (11,520,161)
------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5)
Net proceeds from sale of shares
Institutional Class 210,363,655 129,553,707
Service Class 1,051,380 2,480,257
Value of shares issued to shareholders in payment of
distributions declared
Institutional Class -- 8,100,619
Service Class -- 64,540
Cost of shares redeemed
Institutional Class (133,051,418) (206,444,379)
Service Class (3,648,180) (1,840,537)
------------- -------------
Net increase (decrease) in net assets from Fund share
transactions 74,715,437 (68,085,793)
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 93,238,555 (57,413,759)
NET ASSETS
At beginning of period 367,092,430 424,506,189
------------- -------------
At end of period (including undistributed net investment
income of $3,899,745 and distributions in excess of net
investment income of $3,934,810, respectively) $ 460,330,985 $ 367,092,430
============= =============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 --------------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ---------- ---------- ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.04 $ 19.43 $ 18.97 $ 21.32 $ 23.22 $ 22.81
-------- -------- -------- -------- ---------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.36 0.75 0.76 1.12 1.34 1.38
Net realized and unrealized gain (loss)
on investments 0.51 0.46 0.01 0.84 (1.15) 0.58
-------- -------- -------- -------- ---------- ----------
Total from investment operations 0.87 1.21 0.77 1.96 0.19 1.96
-------- -------- -------- -------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.47) (0.31) (4.31) (2.08) (1.21)
From net realized gain on investments -- -- -- -- (0.01) (0.34)
From tax return of capital -- (0.13) -- -- -- --
-------- -------- -------- -------- ---------- ----------
Total distributions to shareholders -- (0.60) (0.31) (4.31) (2.09) (1.55)
-------- -------- -------- -------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 20.91 $ 20.04 $ 19.43 $ 18.97 $ 21.32 $ 23.22
======== ======== ======== ======== ========== ==========
TOTAL RETURN 4.34%++ 6.44% 4.07% 9.68% 0.79% 8.73%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.58%+ 0.59% 0.56% 0.53% 0.52% 0.52%
Net Investment Income (to average daily
net assets) 3.58%+ 3.89% 3.94% 5.21% 5.82% 5.92%
Portfolio Turnover 119%++ 159% 211% 240% 162% 156%
Net Assets, End of Period (000's
omitted) $460,174 $364,460 $422,626 $454,333 $1,051,443 $1,352,383
- -----------------
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income per share by
$0.007, increase net realized and unrealized gains and losses per share by
$0.007 and decrease the ratio of net investment income to average net
assets from 3.98% to 3.94%. Per share data and ratios/supplemental data for
the periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS - SERVICE CLASS
- --------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS YEAR ENDED APRIL 25, 2000
ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2003 ------------------ OPERATIONS) TO
(UNAUDITED) 2002 2001(A) DECEMBER 31, 2000
------------- --------- ------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $19.78 $19.24 $18.81 $21.48
------ ------ ------ ------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.33 0.69 0.69 0.69
Net realized and unrealized gain on investments 0.59 0.45 0.02 0.67
------ ------ ------ ------
Total from investment operations 0.92 1.14 0.71 1.36
------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.47) (0.28) (4.03)
From tax return of capital -- (0.13) -- --
------ ------ ------ ------
Total distributions to shareholders -- (0.60) (0.28) (4.03)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $20.70 $19.78 $19.24 $18.81
====== ====== ====== ======
TOTAL RETURN+++ 4.65%++ 6.13% 3.81% 6.61%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.82%+ 0.84% 0.81% 0.78%+
Net Investment Income (to average daily net assets)* 3.29%+ 3.64% 3.56% 4.89%+
Portfolio Turnover 119%++ 159% 211% 240%
Net Assets, End of Period (000's omitted) $ 157 $2,633 $1,880 $ 213
- -----------------
* For the periods indicated, the investment advisor voluntarily agreed to
reimburse the Class for a portion of its operating expenses. If this
voluntary action had not been taken, the investment income (loss) per share
and ratios would have been:
Net investment income (loss) per share(1) $ 0.29 $ 0.59 $ 0.51 $(0.19)
Ratios (to average daily net assets):
Expenses 1.26%+ 1.36% 1.75% 7.02%+
Net investment income 2.85%+ 3.12% 2.62% (1.35)%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income per share by
$0.007, increase net realized and unrealized gains and losses per share by
$0.007 and decrease the ratio of net investment income to average net
assets from 3.60% to 3.56%. Per share data and ratio/supplemental data for
the periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 93.5%
ASSET BACKED -- 0.7%
Golden State Tobacco
Securitization Corp. 5.000% 06/01/2021 USD 490,000 $ 478,034
Golden State Tobacco
Securitization Corp. 7.875% 06/01/2042 1,620,000 1,624,309
South Carolina Tobacco
Settlement Authority 6.000% 05/15/2022 1,150,000 1,057,195
------------
Total Asset Backed (Cost $3,082,472) 3,159,538
------------
CONVERTIBLE CORPORATE BONDS -- 0.0%
Royal Caribbean Cruises Step Up
Notes(a) 0.000% 05/18/2021 375,000 173,415
------------
Total Convertible Corporate Bonds (Cost $171,161) 173,415
------------
CORPORATE -- 2.9%
BASIC INDUSTRY -- 0.4%
Crompton Corp. Senior Notes 8.500% 03/15/2005 1,275,000 1,345,125
CSC Holdings, Inc. 7.875% 12/15/2007 420,000 428,400
------------
1,773,525
------------
CAPITAL GOODS -- 0.1%
SPX Corp. Senior Notes 6.250% 06/15/2011 335,000 341,700
------------
COMMUNICATIONS -- 0.9%
Sprint Capital Corp. 6.125% 11/15/2008 1,150,000 1,250,918
Sprint Capital Corp. 6.900% 05/01/2019 1,380,000 1,452,688
Sprint Capital Corp. 8.750% 03/15/2032 1,125,000 1,343,682
------------
4,047,288
------------
CONSUMER CYCLICAL -- 0.3%
Mohegan Tribal Gaming Authority 8.750% 01/01/2009 925,000 985,125
TRW Automotive, Inc. 144A
Senior Notes 9.375% 02/15/2013 370,000 403,300
TRW Automotive, Inc. 144A
Senior Sub Notes 11.000% 02/15/2013 150,000 165,000
------------
1,553,425
------------
CONSUMER NONCYCLICAL -- 0.6%
Aramark Services, Inc. 7.000% 07/15/2006 2,000,000 2,224,570
Del Monte Corp. 144A Senior Sub
Notes 8.625% 12/15/2012 300,000 324,750
------------
2,549,320
------------
ENERGY -- 0.3%
ANR Pipeline Co. 7.375% 02/15/2024 250,000 251,875
Chesapeake Energy Corp. 8.125% 04/01/2011 555,000 598,012
Premcor Refining Group 144A
Senior Notes 9.500% 02/01/2013 435,000 480,675
XTO Energy, Inc. 144A Senior
Notes 6.250% 04/15/2013 85,000 90,525
------------
1,421,087
------------
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
FINANCIAL -- 0.1%
RH Donnelley Finance Corp. I
144A Senior Notes 8.875% 12/15/2010 USD 125,000 $ 137,500
RH Donnelley Finance Corp. I
144A Senior Sub Notes 10.875% 12/15/2012 195,000 226,200
------------
363,700
------------
PUBLIC UTILITY -- 0.2%
AES Corp. 144A 8.750% 05/15/2013 610,000 642,025
Southern Natural Gas Co. 144A
Senior Notes 8.875% 03/15/2010 255,000 279,862
------------
921,887
------------
Total Corporate (Cost $12,283,799) 12,971,932
------------
YANKEE BONDS -- 3.0%
Abitibi-Consolidated, Inc. 6.000% 06/20/2013 1,075,000 1,031,247
Banque Centrale de Tunisie 7.375% 04/25/2012 580,000 667,000
Brascan Corp. 7.125% 12/16/2003 1,600,000 1,634,091
Dominican Republic 144A 9.500% 09/27/2006 265,000 249,100
Dominican Republic Euro
Registered 9.500% 09/27/2006 525,000 493,500
Petronas Capital Ltd. 144A 7.875% 05/22/2022 430,000 509,682
Republic of Brazil(b) 2.188% 04/15/2012 570,000 428,925
Republic of Brazil 8.000% 04/15/2014 430,994 379,274
Republic of Brazil 8.875% 04/15/2024 645,000 496,650
Republic of Brazil 10.000% 01/16/2007 605,000 618,613
Republic of Brazil 10.250% 06/17/2013 485,000 456,628
Republic of Colombia 10.750% 01/15/2013 830,000 971,930
Republic of El Salvador 8.500% 07/25/2011 510,000 546,975
Republic of Peru 9.125% 02/21/2012 420,000 447,720
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 640,000 640,909
Royal Caribbean Cruises 8.250% 04/01/2005 225,000 232,875
Russian Federation 5.000% 03/31/2030 960,000 930,000
Russian Federation 11.000% 07/24/2018 360,000 514,800
Ukraine Government 144A 7.650% 06/11/2013 510,000 506,175
Ukraine Government Senior Notes 11.000% 03/15/2007 448,002 493,362
United Mexican States 8.300% 08/15/2031 845,000 973,018
United Mexican States 9.875% 02/01/2010 730,000 939,875
------------
Total Yankee Bonds (Cost $13,790,763) 14,162,349
------------
U.S. GOVERNMENT AGENCY -- 2.2%
PASS THRU SECURITIES -- 2.2%
FNMA 6.500% 09/01/2032 - 10/01/2032 1,728,229 1,802,253
FNMA (TBA) 6.000% 07/01/2033 8,225,000 8,546,285
------------
10,348,538
------------
Total U.S. Government Agency (Cost $10,333,478) 10,348,538
------------
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
FOREIGN DENOMINATED -- 84.7%
CANADA -- 0.3%
Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 2,000,000 $ 1,469,683
------------
DENMARK -- 5.9%
Denmark Realkredit 4.000% 01/01/2006 DKK 13,965,000 2,229,289
Denmark Realkredit 6.000% 10/01/2032 105,211,895 16,709,206
Denmark Realkredit 8.000% 10/01/2026 745 126
Kingdom of Denmark 4.000% 11/15/2004 53,200,000 8,422,634
------------
27,361,255
------------
EURO -- 64.2%
Air Products & Chemicals 6.000% 03/30/2005 EUR 1,050,000 1,275,303
Allied Domecq PLC 5.875% 06/12/2009 370,000 460,993
Allied Irish Banks Ltd.(b) 7.500% 02/28/2011 365,000 492,382
Bank of Ireland Holdings(b) 7.400% 12/29/2049 355,000 480,694
Barclays Bank PLC(b) 7.500% 12/15/2010 350,000 475,654
British Telecom PLC 6.125% 02/15/2006 375,000 465,464
Bundes Obligation Series 135 5.000% 05/20/2005 17,400,000 20,997,435
Bundes Obligation Series 136 5.000% 08/19/2005 15,860,000 19,233,695
Bundes Obligation Series 140 4.500% 08/17/2007 9,075,000 11,099,876
Buoni del Tesoro Poliennali 4.500% 03/01/2007 10,675,000 13,035,806
Daimlerchrysler International
Finance 6.125% 03/21/2006 1,240,000 1,521,136
DePfa ACS Bank 144A 3.875% 07/15/2013 4,350,000 4,943,474
Deutsche Telekom International
Finance BV 8.125% 05/29/2012 1,795,000 2,534,980
Deutschland Republic 4.000% 07/04/2009 8,010,000 9,585,805
Deutschland Republic 4.125% 07/04/2008 1,000,000 1,208,448
Deutschland Republic 4.750% 07/04/2028 6,265,000 7,244,771
Deutschland Republic 5.000% 07/04/2011 5,015,000 6,306,077
Deutschland Republic 5.000% 07/04/2012 780,000 977,296
Deutschland Republic 5.250% 01/04/2011 5,420,000 6,919,909
Deutschland Republic 5.625% 01/04/2028 940,000 1,222,701
Deutschland Republic 6.250% 01/04/2030 9,185,000 12,970,942
Dexia Municipal Agency 5.375% 04/26/2007 3,500,000 4,377,090
Eurohypo AG 4.500% 01/21/2013 970,000 1,154,905
European Investment Bank 3.625% 10/15/2013 1,130,000 1,253,448
FBG Treasury BV 5.750% 03/17/2005 750,000 904,390
Fort James Corp. 4.750% 06/29/2004 3,345,000 3,781,471
France Telecom 7.250% 01/28/2013 1,890,000 2,534,655
France Telecom 8.250% 03/14/2008 855,000 1,132,892
France Telecom CDS CLN 5.549% 02/13/2004 2,140,000 2,485,551
French Government 3.150% 07/25/2032 3,649,824 4,544,122
French Treasury Note 5.000% 01/12/2006 12,775,000 15,546,286
General Motors Corp. 6.050% 07/01/2008 1,000,000 1,143,109
General Motors Corp. 7.250% 07/01/2013 1,000,000 1,141,617
HBOS PLC(b) 6.050% 11/23/2049 390,000 495,644
Heinz BV 5.125% 04/10/2006 550,000 669,898
Hilton Group Finance PLC 6.500% 07/17/2009 565,000 721,664
Honeywell Holding BV 5.250% 12/20/2006 405,000 486,885
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Household Finance Corp. Senior
Unsubordinated Notes 6.500% 05/05/2009 EUR 965,000 $ 1,260,813
Inco, Ltd. 15.750% 07/15/2006 796,000 1,633,171
International Paper Co. 5.375% 08/11/2006 405,000 491,643
Italian Government 7.750% 11/01/2006 16,410,000 21,922,493
Kappa Beheer BV 10.625% 07/15/2009 365,000 450,329
Kingdom of Belgium 5.750% 09/28/2010 11,400,000 14,953,452
Kingdom of Belgium Series 41 4.250% 09/28/2013 3,915,000 4,610,969
Lear Corp. Senior Notes 8.125% 04/01/2008 365,000 452,423
MBNA Corp. Series 6 4.375% 08/19/2004 3,620,000 4,251,686
Messer Greisheim Holdings AG
Senior Notes 10.375% 06/01/2011 360,000 462,753
Morgan Stanley Dean Witter 5.750% 04/01/2009 585,000 737,122
National Westminister Bank(b) 6.625% 10/29/2049 740,000 961,652
Netherland Government Notes 5.500% 07/15/2010 8,795,000 11,383,028
NGG Finance PLC 5.250% 08/23/2006 1,235,000 1,503,925
Nordbanken(b) 6.000% 12/13/2010 380,000 468,901
Parker-Hannifin Corp. 6.250% 11/21/2005 200,000 244,106
Pemex Project Funding Master
Trust 144A 6.625% 04/04/2010 440,000 530,869
Republic of Austria 5.500% 10/20/2007 7,500,000 9,498,781
Republic of Bulgaria 144A 7.500% 01/15/2013 630,000 796,539
Republic of South Africa 5.250% 05/16/2013 345,000 381,900
Sara Lee Corp. 6.125% 07/27/2007 545,000 693,395
Sogerim 7.000% 04/20/2011 555,000 731,564
Spanish Government 3.250% 01/31/2005 10,500,000 12,262,427
Spanish Government 4.250% 10/31/2007 14,595,000 17,658,016
Spanish Government 5.000% 07/30/2012 10,825,000 13,498,516
Svenska Handelsbanken(b) 5.500% 03/07/2011 400,000 489,205
Telelfonica Europe BV 5.125% 02/14/2013 1,290,000 1,550,858
Telenor ASA 5.875% 12/05/2012 1,100,000 1,397,480
ThyssenKrupp 7.000% 03/19/2009 420,000 526,622
Tyco International Group SA 5.500% 11/19/2008 2,295,000 2,607,632
Vivendi Environnement Senior
Notes 5.875% 06/27/2008 940,000 1,179,858
------------
295,418,596
------------
JAPAN -- 2.1%
GE Financial Assurance 1.600% 06/20/2011 JPY 1,185,000,000 9,811,108
------------
NEW ZEALAND -- 3.5%
New Zealand Government 7.000% 07/15/2009 NZD 13,660,000 8,766,835
New Zealand Government 8.000% 11/15/2006 11,300,000 7,241,941
------------
16,008,776
------------
SINGAPORE -- 3.0%
Singapore Government 3.500% 07/01/2012 SGD 21,800,000 13,757,447
------------
SOUTH AFRICA -- 0.2%
Republic of South Africa 13.000% 08/31/2010 ZAR 5,265,000 858,320
------------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
SWEDEN -- 2.2%
Swedish Government Series 1037 8.000% 08/15/2007 SEK 67,800,000 $ 9,921,974
------------
UNITED KINGDOM -- 3.3%
UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 8,745,000 15,212,406
------------
Total Foreign Denominated (Cost $354,968,311) 389,819,565
------------
TOTAL BONDS AND NOTES (COST $394,629,984) 430,635,337
------------
CONTRACT
SIZE
------------
PURCHASED OPTIONS -- 0.3%
JPY Put/USD Call, Strike Price 119.35,
10/17/2003 (USD) 2,020,000 38,420
JPY Put/USD Call, Strike Price 130.00,
05/13/2004 (USD) 7,320,000 35,569
JPY Put/USD Call, Strike Price 130.00,
09/23/2003 (USD) 16,230,000 5,176
USD Put/AUD Call, Strike Price 0.61,
10/21/2003 (USD) 3,610,000 300,713
USD Put/CAD Call, Strike Price 1.36,
11/19/2003 (USD) 9,700,000 183,330
USD Put/EUR Call, Strike Price 1.16,
08/13/2003 (USD) 4,335,000 38,148
USD Put/JPY Call, Strike Price 119.35,
10/17/2003 (USD) 2,020,000 35,855
USD Put/NZD Call, Strike Price 0.55,
07/21/2003 (USD) 8,290,000 536,363
-------------
TOTAL PURCHASED OPTIONS (COST $986,390) 1,173,574
-------------
PAR
RATE MATURITY VALUE/SHARES
------- ----------------------- -------------
SHORT-TERM INVESTMENTS -- 3.8%
CASH EQUIVALENTS -- 0.2%
Bank of Montreal Eurodollar
Time Deposit(c) 1.150% 07/09/2003 USD 110,306 110,306
Credit Agricole Indosuez
Eurodollar Time Deposit(c) 1.050% 08/26/2003 121,062 121,062
Den Danske Bank Eurodollar Time
Deposit(c) 1.040% 07/24/2003 96,849 96,849
Goldman Sachs Financial Square
Funds - Prime Obligations
Fund(c) 121,061 121,061
Royal Bank of Canada Eurodollar
Time Deposit(c) 1.300% 07/01/2003 217,911 217,911
Royal Bank of Scotland
Eurodollar Time Deposit(c) 1.125% 07/01/2003 217,911 217,911
------------
885,100
------------
U.S. GOVERNMENT -- 0.1%
U.S. Treasury Bill=/=+ 0.843% 09/25/2003 400,000 399,180
------------
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY -- 0.1%
FNMA Discount Note=/=+ 4.770% 07/01/2003 USD 250,000 $ 250,000
------------
REPURCHASE AGREEMENTS -- 3.4%
Tri-party repurchase agreement
dated 06/30/03 with Salomon
Smith Barney, Inc. and
Investors Bank and Trust
Company, due 07/01/03, with a
maturity value of $15,858,592
and an effective yield of
0.75%, collateralized by a U.S.
Government Obligation with a
rate of 8.75%, a maturity date
of 08/15/20 and an aggregated
market value of $16,243,048. 15,858,262
------------
TOTAL SHORT-TERM INVESTMENTS (COST $17,392,571) 17,392,542
------------
TOTAL INVESTMENTS -- 97.6% (COST
$413,008,945) $ 449,201,453
OTHER ASSETS, LESS LIABILITIES -- 2.4% 11,129,532
-------------
NET ASSETS -- 100.0% $ 460,330,985
=============
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
AUD - Australian Dollar
CAD - Canadian Dollar
CDS - Credit Default Swap
CLN - Credit-Linked Notes
DKK - Danish Krone
EUR - Euro
FNMA - Federal National Mortgage Association
GBP - Great British Pound
JPY - Japanese Yen
NZD - New Zealand Dollar
SEK - Swedish Krona
SGD - Singapore Dollar
Step Up - Coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 2003.
Maturity date disclosed is the ultimate maturity.
TBA - To Be Announced
ZAR - South African Rand
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Variable Rate Security; rate indicated is as of 6/30/03.
(c) Represents investments of security lending collateral (Note 8).
=/= Rate noted is yield to maturity.
+ Denotes all or part of security segregated as collateral.
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- ------------------------------------------------------------------------
Foreign Government 63.1%
Financial 21.9%
Communications 3.6%
U.S. Government 2.3%
Basic Industry 1.9%
Capital Goods 1.5%
Consumer Noncyclical 1.0%
Consumer Cyclical 0.8%
Transportation 0.4%
Banking 0.4%
Public Utility 0.3%
Energy 0.2%
Technology 0.2%
-------
97.6%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- ------------------------------------------------------------------------
Germany 21.6%
United States 12.2%
Spain 9.4%
Italy 7.6%
France 7.1%
Denmark 5.9%
United Kingdom 4.5%
Belgium 4.3%
Netherlands 4.2%
New Zealand 3.6%
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon International Fixed Income Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The Fund currently offers two classes of shares: Institutional Class and
Service Class. Expenses of the Fund are borne pro-rata by the holders of
each class of shares, except for transfer agent fees and an account
service fee of up to 0.25% of the average daily net assets of the Service
Class of shares. Each class votes separately as a class only with respect
to its own distribution plan (Service Class only) or other matters that
relate only to that class. Shares of each class would receive their
pro-rata share of the net assets of the Fund (after satisfaction of any
class-specific expenses) if the Fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
Shares of the Service Class may be purchased by entities ("Account
Administrators") that provide omnibus accounting services for groups of
individuals who beneficially own Service Class shares ("Omnibus
Accounts"). Omnibus Accounts include pension and retirement plans (such as
401(k) plans, 457 plans and 403(b) plans), and programs through which
personal and or account maintenance services are provided to groups of
individuals whether or not such individuals invest on a tax-deferred
basis. Individual investors may only purchase Service Class shares through
their Omnibus Account Administrators.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity
by investing, under normal circumstances, at least 80% of net assets in
fixed income securities. The Fund also invests, under normal
circumstances, at least 65% of net assets in non-U.S. dollar denominated
fixed income securities of foreign governments and companies located in
various countries, including emerging markets.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish International Fixed Income Fund was changed to Standish Mellon
International Fixed Income Fund. In addition, the name of the Standish,
Ayer & Wood Investment Trust was changed to Mellon Institutional Funds
Investment Trust. The name changes for the Fund and the Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes
in market prices of securities held. Such fluctuations are included with
the net realized and unrealized gain or loss from investments. Net
realized gains and losses on foreign currency transactions represent gains
and losses on disposition of foreign currencies and forward foreign
currency exchange contracts, currency gains and losses realized between
the trade and settlement dates on securities transactions, and the
difference between the amount of investment income and foreign withholding
taxes recorded on the Fund's books and the U.S. dollar equivalent amounts
usually received or paid.
D. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
E. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on ex-dividend date. Dividends
from net investment income and distributions from capital gains, if any,
are reinvested in additional shares of the Fund unless the shareholder
elects to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences, which may result in distribution reclassifications, are
primarily due to differing treatments for foreign currency transactions,
amortization and/or accretion of premiums and discounts on certain
securities, capital loss carry forwards, losses deferred due to wash sales
and excise tax regulations.
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
G. ALLOCATION OF OPERATING ACTIVITY
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration among other things, the
nature and type of expense and the relative size of the funds. Investment
income, common expenses and realized and unrealized gains and losses are
allocated among the share classes of the Fund based on the relative net
assets of each class. Transfer agent fees, which are directly attributable
to a class of shares, are charged to that class' operations. Service fees,
which are directly attributable to the Service Class shares, are charged
to the Service Class operations.
H. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory and administrative
services, and general office facilities is paid monthly at the annual rate
of 0.40% of the Fund's average daily net assets. Standish Mellon
voluntarily agreed to limit the Service Class operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) for
the six months ended June 30, 2003, so that the Service Class annual
operating expenses do not exceed the total operating expenses of the
Institutional Class (net of any expense limitation) for the comparable
period plus 0.25% (the maximum Service Fee). Pursuant to this agreement,
for the six months ended June 30, 2003, Standish Mellon reimbursed the
Service Class $6,569 for class specific operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by Standish
Mellon at any time.
Effective January 28, 2003, the Institutional Class of the Fund began
imposing a redemption fee of 2% of the net asset value of the shares, with
certain exceptions, which are redeemed or exchanged less than 90 days from
the day of their purchase. The redemption fee is paid directly to the
Fund, and is designed to offset brokerage commissions, market impact, and
other costs associated with short-term trading. The fee does not apply to
shares that were acquired through reinvestment of distributions. The
redemption fee is applicable to shares of the Institutional Class
purchased on or after January 28, 3003. For the period ended June 30,
2003, the Fund received $142 in redemption fees.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) SERVICE FEE:
Pursuant to a service plan, the Service Class pays a service fee at an
aggregate annual rate of up to 0.25% of the class' average daily net
assets. The service fee is payable for the benefit of participants in the
omnibus accounts that are
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
shareholders in the Service Class and is intended to be compensation to
Account Administrators for providing personal services and/or account
maintenance services to participants in omnibus accounts that are the
beneficial owners of Service Class shares.
(4) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
------------ ------------
U.S. Government Securities $ 62,508,053 $ 73,911,400
============ ============
Investments (non-U.S.Government Securities) $466,065,549 $417,066,147
============ ============
(5) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
INSTITUTIONAL CLASS: (UNAUDITED) DECEMBER 31, 2002
-------------------------------------------------- ---------------- --------------------
Shares sold 10,284,202 6,633,795
Shares issued to shareholders in payment of
distributions declared -- 431,803
Shares redeemed (6,468,696) (10,629,935)
------------- ----------------
Net increase (decrease) 3,815,506 (3,564,337)
============= ================
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
SERVICE CLASS: (UNAUDITED) DECEMBER 31, 2002
-------------------------------------------------- ---------------- --------------------
Shares sold 52,107 129,719
Shares issued to shareholders in payment of
distributions declared -- 3,477
Shares redeemed (177,628) (97,810)
------------ --------------
Net increase (decrease) (125,521) 35,386
============ ==============
(6) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $413,192,152
===========
Gross unrealized appreciation 38,031,210
Gross unrealized depreciation (2,021,909)
-----------
Net unrealized appreciation $36,009,301
===========
(7) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Fund may use options to seek to hedge against risks
of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. Options, both held
and written by the Fund, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at
value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
A summary of written put option transactions for the six months ended
June 30, 2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 6,150
Options expired (1) (6,150)
----------- -------
Outstanding, end of period 0 $ --
=========== =======
At June 30, 2003, the Fund held no open written put option contracts.
17
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
A summary of written call option transactions for the six months ended
June 30, 2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 4,600
Options closed (1) (4,600)
----------- -------
Outstanding, end of period 0 $ --
=========== =======
At June 30, 2003, the Fund held no open written call option contracts.
A summary of written currency option transactions for the six months ended
June 30, 2003 is as follows:
WRITTEN CURRENCY OPTION TRANSACTIONS
---------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ----------------
Outstanding, beginning of period 2 $ 108,650
Options written 5 304,049
Options closed (5) (296,209)
----------- ---------
Outstanding, end of period 2 $ 116,490
=========== =========
At June 30, 2003, the Fund held the following written currency option
contracts:
SECURITY CONTRACTS VALUE
------------------------------------------------------------ --------- ----------
CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $65,960
USD Put/EUD Call, Strike Price 1.22, 08/13/2003 1 3,901
-------
Total (premiums received $116,490) $69,861
=======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
18
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2003, the Fund held the following forward foreign currency
contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
-------------------------------------------------------------------------------------------------------------
British Pound Sterling 9,350,000 09/17/2003 $ 15,396,645 $ 15,485,470 $ 88,825
Canadian Dollar 2,000,000 09/17/2003 1,474,437 1,472,104 (2,333)
Danish Krone 184,190,000 09/17/2003 28,409,915 28,886,205 476,290
Euro 255,899,000 09/17/2003 293,041,447 302,444,288 9,402,841
Japanese Yen 1,036,330,000 09/17/2003 8,665,329 8,832,609 167,280
New Zealand Dollar 27,220,000 09/17/2003 15,826,795 15,657,563 (169,232)
Singapore Dollar 23,795,000 09/17/2003 13,533,342 13,762,131 228,789
South African Rand 6,480,000 08/29/2003 852,246 768,906 (83,340)
Swedish Krona 74,800,000 09/17/2003 9,303,078 9,533,520 230,442
----------------- ----------------- ----------------
TOTAL $ 386,503,234 $ 396,842,796 $ 10,339,562
================= ================= ================
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET MARKET CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE IN EXCHANGE FOR VALUE VALUE DATE GAIN
--------------------------------------------------------------------------------------------------------------------
New Zealand Dollar $ 9,224,553 Australian Dollar $ 9,384,646 09/04/2003 $ 160,093
--------------- --------------- -------------
TOTAL $ 9,224,553 $ 9,384,646 $ 160,093
=============== =============== =============
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2003, the Fund held the following financials futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
-----------------------------------------------------------------------------------------------
U.S. 10 Year Note (148 contracts) Short 9/30/2003 $17,380,750 $179,182
U.S. 5 Year Note (212 contracts) Short 9/30/2003 24,406,500 114,879
--------
$294,061
========
19
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Credit and market risk exist with respect to
these instruments. If forecasts of interest rates and other market factors
are incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Fund expects to enter into these transactions
primarily for hedging purposes including, but not limited to, preserving a
return or spread on a particular investment or portion of its portfolio,
protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities the
Fund anticipates purchasing at a later date. Interest rate swaps are
marked to market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gain or loss. Payments made or
received are included as part of interest income. Gains and losses are
realized upon the expiration or closing of the swap contracts.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(8) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on
the next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the
risk of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears
the risk in the event that the interest and/or dividends received on
invested collateral is not sufficient to meet the Fund's obligations due
on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$859,805. The Fund received cash collateral of $885,100 which is invested,
together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
20
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 29 Port Financial
c/o Decision 11/3/1986 and Chief Executive Corp.
Resources, Inc. Officer, Decision
1100 Winter Street Resources, Inc.
Waltham, MA 02154
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street 11/3/1986 Associates (family
Associates investment trust
400 Essex Street office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 29 None
c/o Harvard University 9/13/1986 Professor of Political
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President and
Management, Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset Management
5/20/54
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- --------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset Chief Executive and Chief Operating
Management Company LLC, Officer Officer, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management; formerly
7/24/65 Vice President and
Chief Financial
Officer, Mellon
Institutional Asset
Management
21
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
TERM OF OFFNAME, OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
POSITION(S) AND LENGADDRESS, AND DURING PAST OVERSEEN BY HELD BY
HELD WITH TRUST TIME SDATEDOF BIRTH 5 YEARS OFFICER OFFICER
- --------------------------------------------------------------------------------------------------------------------------
Beverly E. Banfield Vice President and Vice President Director and Secretary; 29 None
c/o Standish Mellon Asset Secretary since 1996; Compliance Officer,
Management, Secretary Standish Mellon Asset
One Boston Place since 2002 Management
Boston, MA 02108
7/6/56
Steven M. Anderson Vice President and Vice President Vice President and 29 None
c/o Standish Mellon Asset Treasurer since 1999; Mutual Funds
Management, Treasurer Controller, Standish
One Boston Place since 2002 Mellon Asset Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual Funds
Management, Operations, Standish
One Boston Place Mellon Asset Management
Boston, MA 02108
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional, Standish
One Boston Place Mellon Asset Management
Boston, MA 02108
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund Operations
Management, since 2001; Shareholder
One Boston Place Representative,
Boston, MA 02108 Standish Mellon Asset
1/19/71 Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners; Fund
Management, Accountant, Mellon
One Boston Place Financial Corp.
Boston, MA 02108
8/17/60
22
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon Fixed Income Portfolio
("Portfolio"), at value (Note 1A) $808,777,195
Receivable for Fund shares sold 39,092
Miscellaneous receivable 6,616
Prepaid expenses 17,229
------------
Total assets 808,840,132
LIABILITIES
Payable for Fund shares redeemed $638,497
Accrued accounting, custody and transfer agent fees 5,350
Accrued trustees' fees and expenses (Note 2) 492
Accrued expenses and other liabilities 42,536
-------
Total liabilities 686,875
------------
NET ASSETS $808,153,257
============
NET ASSETS CONSIST OF:
Paid-in capital $975,727,960
Accumulated net realized loss (210,264,023)
Undistributed net investment income 5,595,997
Net unrealized appreciation 37,093,323
------------
TOTAL NET ASSETS $808,153,257
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 39,950,086
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 20.23
============
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $18,169,349
Dividend income allocated from Portfolio 640,170
Expenses allocated from Portfolio (1,667,065)
-----------
Net investment income allocated from Portfolio 17,142,454
EXPENSES
Accounting, custody, and transfer agent fees $ 41,693
Legal and audit services 34,236
Registration fees 17,654
Insurance expense 1,476
Trustees' fees and expenses (Note 2) 991
Miscellaneous 25,856
-----------
Total expenses 121,906
Deduct:
Reimbursement of Fund operating expenses (Note 2) (121,350)
-----------
Net expenses 556
-----------
Net investment income 17,141,898
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 21,404,435
Financial futures contracts (4,126,264)
Written options transactions 611,705
Foreign currency transactions and forward foreign
currency exchange contracts (10,085,171)
-----------
Net realized gain 7,804,705
Change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investment securities 5,823,182
Financial futures contracts 2,445,104
Written options (907,740)
Foreign currency and forward foreign currency exchange
contracts 4,289,662
-----------
Change in net unrealized appreciation (depreciation) 11,650,208
-----------
Net realized and unrealized gain on investments 19,454,913
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $36,596,811
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 17,141,898 $ 53,285,875
Net realized gain 7,804,705 13,179,486
Change in net unrealized appreciation (depreciation) 11,650,208 23,791,586
------------- --------------
Net increase in net assets from investment operations 36,596,811 90,256,947
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (13,160,444) (48,646,406)
------------- --------------
Total distributions to shareholders (13,160,444) (48,646,406)
------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 10,016,875 94,184,646
Value of shares issued to shareholders in payment of
distributions declared 9,715,993 34,960,251
Cost of shares redeemed (176,256,030) (705,084,925)
------------- --------------
Net decrease in net assets from Fund share transactions (156,523,162) (575,940,028)
------------- --------------
TOTAL DECREASE IN NET ASSETS (133,086,795) (534,329,487)
NET ASSETS
At beginning of period 941,240,052 1,475,569,539
------------- --------------
At end of period (including undistributed net investment
income of $5,595,997 and $1,614,543) $ 808,153,257 $ 941,240,052
============= ==============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ------------------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ------------ ------------ ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.70 $ 18.93 $ 18.92 $ 18.55 $ 20.13 $ 20.80
-------- -------- ---------- ---------- ---------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income*(1) 0.39 0.93 1.22 1.35 1.34 1.37
Net realized and unrealized gain
(loss) on investments 0.44 0.71 0.10 0.47 (1.47) (0.30)
-------- -------- ---------- ---------- ---------- ----------
Total from investment operations 0.83 1.64 1.32 1.82 (0.13) 1.07
-------- -------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.30) (0.87) (1.31) (1.45) (1.42) (1.38)
From net realized gain on
investments -- -- -- -- (0.03) (0.36)
-------- -------- ---------- ---------- ---------- ----------
Total distributions to shareholders (0.30) (0.87) (1.31) (1.45) (1.45) (1.74)
-------- -------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 20.23 $ 19.70 $ 18.93 $ 18.92 $ 18.55 $ 20.13
======== ======== ========== ========== ========== ==========
TOTAL RETURN+++ 4.24%++ 8.89% 7.16% 10.21% (0.70)% 5.25%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)* 0.38%+ 0.38% 0.38% 0.37% 0.36% 0.36%
Net Investment Income (to average
daily net assets)* 3.91%+ 4.86% 6.35% 7.23% 6.85% 6.54%
Net Assets, End of Period (000's
omitted) $808,153 $941,240 $1,475,570 $2,220,981 $2,910,545 $3,392,570
- -----------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee payable to the Portfolio
and/or reimbursed the Fund for a portion of its operating expenses. If this
voluntary action had not been taken, the investment income per share and
ratios would have been:
Net investment income per share(1) $ 0.38 $ 0.93 N/A N/A N/A N/A
Ratios (to average daily net
assets):
Expenses 0.44%+ 0.42% N/A N/A N/A N/A
Net investment income 3.85%+ 4.82% N/A N/A N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to decrease net
investment income per share by $0.004, increase net realized and unrealized
gains and losses per share by $0.004 and decrease the ratio of net
investment income to average net assets from 6.37% to 6.35%. Per share data
and ratios/supplemental data for periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absense of the expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Fixed Income Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of the
Standish Mellon Fixed Income Portfolio (the "Portfolio"), a subtrust of
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which
is organized as a New York trust and which has the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the
Portfolio (approximately 100% at June 30, 2003). The performance of the
Fund is directly affected by the performance of the Portfolio. The
financial statements of the Portfolio are included elsewhere in this
report and should be read in conjunction with the Fund's financial
statements.
The objective of the Fund is to achieve a high level of current income,
consistent with conserving principal and liquidity, and secondarily to
seek capital appreciation when changes in interest rates and economic
conditions indicate that capital appreciation may be available without
significant risk to principal by the Portfolio investing, under normal
circumstances, at least 80% of net assets in fixed income securities
issued by U.S. and foreign governments and companies.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Fixed Income Fund was changed to Standish Mellon Fixed Income
Fund. In addition, the name of the Standish, Ayer & Wood Investment Trust
was changed to Mellon Institutional Funds Investment Trust. The name
changes for the Fund and the Trust are effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted
accounting principles. All realized and unrealized gains and losses of the
Portfolio are allocated pro rata among the investors in the Portfolio. The
Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held.
Such fluctuations are included with the net realized and unrealized gain
or loss from investments.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. In determining the amounts of its
dividends, the Fund will take into account its share of the income, gains
or losses, expenses, and any other tax items of the Portfolio. Dividends
from net investment income and distributions from capital gains, if any,
are reinvested in additional shares of the Fund unless a shareholder
elects to receive them in cash. Income and capital gain distributions are
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences, which may
result in distribution reclassifications, are primarily due to differing
treatments for foreign currency transactions, options, futures, interest
rate floor, capital loss carryforwards, losses deferred due to wash sales,
paydown gains and losses, and amortization and/or accretion of premiums
and discounts on certain securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
E. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish Mellon Asset Management Company LLC ("Standish
Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. Standish Mellon voluntarily
agreed to limit the total operating expenses of the Fund and its pro rata
share of the Portfolio expenses (excluding brokerage commissions, taxes
and extraordinary expenses) to 0.38% of the Fund's average daily net
assets for the six months ended June 30, 2003. Pursuant to this agreement,
for the six months ended June 30, 2003, Standish Mellon voluntarily
reimbursed the Fund for $121,350 of its operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by Standish
Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 2003, aggregated $10,021,412 and $181,939,231,
respectively.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 499,640 4,867,816
Shares issued to shareholders in payment of
distributions declared 486,278 1,827,424
Shares redeemed (8,825,518) (36,871,959)
------------- ----------------
Net decrease (7,839,600) (30,176,719)
============= ================
At June 30, 2003, one shareholder held of record approximately 13% of the
total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 113.8%
ASSET BACKED -- 18.9%
Advanta Mortgage Loan Trust 1997-4 M1 7.040% 01/25/2029 USD 2,306,087 $ 2,373,828
Advanta Mortgage Loan Trust 1999-3 A4 7.750% 10/25/2026 2,195,789 2,352,292
Americredit Auto Receivables Trust
2001-1 A3 5.130% 11/06/2005 1,841,251 1,864,306
Americredit Auto Receivables Trust
2001-D A3(a) 1.610% 09/12/2006 4,231,370 4,236,011
ARG Funding Corp. 1999-1A A3 6.020% 05/20/2005 400,000 400,000
Capital Auto Receivables Asset Trust
2003-2 A3A 1.440% 02/15/2007 7,625,000 7,610,703
Capital One Master Trust 2000-5 B(a) 1.555% 08/15/2006 11,500,000 11,505,228
Capital One Multi-Asset Execution Trust
2003-B2 B2 3.500% 02/17/2009 725,000 737,461
Chase Funding Mortgage Loan Asset-Backed
2001-1 2A1(a) 1.275% 12/25/2030 5,702,003 5,702,223
Chase Manhattan Auto Owner Trust 2003-A
A3 1.520% 05/15/2007 3,500,000 3,498,654
Citibank Credit Card Issuance Trust
2000-C1 7.450% 09/15/2007 3,250,000 3,595,231
Citibank Credit Card Issuance Trust
2003-A2 A2 2.700% 01/15/2008 8,500,000 8,677,116
Citibank Credit Card Master Trust I
1997-6 B, PO(b) 0.000% 08/15/2006 4,500,000 4,424,136
Citifinancial Mortgage Securities, Inc.
2003-2 AV1(a) 1.128% 05/25/2033 4,000,000 3,998,750
Daimler Chrysler Auto Trust 2001-C A3 4.210% 07/06/2005 19,000,000 19,223,852
Discover Card Master Trust I 1998-7 A 5.600% 05/16/2006 12,227,000 12,433,427
First Bankcard Master Credit Card Trust
2000-2A A(a) 1.350% 04/17/2006 3,100,000 3,100,484
First Bankcard Master Credit Card Trust
2000-2A C(a) 2.230% 04/17/2006 2,000,000 1,998,750
First USA Credit Card Master Trust
1996-6 A(a) 1.414% 07/10/2006 1,470,000 1,470,563
First USA Credit Card Master Trust
1997-7 B(a) 1.666% 05/17/2007 9,430,000 9,439,329
Golden State Tobacco Securitization
Corp. 5.000% 06/01/2021 2,195,000 2,141,398
Green Tree Home Equity Loan Trust 1999-A
A1B(a) 1.460% 02/15/2029 4,062,796 4,065,908
Harley-Davidson Motorcycle Trust 2001-3
B 3.720% 10/15/2009 3,003,197 3,065,302
Honda Auto Receivables Owner Trust
2003-1 A3 1.920% 11/20/2006 4,635,000 4,672,987
MBNA Master Credit Card Trust 1996-J
B(a) 1.730% 02/15/2006 2,930,000 2,931,202
MBNA Master Credit Card Trust 1996-K
A(a) 1.310% 03/15/2006 3,000,000 3,000,591
MBNA Master Credit Card Trust 1998-D C 6.300% 12/15/2005 4,000,000 4,005,625
MBNA Master Credit Card Trust 1998-J B 5.650% 02/15/2006 4,200,000 4,239,635
MBNA Master Credit Card Trust 2000-A C 7.900% 07/16/2007 2,070,000 2,246,597
Residential Asset Mortgage Products,
Inc. 2003-RS1 AI1(a) 1.480% 01/25/2019 3,642,771 3,642,085
Residential Asset Securities Corp.
2002-KS5 AI1(a) 1.493% 07/25/2017 937,660 937,543
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
ASSET BACKED (CONTINUED)
SLMA Student Loan Trust 2003-6 A1(a) 1.280% 06/16/2008 USD 8,000,000 $ 8,002,500
Vanderbilt Mortgage Finance 1999-A 1A6 6.750% 03/07/2029 1,110,000 1,126,650
--------------
Total Asset Backed (Cost $152,573,195) 152,720,367
--------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.6%
Bear Stearns Mortgage 1998-2 B 6.750% 04/30/2030 1,374,831 1,350,772
Calwest Industrial Trust 2002-CALW A
144A 6.127% 02/15/2017 3,945,000 4,499,515
FNMA Grantor Trust 2001-T6 B 6.088% 05/25/2011 3,983,000 4,622,310
FNMA Grantor Trust 2002-T11 A 4.769% 04/25/2012 1,604,091 1,718,485
FNMA Grantor Trust 2002-T3 A 5.139% 12/25/2011 6,790,377 7,371,733
GNMA 2003-48 AC 2.712% 02/16/2020 2,950,823 2,969,634
Merrill Lynch Mortgage Investors, Inc.
1996-C2 B 6.960% 11/21/2028 1,035,000 1,166,341
Merrill Lynch Mortgage Investors, Inc.
1996-C2 D Non-ERISA 6.960% 11/21/2028 1,030,000 1,150,381
Permanent Financing PLC 2 1C Step Up(a) 2.581% 06/10/2042 3,000,000 3,000,000
Prudential Home Mortgage 1993-B 3B
144A(a) 7.634% 04/28/2023 377,497 377,497
Vendee Mortgage Trust 2003-1 A 5.750% 09/15/2012 551,693 574,031
--------------
Total Collateralized Mortgage Obligations (Cost $27,800,720) 28,800,699
--------------
CORPORATE -- 23.2%
BANKING -- 4.2%
BankBoston NA 6.375% 04/15/2008 933,000 1,053,239
First Union National Bank Sub Notes 7.800% 08/18/2010 3,900,000 4,893,155
FleetBoston Corp. 6.500% 03/15/2008 1,500,000 1,724,611
National City Bank 6.200% 12/15/2011 2,300,000 2,616,998
National City Corp. 6.875% 05/15/2019 1,025,000 1,238,744
Union Planters Corp. 7.750% 03/01/2011 1,900,000 2,320,690
Wells Fargo & Co. 4.250% 08/15/2003 15,000,000 15,055,564
Wells Fargo & Co. 5.000% 11/15/2014 4,535,000 4,809,359
--------------
33,712,360
--------------
BASIC INDUSTRY -- 1.5%
Crompton Corp. Senior Notes 8.500% 03/15/2005 2,815,000 2,969,825
General Electric Co. 5.000% 02/01/2013 2,830,000 2,988,583
International Paper Co. 6.750% 09/01/2011 600,000 693,965
International Paper Co. 144A 5.300% 04/01/2015 675,000 694,556
Occidental Petroleum Senior Notes 8.450% 02/15/2029 370,000 506,429
Sealed Air Corp. 144A 5.625% 07/15/2013 1,465,000 1,460,063
Tosco Corp. 7.250% 01/01/2007 1,415,000 1,609,251
Tosco Corp. 7.800% 01/01/2027 201,000 256,337
Tosco Corp. 8.125% 02/15/2030 450,000 602,664
Westvaco Corp. 8.200% 01/15/2030 341,000 431,561
--------------
12,213,234
--------------
CAPITAL GOODS -- 1.9%
Allied Waste Industries 144A Notes 7.625% 01/01/2006 4,200,000 4,357,500
American Standard, Inc. 7.375% 02/01/2008 500,000 553,125
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
CAPITAL GOODS (CONTINUED)
Lockheed Martin Corp. 8.200% 12/01/2009 USD 1,045,000 $ 1,317,864
Lockheed Martin Corp. 8.500% 12/01/2029 1,200,000 1,631,890
Northrop Grumman Corp. 7.125% 02/15/2011 820,000 982,591
Northrop Grumman Corp. 7.750% 02/15/2031 2,360,000 3,042,351
NVR Inc. Senior Notes 8.000% 06/01/2005 760,000 792,300
Raytheon Co. 5.500% 11/15/2012 755,000 807,366
SPX Corp. Senior Notes 6.250% 06/15/2011 230,000 234,600
SPX Corp. Senior Notes 7.500% 01/01/2013 1,225,000 1,316,875
--------------
15,036,462
--------------
COMMUNICATIONS -- 0.8%
AOL Time Warner, Inc. 7.700% 05/01/2032 1,485,000 1,729,523
Comcast Corp. 5.500% 03/15/2011 735,000 783,798
Verizon Global Funding Corp. 4.375% 06/01/2013 1,300,000 1,281,955
Verizon Virginia, Inc. 4.625% 03/15/2013 2,605,000 2,660,590
--------------
6,455,866
--------------
CONSUMER CYCLICAL -- 2.5%
Cox Communications, Inc. 7.750% 11/01/2010 1,875,000 2,280,355
Daimler Chrysler NA Holding 8.500% 01/18/2031 325,000 383,444
ERAC USA Finance Co. 144A 8.250% 05/01/2005 1,950,000 2,153,638
Harrahs Operating Co., Inc. 7.125% 06/01/2007 1,278,000 1,433,904
Horseshoe Gaming Holding Corp. 8.625% 05/15/2009 495,000 527,175
International Flavors & Fragrance 6.450% 05/15/2006 950,000 1,052,603
Lear Corp. 8.110% 05/15/2009 2,225,000 2,564,312
Liberty Media Corp. 5.700% 05/15/2013 2,050,000 2,118,498
MGM Mirage, Inc. 6.950% 02/01/2005 720,000 752,400
Mohegan Tribal Gaming Authority Senior
Notes 8.375% 07/01/2011 1,035,000 1,117,800
Mohegan Tribal Gaming Authority Senior
Sub Notes 8.125% 01/01/2006 1,355,000 1,470,175
Moore North America Finance, Inc. 144A
Senior Notes 7.875% 01/15/2011 350,000 372,750
News America, Inc. Deb Notes 144A 7.625% 11/30/2028 910,000 1,081,899
TCI Communications, Inc. 7.875% 02/15/2026 825,000 962,080
Univision Communications, Inc. 7.850% 07/15/2011 1,617,000 1,912,889
--------------
20,183,922
--------------
CONSUMER NONCYCLICAL -- 3.1%
Amerisourcebergen Corp. Senior Notes 7.250% 11/15/2012 275,000 299,062
Amerisourcebergen Corp. Senior Notes 8.125% 09/01/2008 950,000 1,047,375
Aramark Services, Inc. 7.000% 07/15/2006 4,890,000 5,439,074
Aramark Services, Inc. 7.000% 05/01/2007 2,825,000 3,085,469
Archer-Daniels-Midland 5.935% 10/01/2032 2,100,000 2,239,619
Ball Corp. 6.875% 12/15/2012 740,000 786,250
HJ Heinz Finance Co. 6.750% 03/15/2032 2,575,000 3,009,235
Kroger Co. 7.500% 04/01/2031 1,252,000 1,478,139
Laboratory Corp. of America Holdings 5.500% 02/01/2013 1,920,000 2,047,936
Tenet Healthcare Corp. Senior Notes 6.375% 12/01/2011 420,000 396,900
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
Tricon Global Restaurant, Inc. Senior
Notes 7.650% 05/15/2008 USD 275,000 $ 305,250
Tricon Global Restaurant, Inc. Senior
Notes 8.875% 04/15/2011 3,060,000 3,580,200
Weyerhaeuser Co. 7.250% 07/01/2013 1,350,000 1,595,969
--------------
25,310,478
--------------
ELECTRIC -- 0.5%
Dominion Resources, Inc. Senior Notes 5.000% 03/15/2013 1,200,000 1,242,625
Dominion Resources, Inc. Senior Notes 5.700% 09/17/2012 1,025,000 1,119,200
Niagara Mohawk Power 7.625% 10/01/2005 593,536 653,114
Niagara Mohawk Power Senior Notes 7.750% 10/01/2008 1,000,000 1,200,542
--------------
4,215,481
--------------
ENERGY -- 1.0%
CenterPoint Energy, Inc. 144A 7.875% 04/01/2013 1,200,000 1,380,271
Consumers Energy Co. 144A 5.375% 04/15/2013 1,580,000 1,657,717
Devon Energy Corp. 7.950% 04/15/2032 1,600,000 2,056,582
Progress Energy, Inc. 7.000% 10/30/2031 905,000 1,005,410
Waste Management, Inc. 7.375% 05/15/2029 50,000 59,224
Waste Management, Inc. Senior Notes 7.000% 07/15/2028 1,600,000 1,811,379
XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 380,000 404,700
--------------
8,375,283
--------------
FINANCIAL -- 5.9%
Allstate Corp. Senior Notes 6.125% 12/15/2032 733,000 812,546
Archstone-Smith Trust REIT 5.000% 08/15/2007 1,675,000 1,800,434
Archstone-Smith Trust REIT 6.500% 02/15/2012 580,000 654,472
ASIF Global Financing XVIII 144A 3.850% 11/26/2007 1,695,000 1,771,954
Boston Properties, Inc. 144A REIT 5.625% 04/15/2015 675,000 709,537
Boston Properties, Inc. REIT Senior
Notes 6.250% 01/15/2013 1,987,000 2,146,439
Citigroup, Inc. Sub Notes 5.625% 08/27/2012 2,495,000 2,750,644
City National Corp. Senior Notes 144A 5.125% 02/15/2013 1,840,000 1,892,293
Duke Realty Corp. REIT Senior Notes 7.750% 11/15/2009 2,200,000 2,670,901
Duke Realty Investments REIT Senior
Notes 6.950% 03/15/2011 25,000 29,123
Duke Realty LP REIT 5.875% 08/15/2012 1,800,000 1,983,284
EOP Operating LP 7.500% 04/19/2029 1,260,000 1,457,473
EOP Operating LP Senior Notes 7.000% 07/15/2011 1,100,000 1,285,254
Ford Motor Credit Co. 6.500% 01/25/2007 3,700,000 3,886,679
General Electric Capital Corp. 6.000% 06/15/2012 2,130,000 2,411,784
General Motors Acceptance Corp. 4.500% 07/15/2006 1,150,000 1,156,060
General Motors Acceptance Corp. 8.000% 11/01/2031 880,000 863,826
Goldman Sachs Group, Inc. 5.700% 09/01/2012 950,000 1,047,067
Healthcare Realty Trust Senior Notes 8.125% 05/01/2011 1,090,000 1,217,700
Host Marriott LP REIT 9.500% 01/15/2007 900,000 974,250
Jefferies Group, Inc. Senior Notes 7.750% 03/15/2012 2,200,000 2,576,125
JP Morgan Chase & Co. Sub Notes 5.750% 01/02/2013 1,485,000 1,617,569
Leucadia National Corp. 144A Senior
Notes 7.000% 08/15/2013 590,000 591,721
Morgan Stanley Dean Witter 6.600% 04/01/2012 2,490,000 2,905,475
Prudential Financial Inc. 4.500% 07/15/2013 1,885,000 1,881,814
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
RBS Capital Trust I(a) 4.709% 12/31/2049 USD 4,500,000 $ 4,531,050
Travelers Property Casualty Corp. Senior
Notes 5.000% 03/15/2013 1,655,000 1,743,017
--------------
47,368,491
--------------
PUBLIC UTILITY -- 0.8%
AES Corp. 144A 10.000% 07/15/2005 900,000 936,000
Appalachian Power Co. 5.950% 05/15/2033 450,000 450,835
Keyspan Corp. Senior Notes 8.000% 11/15/2030 970,000 1,308,215
NiSource Finance Corp. 7.625% 11/15/2005 440,000 485,761
NiSource Finance Corp. 7.875% 11/15/2010 1,450,000 1,709,004
Northern States Power Co. 8.000% 08/28/2012 415,000 523,840
Southern Natural Gas Co. 6.700% 10/01/2007 945,000 935,550
--------------
6,349,205
--------------
TECHNOLOGY -- 0.2%
L-3 Communications Corp. 144A Senior Sub
Notes 7.625% 06/15/2012 1,450,000 1,595,000
--------------
TRANSPORTATION -- 0.8%
CSX Corp. 6.250% 10/15/2008 865,000 986,555
Norfolk Southern Corp. 7.050% 05/01/2037 1,500,000 1,752,346
Norfolk Southern Corp. Senior Notes 7.250% 02/15/2031 670,000 801,240
Union Pacific Corp. 3.625% 06/01/2010 1,645,000 1,611,649
Union Pacific Corp. 3.875% 02/15/2009 1,400,000 1,424,107
--------------
6,575,897
--------------
Total Corporate (Cost $175,584,552) 187,391,679
--------------
MUNICIPAL OBLIGATIONS -- 1.1%
Illinois State 5.100% 06/01/2033 5,770,000 5,674,045
New York NY NCL 5.250% 06/01/2013 1,100,000 1,210,187
New York NY NCL 5.500% 08/01/2012 1,750,000 1,964,357
--------------
Total Municipal Obligations (Cost $8,976,887) 8,848,589
--------------
YANKEE BONDS -- 7.6%
Abbey National PLC 7.950% 10/26/2029 1,383,000 1,837,890
Abitibi-Consolidated, Inc. 8.850% 08/01/2030 1,410,000 1,530,816
Amvescap Senior Notes 144A 6.600% 05/15/2005 2,125,000 2,301,035
British Sky Broadcasting 8.200% 07/15/2009 2,955,000 3,452,688
British Telecom PLC 8.875% 12/15/2030 692,000 946,763
Carnival Corp. 6.650% 01/15/2028 2,800,000 2,944,668
ChevronTexaco Capital Co. 3.500% 09/17/2007 4,595,000 4,764,876
Deutsche Telekom 8.750% 06/15/2030 1,255,000 1,590,926
Dominican Republic 144A 9.500% 09/27/2006 390,000 366,600
Domtar, Inc. 7.875% 10/15/2011 1,160,000 1,395,019
Donohue Forest Products 7.625% 05/15/2007 2,575,000 2,769,848
Financement Quebec 5.000% 10/25/2012 3,375,000 3,640,414
France Telecom(a) 7.750% 03/01/2011 1,795,000 2,259,124
France Telecom 8.500% 03/01/2031 175,000 242,154
Koninklijke KPN NV 8.000% 10/01/2010 1,325,000 1,640,280
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
YANKEE BONDS (CONTINUED)
Nordea Bank Sweden AB 144A 5.250% 11/30/2012 USD 3,710,000 $ 3,965,338
Province of Ontario 4.200% 06/30/2005 1,505,000 1,583,650
Republic of Brazil 8.000% 04/15/2014 708,061 623,093
Republic of Brazil 10.250% 06/17/2013 1,360,000 1,280,440
Republic of Bulgaria 144A 8.250% 01/15/2015 835,000 985,300
Republic of El Salvador 8.500% 07/25/2011 870,000 933,075
Republic of Peru 9.875% 02/06/2015 470,000 515,825
Republic of South Africa 8.500% 06/23/2017 1,118,000 1,369,550
Republic of South Africa 9.125% 05/19/2009 850,000 1,049,750
Rio Tinto Finance USA Ltd. 2.625% 09/30/2008 4,255,000 4,176,926
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 550,000 550,781
Royal Caribbean Cruises Senior Notes 8.750% 02/02/2011 2,350,000 2,467,500
Russian Federation 5.000% 03/31/2030 1,140,000 1,104,375
State of Qatar 144A 9.750% 06/15/2030 565,000 779,700
Teck Cominico Ltd. 7.000% 09/15/2012 1,865,000 2,016,710
Telus Corp. 8.000% 06/01/2011 790,000 924,300
Tyco International Group SA 6.750% 02/15/2011 975,000 1,050,562
United Mexican States 6.625% 03/03/2015 1,590,000 1,693,350
United Mexican States 8.300% 08/15/2031 1,610,000 1,853,915
UPM-Kymmene Corp. Senior Notes 5.625% 12/01/2014 895,000 964,953
--------------
Total Yankee Bonds (Cost $57,394,694) 61,572,194
--------------
NON-AGENCY -- 3.8%
PASS THRU SECURITIES -- 3.8%
CS First Boston Mortgage Securities
Corp. 2001-CF2 A4 6.505% 02/15/2034 825,000 960,842
DLJ Commercial Mortgage Corp. 1998-CF2
A1B 6.240% 11/12/2031 3,705,000 4,233,773
DLJ Commercial Mortgage Corp. 1998-CF2
B1(a) 7.058% 11/12/2031 2,225,000 2,567,953
First Chicago/Lennar Trust
1997-CHL1-D(a) 7.999% 04/29/2039 7,610,000 7,820,462
GMAC Commercial Mortgage Securities,
Inc. 1996-C1 F Non-ERISA 7.860% 11/15/2006 2,375,000 2,521,025
JP Morgan Commercial Mortgage Finance
Corp. 1997-C5 A3 7.088% 09/15/2029 1,300,000 1,486,616
Morgan Stanley Capital 1998-HF1 E(a) 7.565% 03/15/2030 5,800,000 6,509,310
Morgan Stanley Dean Witter Capital I
2001-IQA A1 4.570% 12/18/2032 4,075,219 4,276,127
Residential Funding Mortgage Securities
I 2002-S4 A8 5.500% 02/25/2032 486,894 491,344
--------------
30,867,452
--------------
Total Non-Agency (Cost $29,049,952) 30,867,452
--------------
U.S. GOVERNMENT AGENCY -- 34.0%
PASS THRU SECURITIES -- 34.0%
FHLMC 7.000% 11/01/2031 918,425 962,865
FNMA 5.000% 07/01/2018 1,500,000 1,552,969
FNMA 5.703% 05/25/2011 1,634,160 1,802,980
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
PASS THRU SECURITIES (CONTINUED)
FNMA 6.500% 08/01/2032 - 09/01/2032 USD 15,445,087 $ 16,106,636
FNMA 7.000% 05/01/2031 - 07/01/2032 229,366 241,544
FNMA 7.500% 11/01/2029 3,345 3,556
FNMA 8.500% 06/01/2012 105,062 114,554
FNMA (TBA)# 5.000% 07/01/2018 - 08/01/2018 22,725,000 23,455,344
FNMA (TBA)# 5.500% 07/01/2033 - 09/01/2033 84,850,000 87,425,238
FNMA (TBA)# 6.000% 07/01/2033 98,850,000 102,711,279
FNMA (TBA)# 6.500% 07/01/2033 38,350,000 39,991,840
GNMA 6.500% 08/15/2032 785,507 824,806
GNMA 9.000% 02/15/2021 22,484 25,058
--------------
275,218,669
--------------
Total U.S. Government Agency (Cost $274,310,064) 275,218,669
--------------
U.S. TREASURY OBLIGATIONS -- 10.4%
TREASURY BONDS -- 2.7%
U.S. Treasury Bond+ 5.375% 02/15/2031 11,722,000 13,199,617
U.S. Treasury Bond 6.250% 05/15/2030 6,712,000 8,355,916
--------------
21,555,533
--------------
TREASURY NOTES -- 7.7%
U.S. Treasury Note 2.000% 05/15/2006 45,770,000 46,256,306
U.S. Treasury Note 2.625% 05/15/2008 7,120,000 7,185,084
U.S. Treasury Note 3.250% 08/15/2007 8,290,000 8,651,718
--------------
62,093,108
--------------
Total U.S. Treasury Obligations (Cost $83,621,301) 83,648,641
--------------
FOREIGN DENOMINATED -- 11.2%
DENMARK -- 0.4%
Denmark Realkredit 6.000% 10/01/2032 DKK 21,211,509 3,368,702
--------------
EURO -- 10.8%
Bundes Obligation Series 136 5.000% 08/19/2005 EUR 8,375,000 10,156,507
Deutschland Republic 4.125% 07/04/2008 23,235,000 28,078,284
Deutschland Republic 4.500% 01/04/2013 10,150,000 12,257,241
Deutschland Republic 5.000% 07/04/2011 1,940,000 2,439,440
Deutschland Republic 5.250% 07/04/2010 1,280,000 1,629,771
Deutschland Republic 5.250% 01/04/2011 10,995,000 14,037,711
Deutschland Republic 5.625% 01/04/2028 5,222,205 6,792,761
Kingdom of Belgium 5.750% 09/28/2010 375,000 491,890
Kingdom of Belgium Series 38 5.000% 09/28/2012 4,100,000 5,134,246
Sappi Pappier Holding AG 144A 6.750% 06/15/2012 1,401,000 1,583,436
Spanish Government 5.000% 07/30/2012 4,100,000 5,112,602
--------------
87,713,889
--------------
Total Foreign Denominated (Cost $76,683,770) 91,082,591
--------------
TOTAL BONDS AND NOTES (COST $885,995,135) 920,150,881
--------------
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------
EQUITIES -- 0.0%
COMMON STOCKS -- 0.0%
GH Water Supply Holdings Ltd. (Hong Kong) 87,018 $ 0
Guangdong Alliance Ltd. 144A (Hong Kong)* 228,997 0
HK Property Co. (Hong Kong)* 228,997 0
--------------
0
--------------
TOTAL EQUITIES (COST $0) 0
--------------
PREFERRED STOCKS -- 0.3%
CONVERTIBLE PREFERRED STOCKS -- 0.3%
Equity Office Properties Trust 144A CVT Pfd REIT 50,600 2,514,820
--------------
Total Convertible Preferred Stocks (Cost $2,513,200) 2,514,820
--------------
TOTAL PREFERRED STOCKS (COST $2,513,200) 2,514,820
--------------
CONTRACT
SIZE
-------------
PURCHASED OPTIONS -- 0.0%
JPY Put/USD Call, Strike Price 150.00, 02/02/2004 (USD) 38,880,000 3,888
--------------
TOTAL PURCHASED OPTIONS (COST $583,200) 3,888
--------------
PAR
VALUE/
RATE MATURITY SHARES
------- ---------- -------------
SHORT-TERM INVESTMENTS -- 27.5%
CASH EQUIVALENTS -- 11.5%
Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 $ 11,594,308 11,594,308
Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 12,724,815 12,724,815
Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 10,179,852 10,179,852
Goldman Sachs Financial Square Funds - Prime Obligations
Fund(c) 12,724,815 12,724,815
Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 22,904,668 22,904,668
Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 22,904,667 22,904,667
--------------
93,033,125
--------------
U.S. GOVERNMENT -- 16.0%
U.S. Treasury Bill++ 1.062% 07/10/2003 129,558,000 129,519,132
--------------
TOTAL SHORT-TERM INVESTMENTS (COST $222,564,197) 222,552,257
--------------
TOTAL INVESTMENTS -- 141.6% (COST
$1,111,655,732) $1,145,221,846
OTHER ASSETS, LESS LIABILITIES --
(41.6%) (336,444,484)
-------------
NET ASSETS -- 100.0% $ 808,777,362
=============
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
CVT - Convertible
DKK - Danish Krone
EUR - Euro
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
JPY - Japanese Yen
NCL - Non-callable
PO - Principal Only
REIT - Real Estate Investment Trust
Step Up - Coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 2003.
Maturity date disclosed is the ultimate maturity.
TBA - To Be Announced
USD - United States Dollar
(a) Variable Rate Security; rate indicated is as of 6/30/03.
(b) Zero coupon security.
(c) Represents investments of security lending collateral (Note 7).
# All or a portion of these securities are delayed delivery contracts (Note
6).
+ Denotes all or part of security pledged as collateral.
* Non-income producing security.
++ Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $91,070,541 (Note 7))
(identified cost, $1,111,655,732) $1,145,221,846
Cash 306,497
Receivable for investments sold 53,464,930
Interest receivable 8,404,735
Unrealized appreciation on forward foreign currency
exchange contracts (Note 5) 2,693,268
Prepaid expenses 14,843
-------------
Total assets 1,210,106,119
LIABILITIES
Payable for investments purchased $276,663,946
Payable for variation margin on open financial futures
contracts (Note 5) 151,503
Payable upon return of securities loaned (Note 7) 93,033,125
Payable for delayed delivery transactions (Note 6) 31,365,547
Accrued accounting and custody fees 35,970
Accrued trustees' fees and expenses (Note 2) 18,291
Accrued expenses and other liabilities 60,375
-----------
Total liabilities 401,328,757
-------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $ 808,777,362
=============
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$47,200 (Note 7)) $18,169,353
Dividend income 640,170
-----------
Total income 18,809,523
EXPENSES
Investment advisory fee (Note 2) $ 1,502,497
Accounting and custody fees 188,189
Legal and audit services 43,168
Trustees' fees and expenses (Note 2) 34,426
Insurance expense 13,272
Licensing fees 9,918
-----------
Total expenses 1,791,470
Deduct:
Waiver of investment advisory fee (Note 2) (124,405)
-----------
Net expenses 1,667,065
-----------
Net investment income 17,142,458
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 21,404,439
Financial futures contracts (4,126,265)
Written options transactions 611,705
Foreign currency transactions and forward foreign
currency exchange contracts (10,085,173)
-----------
Net realized gain 7,804,706
Change in unrealized appreciation (depreciation)
Investment securities 5,823,184
Financial futures contracts 2,445,104
Written options (907,740)
Foreign currency and forward foreign currency exchange
contracts 4,289,662
-----------
Change in net unrealized appreciation (depreciation) 11,650,210
-----------
Net realized and unrealized gain 19,454,916
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $36,597,374
===========
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 17,142,458 $ 53,285,882
Net realized gain 7,804,706 13,179,491
Change in net unrealized appreciation (depreciation) 11,650,210 23,791,589
------------- --------------
Net increase in net assets from investment operations 36,597,374 90,256,962
------------- --------------
CAPITAL TRANSACTIONS
Contributions 10,021,412 94,362,926
Withdrawals (181,939,231) (735,911,427)
------------- --------------
Net decrease in net assets from capital transactions (171,917,819) (641,548,501)
------------- --------------
TOTAL DECREASE IN NET ASSETS (135,320,445) (551,291,539)
NET ASSETS
At beginning of period 944,097,807 1,495,389,346
------------- --------------
At end of period $ 808,777,362 $ 944,097,807
============= ==============
The accompanying notes are an integral part of the financial statements.
19
STANDISH, AYER & WOOD MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ------------------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ------------ ------------ ------------ ------------
TOTAL RETURN+++ 4.24%++ 8.89% 7.18% 10.23% (0.69)% 5.27%
RATIOS:
Expenses (to average daily net
assets)* 0.38%+ 0.38% 0.36% 0.35% 0.35% 0.34%
Net Investment Income (to average
daily net assets)* 3.91%+ 4.86% 6.37% 7.24% 6.86% 6.56%
Portfolio Turnover 222%++ 384% 329% 233% 159% 148%
Net Assets, End of Period (000's
omitted) $808,777 $944,098 $1,495,389 $2,226,002 $2,911,705 $3,416,462
- -----------------
* For the period indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee. If this voluntary action
had not been taken, the ratios would have been:
Ratios (to average daily net
assets):
Expenses 0.41%+ 0.39% N/A N/A N/A N/A
Net investment income 3.88%+ 4.85% N/A N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease the ratio of net investment income to
average net assets from 6.39% to 6.37%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
The accompanying notes are an integral part of the financial statements.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Fixed Income Portfolio (the "Portfolio") is a separate diversified
investment series of the Portfolio Trust.
At June 30, 2003, there was one fund, Standish Mellon Fixed Income Fund
(the "Fund"), invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at
June 30, 2003 was approximately 100%.
The objective of the Portfolio is to achieve a high level of current
income, consistent with conserving principal and liquidity, and
secondarily to seek capital appreciation when changes in interest rates
and economic conditions indicate that capital appreciation may be
available without significant risk to principal by investing, under normal
circumstances, at least 80% of net assets in fixed income securities
issued by U.S. and foreign governments and companies.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Fixed Income Portfolio was changed to Standish Mellon Fixed
Income Portfolio. In addition, the name of the Standish, Ayer & Wood
Master Portfolio was changed to Mellon Institutional Funds Master
Portfolio. The name changes for the Portfolio and the Portfolio Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized value based upon the value on such
date unless the Trustees determine during such sixty-day period that
amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Portfolio to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the
Portfolio and the counterparty. Additionally, procedures have been
established by the Portfolio to monitor on a daily basis, the market value
and accrued interest of the repurchase agreement's underlying investments
to ensure the existence of a proper level of collateral.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio allocates at least annually among its investors each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss deduction or
credit.
E. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
G. COMMITMENT AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks of
loss to be remote.
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon") for overall investment advisory and
administrative services is paid monthly at the annual rate of 0.40% of the
Portfolio's first $250,000,000 of average daily net assets, 0.35% of the
next $250,000,000 of average daily net assets, and 0.30% of the average
daily net assets in excess of $500,000,000. Standish Mellon voluntarily
agreed to limit the Portfolio's total annual operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.38% of the
Portfolio's average daily net assets. Pursuant to this agreement, for the
six months ended June 30, 2003, Standish Mellon voluntarily waived
$124,405 of its investment advisory fee. This agreement is voluntary and
temporary and may be discontinued or revised by Standish Mellon at any
time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Portfolio for serving as
an officer or Trustee of the Trust. The Trust pays each Trustee who is not
a director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Portfolio Trust pays the legal
fees for the independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
-------------- --------------
U.S. Government Securities $1,892,586,049 $2,177,655,495
============== ==============
Investments (non-U.S.Government Securities) $ 291,872,669 $ 141,580,790
============== ==============
(4) FEDERAL TAXES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal tax
basis, were as follows:
Aggregate Cost $1,111,662,762
==============
Gross unrealized appreciation 36,211,521
Gross unrealized depreciation (2,652,437)
--------------
Net unrealized appreciation $ 33,559,084
==============
(5) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in Parts A and B of the Portfolio Trust's registration statement.
The Portfolio trades the following financial instruments with off-balance
sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
decrease the Portfolio's exposure to the underlying instrument, or hedge
other Portfolio investments. Options, both held and written by the
Portfolio, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any
open purchased options is shown in the Schedule of Investments. This
amount reflects each contract's exposure to the underlying instrument at
period end. Losses may arise from changes in the value of the underlying
instruments if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ------------------
Outstanding, beginning of period 4 $ 855,084
Options written 4 305,461
Options expired (8) (1,160,545)
----------- -----------
Outstanding, end of period 0 $ --
=========== ===========
At June 30, 2003, the Portfolio held no written put option contracts.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ----------------
Outstanding, beginning of period 3 $ 105,383
Options written 4 305,461
Options expired (2) (94,895)
Options closed (5) (315,949)
----------- ---------
Outstanding, end of period 0 $ --
=========== =========
At June 30, 2003, the Portfolio held no written call option contracts.
INTEREST RATE FLOORS
Interest rate floors purchased by the Portfolio entitle the Portfolio to
receive payments on a notional principal amount from the party selling
such floor to the extent that a specified index falls below a
predetermined interest rate amount. Credit and market risk exist with
respect to these instruments. If forecasts of interest rates and other
market factors are incorrect, investment performance will diminish
compared to what performance would have been if these investment
techniques were not used. Even if the forecasts are correct, there are
risks that the positions may correlate imperfectly with the asset or
liability being hedged, a liquid secondary market may not always exist, or
a counterparty to a transaction may not perform. The Portfolio expects to
enter these transactions primarily for hedging purposes including,
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
but not limited to, preserving a return or spread on a particular
investment or portion of its portfolio, protecting against currency
fluctuations, as a duration management technique or protecting against an
increase in the price of securities the Portfolio anticipates purchasing
at a later date. Interest rate floors are "marked-to-market" daily based
on quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
Periodic payments of interest, if any, are reported as additions to
interest income in the Statement of Operations. Realized gains or losses
from these agreements are disclosed in the Statement of Operations.
At June 30, 2003, the Portfolio did not hold any open interest rate floor
agreements.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
At June 30, 2003, the Portfolio held the following forward foreign
currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
-----------------------------------------------------------------------------------------------------------
Danish Krone 23,960,000 09/17/2003 $ 3,695,649 $ 3,757,606 $ 61,957
Euro 74,475,000 09/17/2003 85,284,670 87,915,981 2,631,311
---------------- ---------------- ---------------
TOTAL $ 88,980,319 $ 91,673,587 $ 2,693,268
================ ================ ===============
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at
a fixed price on a future date. Pursuant to margin requirements the
Portfolio deposits either cash or securities in an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, depending on the daily fluctuations in
the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Portfolio. There
are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments or indices,
which may not correlate with changes in the value of hedged investments.
Buying futures tends to increase the Portfolio's exposure to the
underlying instrument, while selling futures tends to decrease the
Portfolio's exposure to the underlying instrument or hedge other
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market. Losses may arise if there is an illiquid secondary market or if
the counterparty does not perform under the contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in securities prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at the
quoted daily settlement prices established by the exchange on which they
trade.
25
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2003, the Portfolio held the following financials futures
contracts:
EXPIRATION UNDERLYING FACE
CONTRACT POSITION DATE AMOUNT AT VALUE UNREALIZED GAIN
---------------------------------------------------------------------------------------------
U.S. 5 Year Note (61 Contracts) Short 9/30/2003 $ 7,031,550 $ 52,392
U.S. 10 Year Note (337 Contracts) Short 9/30/2003 39,576,437 536,120
--------
$588,512
========
(6) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place
a month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income
on the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least
equal to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the
forward sale of other securities it owns. Income on the securities will
not be earned until settlement date. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of decline in the value of the
Portfolio's other assets. Unsettled TBA purchase commitments are valued at
the current market value of the underlying securities, according to the
procedures described under "Investment security valuations" above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is "marked-to-
market" daily and the change in market value is recorded by the Portfolio
as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the
sale of the securities based upon the unit price established at the date
the commitment was entered into.
See the Schedule of Investments for outstanding delayed delivery
transactions.
(7) SECURITIES LENDING:
The Portfolio may lend its securities, through its agent Investors Bank &
Trust Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Portfolio
on the next business day. For the duration of a loan, the Portfolio
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment
of the collateral. As with other extensions of credit, the Portfolio bears
the risk of delay in recovery or even loss of rights in its securities on
loan should the borrower of the securities fail financially or default on
its obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
26
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
At June 30, 2003, the Portfolio loaned securities having a market value of
$91,070,541. The Portfolio received cash collateral of $93,033,125 which
is invested, together with collateral of other Mellon Institutional funds,
in high-grade short-term investments.
27
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
28
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Assistant Vice Since 2001 Assistant Manager, 29 None
Cara E. Hultgren, President Mutual Fund
c/o Standish Mellon Asset Operations since
Management, 2001; Shareholder
One Boston Place Representative,
Boston, MA 02108 Standish Mellon
1/19/71 Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
29
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $32,405 (Note 7)) (identified cost, $22,833,016) $24,898,862
Cash 2,045,272
Foreign currency, at value (cost $2,688) 2,699
Receivable for investments sold 272,657
Receivable for Fund shares sold 1,646
Interest receivable 558,149
Unrealized appreciation on forward foreign currency
exchange contracts (Note 6) 126,293
Prepaid expenses 11,487
-----------
Total assets 27,917,065
LIABILITIES
Payable for investments purchased $ 466,458
Payable for Fund shares redeemed 1,486,757
Payable for variation margin on open financial futures
contracts (Note 6) 4,641
Unrealized depreciation on forward foreign currency
exchange contracts (Note 6) 161,997
Payable for closed forward foreign currency exchange
contracts (Note 6) 15,043
Payable upon return of securities loaned (Note 7) 33,275
Options written, at value (Note 6) (premiums received,
$5,965) 3,593
Accrued accounting, custody and transfer agent fees 13,093
Accrued trustees' fees and expenses (Note 2) 1,026
Accrued expenses and other liabilities 18,024
---------
Total liabilities 2,203,907
-----------
NET ASSETS $25,713,158
===========
NET ASSETS CONSIST OF:
Paid-in capital $23,577,066
Accumulated net realized gain 47,827
Undistributed net investment income 29,661
Net unrealized appreciation 2,058,604
-----------
TOTAL NET ASSETS $25,713,158
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,100,352
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 23.37
===========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$86 (Note 7)) $ 448,314
Dividend income 1,090
----------
Total investment income 449,404
EXPENSES
Investment advisory fee (Note 2) $ 45,227
Accounting, custody, and transfer agent fees 66,066
Legal and audit services 19,123
Registration fees 8,125
Insurance expense 3,672
Trustees' fees and expenses (Note 2) 1,789
Miscellaneous 3,516
---------
Total expenses 147,518
Deduct:
Waiver of investment advisory fee (Note 2) (45,227)
Reimbursement of Fund operating expenses (Note 2) (40,103)
---------
Total expense deductions (85,330)
---------
Net expenses 62,188
----------
Net investment income 387,216
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 1,812,535
Financial futures contracts (75,486)
Written options transactions (2,375)
Foreign currency transactions and forward foreign
currency exchange contracts (182,114)
---------
Net realized gain 1,552,560
Change in unrealized appreciation (depreciation)
Investment securities 280,044
Financial futures contracts 31,730
Written options 1,737
Foreign currency and forward foreign currency exchange
contracts (146,030)
---------
Change in net unrealized appreciation (depreciation) 167,481
----------
Net realized and unrealized gain 1,720,041
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $2,107,257
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 387,216 $ 941,984
Net realized gain (loss) 1,552,560 (971,630)
Change in net unrealized appreciation (depreciation) 167,481 3,385,918
----------- ------------
Net increase in net assets from investment operations 2,107,257 3,356,272
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (401,470) --
----------- ------------
Total distributions to shareholders (401,470) --
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 5,782,712 12,416,156
Value of shares issued to shareholders in payment of
distributions declared 399,170 --
Cost of shares redeemed (3,376,626) (34,907,479)
----------- ------------
Net increase (decrease) in net assets from Fund share
transactions 2,805,256 (22,491,323)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 4,511,043 (19,135,051)
NET ASSETS
At beginning of period 21,202,115 40,337,166
----------- ------------
At end of period (including undistributed net investment
income of $29,661 and $43,915) $25,713,158 $ 21,202,115
=========== ============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED DECEMBER 31, JUNE 30, 1999
JUNE 30, 2003 ---------------------------- (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) 2002 2001(A) 2000 TO DECEMBER 31, 1999
------------- --------- -------- ------- ----------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 21.66 $ 17.83 $ 18.87 $ 19.47 $ 20.00
------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.39 0.73 0.73 0.98 0.61
Net realized and unrealized gain
(loss) on investments 1.72 3.10 (1.74) (1.50) (0.04)
------- ------- ------- ------- -------
Total from investment operations 2.11 3.83 (1.01) (0.52) 0.57
------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.40) -- (0.03) (0.08) (1.10)
------- ------- ------- ------- -------
Total distributions to shareholders (0.40) -- (0.03) (0.08) (1.10)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 23.37 $ 21.66 $ 17.83 $ 18.87 $ 19.47
======= ======= ======= ======= =======
TOTAL RETURN+++ 9.78%++ 21.48% (5.31)% (2.73)% 2.84%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net
assets)* 0.55%+ 0.55% 0.55% 0.27% 0.00%+
Net Investment Income (to average
daily net assets)* 3.42%+ 3.87% 3.99% 5.30% 5.93%+
Portfolio Turnover 107%++ 178% 205% 216% 91%++
Net Assets, End of Period (000's
omitted) $25,713 $21,202 $40,337 $41,614 $23,999
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed
the Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income per
share(1) $ 0.30 $ 0.60 $ 0.68 $ 0.86 $ 0.51
Ratios (to average daily net
assets):
Expenses 1.30%+ 1.23% 0.85% 0.90% 1.02%+
Net investment income 2.67%+ 3.19% 3.69% 4.67% 4.91%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income per share by
$0.002, increase net realized and unrealized gains and losses per share by
$0.002 and decrease the ratio of net investment income to average net
assets from 4.00% to 3.99%. Per share data and ratios/supplemental data for
the periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 84.1%
ASSET BACKED -- 0.6%
Golden State Tobacco Securitization Corp. 5.000% 06/01/2021 USD 25,000 $ 24,389
Golden State Tobacco Securitization Corp. 7.875% 06/01/2042 75,000 75,199
South Carolina Tobacco Settlement Authority 6.000% 05/15/2022 60,000 55,158
-----------
Total Asset Backed (Cost $150,777) 154,746
-----------
CONVERTIBLE CORPORATE BONDS -- 0.0%
Royal Caribbean Cruises Step Up Notes(a) 0.000% 05/18/2021 25,000 11,561
-----------
Total Convertible Corporate Bonds (Cost $11,411) 11,561
-----------
CORPORATE -- 2.1%
BASIC INDUSTRY -- 0.3%
Crompton Corp. Senior Notes 8.500% 03/15/2005 60,000 63,300
CSC Holdings, Inc. 7.875% 12/15/2007 20,000 20,400
-----------
83,700
-----------
CAPITAL GOODS -- 0.1%
SPX Corp. Senior Notes 6.250% 06/15/2011 15,000 15,300
-----------
COMMUNICATIONS -- 0.8%
Salem Communciations Corp. Senior Sub Notes 7.750% 12/15/2010 15,000 15,525
Sprint Capital Corp. 6.125% 11/15/2008 60,000 65,265
Sprint Capital Corp. 6.900% 05/01/2019 65,000 68,424
Sprint Capital Corp. 8.750% 03/15/2032 50,000 59,719
-----------
208,933
-----------
CONSUMER CYCLICAL -- 0.2%
Mohegan Tribal Gaming Authority Senior
Notes 8.375% 07/01/2011 20,000 21,600
TRW Automotive, Inc. 144A Senior Notes 9.375% 02/15/2013 15,000 16,350
TRW Automotive, Inc. 144A Senior Sub Notes 11.000% 02/15/2013 5,000 5,500
-----------
43,450
-----------
CONSUMER NONCYCLICAL -- 0.1%
Del Monte Corp. 144A Senior Sub Notes 8.625% 12/15/2012 20,000 21,650
-----------
ENERGY -- 0.3%
ANR Pipeline Co. 7.375% 02/15/2024 10,000 10,075
Chesapeake Energy Corp. 8.125% 04/01/2011 30,000 32,325
Premcor Refining Group 144A Senior Notes 9.500% 02/01/2013 20,000 22,100
XTO Energy, Inc. 144A Senior Notes 6.250% 04/15/2013 5,000 5,325
-----------
69,825
-----------
FINANCIAL -- 0.1%
RH Donnelley Finance Corp. I 144A Senior
Notes 8.875% 12/15/2010 5,000 5,500
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
RH Donnelley Finance Corp. I 144A Senior
Sub Notes 10.875% 12/15/2012 USD 10,000 $ 11,600
-----------
17,100
-----------
PUBLIC UTILITY -- 0.2%
AES Corp. 144A 8.750% 05/15/2013 25,000 26,312
Southern Natural Gas Co. 144A Senior Notes 8.875% 03/15/2010 15,000 16,462
-----------
42,774
-----------
Total Corporate (Cost $483,316) 502,732
-----------
YANKEE BONDS -- 2.1%
Abitibi-Consolidated, Inc. 6.000% 06/20/2013 50,000 47,965
Banque Centrale de Tunisie 7.375% 04/25/2012 30,000 34,500
Dominican Republic Euro Registered 9.500% 09/27/2006 35,000 32,900
Republic of Brazil(b) 2.188% 04/15/2012 30,000 22,575
Republic of Brazil 8.000% 04/15/2014 12,314 10,836
Republic of Brazil 8.875% 04/15/2024 35,000 26,950
Republic of Brazil 10.000% 01/16/2007 20,000 20,450
Republic of Brazil 10.250% 06/17/2013 20,000 18,830
Republic of Colombia 10.750% 01/15/2013 40,000 46,840
Republic of El Salvador 8.500% 07/25/2011 25,000 26,813
Republic of Peru 9.125% 02/21/2012 20,000 21,320
Rogers Cable, Inc. 144A Notes 6.250% 06/15/2013 30,000 30,043
Royal Caribbean Cruises 8.250% 04/01/2005 15,000 15,525
Russian Federation 5.000% 03/31/2030 50,000 48,438
Russian Federation 11.000% 07/24/2018 20,000 28,600
Ukraine Government Senior Notes 11.000% 03/15/2007 22,400 24,668
United Mexican States 8.300% 08/15/2031 45,000 51,818
United Mexican States 9.875% 02/01/2010 35,000 45,063
-----------
Total Yankee Bonds (Cost $539,229) 554,134
-----------
U.S. GOVERNMENT AGENCY -- 1.1%
PASS THRU SECURITIES -- 1.1%
FNMA 6.500% 09/01/2032 - 10/01/2032 111,945 116,740
FNMA (TBA)# 6.000% 07/01/2033 150,000 155,859
-----------
272,599
-----------
Total U.S. Government Agency (Cost $271,863) 272,599
-----------
U.S. TREASURY OBLIGATIONS -- 0.0%
TREASURY NOTES -- 0.0%
U.S. Treasury Note 4.375% 05/15/2007 10,000 10,864
-----------
Total U.S. Treasury Obligations (Cost $10,772) 10,864
-----------
FOREIGN DENOMINATED -- 78.2%
CANADA -- 0.3%
Canadian Pacific Railway 144A 5.200% 06/20/2010 CAD 95,000 69,810
-----------
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
DENMARK -- 5.8%
Denmark Realkredit 4.000% 01/01/2006 DKK 735,000 $ 117,331
Denmark Realkredit 6.000% 10/01/2032 5,503,838 874,091
Kingdom of Denmark 4.000% 11/15/2004 3,080,000 487,626
-----------
1,479,048
-----------
EURO -- 59.2%
Allied Domecq PLC 5.875% 06/12/2009 EUR 20,000 24,919
Allied Irish Banks Ltd.(b) 7.500% 02/28/2011 20,000 26,980
Bank of Ireland Holdings(b) 7.400% 12/29/2049 20,000 27,081
Barclays Bank PLC(b) 7.500% 12/15/2010 20,000 27,180
British Telecom PLC 6.125% 02/15/2006 20,000 24,825
Bundes Obligation Series 135 5.000% 05/20/2005 110,000 132,742
Bundes Obligation Series 136 5.000% 08/19/2005 255,000 309,243
Bundes Obligation Series 140 4.500% 08/17/2007 695,000 850,073
Bundes Obligation Series 94 7.500% 11/11/2004 315,000 387,628
Buoni del Tesoro Poliennali 4.500% 03/01/2007 795,000 970,816
Daimlerchrysler International Finance 6.125% 03/21/2006 75,000 92,004
DePfa ACS Bank 144A 3.875% 07/15/2013 200,000 227,286
Deutsche Telekom International Finance BV 8.125% 05/29/2012 85,000 120,041
Deutschland Republic 4.000% 07/04/2009 655,000 783,858
Deutschland Republic 4.125% 07/04/2008 50,000 60,422
Deutschland Republic 4.750% 07/04/2028 1,010,000 1,167,952
Deutschland Republic 5.000% 07/04/2011 285,000 358,371
Deutschland Republic 5.000% 07/04/2012 115,000 144,089
Deutschland Republic 5.250% 01/04/2011 90,000 114,906
Deutschland Republic 5.625% 01/04/2028 60,000 78,045
Dexia Municipal Agency 5.375% 04/26/2007 185,000 231,360
Eurohypo AG 4.500% 01/21/2013 50,000 59,531
European Investment Bank 3.625% 10/15/2013 50,000 55,462
FBG Treasury BV 5.750% 03/17/2005 40,000 48,234
Fort James Corp. 4.750% 06/29/2004 165,000 186,530
France Telecom 7.250% 01/28/2013 90,000 120,698
France Telecom 8.250% 03/14/2008 45,000 59,626
France Telecom CDS CLN 5.549% 02/13/2004 105,000 121,955
French Government 3.150% 07/25/2032 187,560 233,517
French Treasury Note 5.000% 01/12/2006 675,000 821,428
General Motors Corp. 6.050% 07/01/2008 50,000 57,155
General Motors Corp. 7.250% 07/01/2013 50,000 57,081
HBOS PLC(b) 6.050% 11/23/2049 20,000 25,418
Heinz BV 5.125% 04/10/2006 50,000 60,900
Hilton Group Finance PLC 6.500% 07/17/2009 30,000 38,318
Honeywell Holding BV 5.250% 12/20/2006 20,000 24,044
Household Finance Corp. Senior
Unsubordinated Notes 6.500% 05/05/2009 45,000 58,794
Inco, Ltd. 15.750% 07/15/2006 200,000 410,345
International Paper Co. 5.375% 08/11/2006 20,000 24,279
Italian Government 7.750% 11/01/2006 900,000 1,202,331
Kappa Beheer BV 10.625% 07/15/2009 20,000 24,676
Kingdom of Belgium Series 41 4.250% 09/28/2013 200,000 235,554
Lear Corp. Senior Notes 8.125% 04/01/2008 20,000 24,790
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Messer Greisheim Holdings AG Senior Notes 10.375% 06/01/2011 EUR 20,000 $ 25,708
Morgan Stanley Dean Witter 5.750% 04/01/2009 30,000 37,801
National Westminister Bank(b) 6.625% 10/29/2049 25,000 32,488
Netherland Government Notes 5.500% 07/15/2010 720,000 931,868
NGG Finance PLC 5.250% 08/23/2006 115,000 140,042
Parker-Hannifin Corp. 6.250% 11/21/2005 10,000 12,205
Pemex Project Funding Master Trust 144A 6.625% 04/04/2010 20,000 24,130
Republic of Austria 5.500% 10/20/2007 180,000 227,971
Republic of Austria 5.750% 04/11/2007 710,000 896,987
Republic of Bulgaria 144A 7.500% 01/15/2013 30,000 37,930
Republic of South Africa 5.250% 05/16/2013 15,000 16,604
Sara Lee Corp. 6.125% 07/27/2007 30,000 38,169
Sogerim 7.000% 04/20/2011 30,000 39,544
Spanish Government 3.250% 01/31/2005 975,000 1,138,654
Spanish Government 4.250% 10/31/2007 780,000 943,697
Spanish Government 5.000% 07/30/2012 185,000 230,691
Telelfonica Europe BV 5.125% 02/14/2013 65,000 78,144
Telenor ASA 5.875% 12/05/2012 60,000 76,226
ThyssenKrupp 7.000% 03/19/2009 25,000 31,347
Tyco International Group SA 5.500% 11/19/2008 115,000 130,666
Vivendi Environnement Senior Notes 5.875% 06/27/2008 40,000 50,207
-----------
15,251,566
-----------
JAPAN -- 2.1%
GE Financial Assurance 1.600% 06/20/2011 JPY 65,000,000 538,162
-----------
NEW ZEALAND -- 3.4%
New Zealand Government 7.000% 07/15/2009 NZD 750,000 481,342
New Zealand Government 8.000% 11/15/2006 600,000 384,528
-----------
865,870
-----------
SINGAPORE -- 2.4%
Singapore Government 3.500% 07/01/2012 SGD 1,000,000 631,076
-----------
SOUTH AFRICA -- 0.2%
Republic of South Africa 13.000% 08/31/2010 ZAR 255,000 41,571
-----------
SWEDEN -- 1.9%
Swedish Government Series 1037 8.000% 08/15/2007 SEK 3,300,000 482,928
-----------
UNITED KINGDOM -- 2.9%
UK Treasury Gilt Stock 5.000% 03/07/2008 GBP 435,000 756,706
-----------
Total Foreign Denominated (Cost $18,100,082) 20,116,737
-----------
TOTAL BONDS AND NOTES (COST $19,567,450) 21,623,373
-----------
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
CONTRACT VALUE
SECURITY SIZE (NOTE 1A)
- ------------------------------------------------------------------------------------
PURCHASED OPTIONS -- 0.2%
JPY Put/USD Call, Strike Price 119.35, 10/17/2003 (USD) 110,000 $ 2,092
JPY Put/USD Call, Strike Price 130.00, 05/13/2004 (USD) 220,000 1,069
JPY Put/USD Call, Strike Price 130.00, 09/23/2003 (USD) 1,050,000 335
USD Put/AUD Call, Strike Price 0.61, 10/21/2003 (USD) 200,000 16,660
USD Put/CAD Call, Strike Price 1.36, 11/19/2003 (USD) 500,000 9,450
USD Put/EUR Call, Strike Price 1.16, 08/13/2003 (USD) 215,000 1,892
USD Put/JPY Call, Strike Price 119.35, 10/17/2003 (USD) 110,000 1,952
USD Put/NZD Call, Strike Price 0.55, 07/21/2003 (USD) 430,000 27,821
-----------
TOTAL PURCHASED OPTIONS (COST $51,329) 61,271
-----------
PAR VALUE/
RATE MATURITY SHARES
------ ---------- -------------
SHORT-TERM INVESTMENTS -- 12.5%
CASH EQUIVALENTS -- 0.1%
Bank of Montreal Eurodollar Time Deposit(c) 1.150% 07/09/2003 USD 4,147 4,147
Credit Agricole Indosuez Eurodollar Time Deposit(c) 1.050% 08/26/2003 4,552 4,552
Den Danske Bank Eurodollar Time Deposit(c) 1.040% 07/24/2003 3,641 3,641
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(c) 4,551 4,551
Royal Bank of Canada Eurodollar Time Deposit(c) 1.300% 07/01/2003 8,192 8,192
Royal Bank of Scotland Eurodollar Time Deposit(c) 1.125% 07/01/2003 8,192 8,192
-----------
33,275
-----------
U.S. GOVERNMENT -- 3.7%
U.S. Treasury Bill=/= 0.843% 09/25/2003 25,000 24,949
U.S. Treasury Bill=/= 1.025% 07/17/2003 391,000 390,822
U.S. Treasury Bill=/= 1.062% 07/10/2003 538,000 537,838
-----------
953,609
-----------
U.S. GOVERNMENT AGENCY -- 4.0%
FNMA Discount Note=/= 1.150% 07/14/2003 1,000,000 999,585
FNMA Discount Note=/= 4.770% 07/01/2003 25,000 25,000
-----------
1,024,585
-----------
REPURCHASE AGREEMENTS -- 4.7%
Tri-party repurchase agreement dated 06/30/03 with Salomon Smith
Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with a
maturity value of $1,202,774 and an effective yield of 0.75%,
collateralized by a U.S. Government Obligation with a rate of 8.75%, a
maturity date of 08/15/20 and an aggregated market value of $1,228,955. 1,202,749
-----------
TOTAL SHORT-TERM INVESTMENTS (COST $3,214,237) 3,214,218
-----------
TOTAL INVESTMENTS -- 96.8% (COST
$22,833,016) $ 24,898,862
OTHER ASSETS, LESS LIABILITIES -- 3.2% 814,296
-------------
NET ASSETS -- 100.0% $ 25,713,158
=============
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule
144A of the Securities Act of 1933. These securities
may be resold in transactions exempt from registration
to qualified buyers.
AUD - Australian Dollar
CAD - Canadian Dollar
CDS - Credit Default Swap
CLN - Credit-Linked Notes
DKK - Danish Krone
EUR - Euro
FNMA - Federal National Mortgage Association
GBP - Great British Pound
JPY - Japanese Yen
NZD - New Zealand Dollar
SEK - Swedish Krona
SGD - Singapore Dollar
Step Up - Coupon rate increases in increments to
maturity. Rate disclosed is as of June 30, 2003.
Maturity date disclosed is the ultimate maturity.
TBA - To Be Announced
USD - United States Dollar
ZAR - South African Rand
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specified rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Variable Rate Security; rate indicated is as of 6/30/03.
(c) Represents investments of security lending collateral (Note 7).
# Delayed delivery contract.
=/= Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- ------------------------------------------------------------------------
Foreign Government 61.6%
Financial 22.2%
U.S. Government 4.8%
Communications 3.2%
Basic Industry 1.6%
Capital Goods 0.8%
Consumer Cyclical 0.6%
Consumer Noncyclical 0.6%
Transportation 0.4%
Banking 0.3%
Technology 0.3%
Energy 0.2%
Public Utility 0.2%
-------
96.8%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- ------------------------------------------------------------------------
United States 18.2%
Germany 17.4%
Spain 9.0%
Italy 8.5%
France 6.6%
Denmark 5.8%
Netherlands 5.3%
Austria 4.4%
United Kingdom 4.3%
New Zealand 3.5%
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon International Fixed Income Fund II (the "Fund")
is a separate non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity
by investing, under normal circumstances, at least 80% of net assets in
fixed income securities, and at least 65% of net assets in non-U.S. dollar
denominated fixed income securities of foreign government and companies
located in various countries, including emerging markets.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish International Fixed Income Fund II was changed to Standish Mellon
International Fixed Income Fund II. In addition, the name of the Standish,
Ayer & Wood Investment Trust was changed to Mellon Institutional Funds
Investment Trust. The name changes for the Fund and the Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis. The Fund does not
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
isolate that portion of the results of operations resulting from changes
in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income
and foreign withholding taxes recorded on the Fund's books and the U.S.
dollar equivalent amounts usually received or paid.
D. FOREIGN CURRENCY TRANSACTIONS
Investment security valuations, other assets, and liabilities initially
expressed in foreign currencies are converted into U.S. dollars based upon
current currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
E. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed
foreign markets.
F. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
for foreign currency transactions, futures, amortization and/or accretion
of premiums and discounts on certain securities, capital loss
carryforwards, losses deferred due to wash sales and excise tax
regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
G. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
H. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory and administrative
services, and general office facilities is paid monthly at the annual rate
of 0.40% of the Fund's average daily net assets. Standish Mellon
voluntarily agreed to limit the Fund's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.55% of the Fund's average daily net assets for the six months ended
June 30, 2003. Pursuant to this agreement, for the six months ended
June 30, 2003, Standish Mellon voluntarily did not impose $45,227 of its
investment advisory fee and reimbursed the Fund for $40,103 of its
operating expenses. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
Effective January 28, 2003, the Fund began imposing a redemption fee of 2%
of the net asset value of the shares, with certain exceptions, which are
redeemed or exchanged less than 90 days from the day of their purchase.
The redemption fee is paid directly to the Fund, and is designed to offset
brokerage commissions, market impact, and other costs associated with
short-term trading. The fee does not apply to shares that were acquired
through reinvestment of distributions. The redemption fee is applicable to
shares of the Fund purchased on or after January 28, 3003. For the period
ended June 30, 2003, the Fund received no redemption fees.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $ 4,006,588 $ 5,050,674
=========== ===========
Investments (non-U.S.Government Securities) $19,683,555 $16,917,256
=========== ===========
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 249,329 633,471
Shares issued to shareholders in payment of
distributions declared 17,382 --
Shares redeemed (145,061) (1,916,987)
------------ ---------------
Net increase (decrease) 121,650 (1,283,516)
============ ===============
At June 30, 2003, two shareholders held of record approximately 73% and
12% of the total outstanding shares of the Fund.
A significant portion of the Fund's shares are beneficially owned by
fiduciary accounts over which Standish Mellon and its affiliates have
either sole or joint investment discretion. Investment activity of these
shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities at June 30, 2003 as computed on a federal income tax
basis, were as follows:
Aggregate Cost $22,857,940
==========
Gross unrealized appreciation 2,104,150
Gross unrealized depreciation (63,228)
----------
Net unrealized appreciation $2,040,922
==========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Fund may use options to seek to hedge against risks
of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. Options, both held
and written by the Fund, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
amount at value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
A summary of the written put options for the six months ended June 30,
2003 is as follows:
WRITTEN PUT OPTION TRANSACTIONS
----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 185
Options expired (1) (185)
----------- -----
Outstanding, end of period 0 $ --
=========== =====
At June 30, 2003, the Fund held no written put option contracts.
A summary of the written call options for the six months ended June 30,
2003 is as follows:
WRITTEN CALL OPTION TRANSACTIONS
-----------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- --------
Outstanding, beginning of period 1 $ 138
Options closed (1) (138)
----------- -----
Outstanding, end of period 0 $ --
=========== =====
At June 30, 2003, the Fund held no written call option contracts.
A summary of the written currency options for the six months ended
June 30, 2003 is as follows:
WRITTEN CURRENCY OPTION TRANSACTIONS
---------------------------------------
NUMBER OF CONTRACTS PREMIUMS
------------------- ---------------
Outstanding, beginning of period 2 $ 2,921
Options written 5 15,474
Options closed (5) (12,430)
----------- --------
Outstanding, end of period 2 $ 5,965
=========== ========
At June 30, 2003, the Fund held the following written currency option
contracts:
SECURITY
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
-------------
CONTRACTS VALUE
--------- ---------
CAD Put/USD Call, Strike Price 1.41, 11/19/2003 1 $3,400
USD Put/EUR Call, Strike Price 1.22, 08/13/2003 1 193
------
Total (premiums received $5,965) $3,593
======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At June 30, 2003, the Fund held the following forward foreign currency
exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS
--------------------------------------------------------------------------------------------------------
British Pound Sterling 205,000 09/17/2003 $ 337,573 $ 339,746 $ (2,173)
Canadian Dollar 870,000 09/17/2003 641,380 647,502 (6,122)
Japanese Yen 918,120,000 09/17/2003 7,676,909 7,818,378 (141,469)
--------------- --------------- --------------
TOTAL $ 8,655,862 $ 8,805,626 $ (149,764)
=============== =============== ==============
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
--------------------------------------------------------------------------------------------------------
Danish Krone 5,655,000 09/17/2003 $ 872,241 $ 886,864 $ 14,623
Euro 2,230,000 09/17/2003 2,553,674 2,633,560 79,886
New Zealand Dollar 1,235,000 09/17/2003 718,078 709,961 (8,117)
Singapore Dollar 1,130,000 09/17/2003 642,685 655,054 12,369
South African Rand 320,000 08/29/2003 42,086 37,970 (4,116)
Swedish Krona 3,660,000 09/17/2003 455,203 466,480 11,277
--------------- --------------- -------------
TOTAL $ 5,283,967 $ 5,389,889 $ 105,922
=============== =============== =============
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET MARKET CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE IN EXCHANGE FOR VALUE VALUE DATE GAIN
------------------------------------------------------------------------------------------------------
New Zealand Dollar $ 468,934 Australian Dollar $ 477,072 09/04/2003 $ 8,138
------------- ------------- -----------
TOTAL $ 468,934 $ 477,072 $ 8,138
============= ============= ===========
17
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2003, the Fund held the following futures contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
-----------------------------------------------------------------------------------------------
U.S. 5 Year Note (9 Contracts) Short 9/30/2003 $1,036,125 $ 2,886
U.S. 10 Year Note (6 Contracts) Short 9/30/2003 704,625 7,736
-------
$10,622
=======
INTEREST RATE SWAP CONTRACTS
Interest rate swaps involve the exchange by the Fund with another party of
their respective commitments to pay or receive interest, e.g., an exchange
of floating rate payments for fixed rate payments with respect to a
notional amount of principal. Credit and market risk exist with respect to
these instruments. If forecasts of interest rates and other market factors
are incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Fund expects to enter into these transactions
primarily for hedging purposes including, but not limited to, preserving a
return or spread on a particular investment or portion of its portfolio,
protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities the
Fund anticipates purchasing at a later date. Interest rate swaps are
marked to market daily based upon quotations from market makers and the
change, if any, is recorded as unrealized gain or loss. Payments made or
received are included as part of interest income. Gains and losses are
realized upon the expiration or closing of the swap contracts.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(7) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on
the next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the
risk of delay
18
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
in recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its obligations
to the Fund. In the event of borrower default, the Fund generally has the
right to use the collateral to offset losses incurred. The Fund may incur
a loss in the event it was delayed or prevented from exercising its rights
to dispose of the collateral. The Fund also bears the risk in the event
that the interest and/or dividends received on invested collateral is not
sufficient to meet the Fund's obligations due on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$32,405. The Fund received cash collateral of $33,275 which is invested,
together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. This Fund segregates securities
having a value at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or
the Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the
unit price established at the date the commitment was entered into.
See the Schedule of Investments for outstanding delayed delivery
transactions.
19
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
20
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
21
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $562,852 (Note 7))
(identified cost, $5,499,115) $5,614,852
Cash 362
Receivable for Fund shares sold 254
Interest receivable 42,879
Prepaid expenses 12,893
----------
Total assets 5,671,240
LIABILITIES
Payable for investments purchased $91,246
Payable for Fund shares redeemed 362,750
Payable upon return of securities loaned (Note 7) 574,375
Accrued accounting, custody and transfer agent fees 4,953
Accrued trustees' fees and expenses (Note 2) 980
Accrued expenses and other liabilities 16,851
-------
Total liabilities 1,051,155
----------
NET ASSETS $4,620,085
==========
NET ASSETS CONSIST OF:
Paid-in capital $3,770,494
Accumulated net realized gain 649,629
Undistributed net investment income 84,225
Net unrealized appreciation 115,737
----------
TOTAL NET ASSETS $4,620,085
==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 233,136
==========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 19.82
==========
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$1,314 (Note 7)) $368,911
EXPENSES
Investment advisory fee (Note 2) $ 32,715
Accounting, custody, and transfer agent fees 36,050
Legal and audit services 16,263
Registration fees 9,310
Insurance expense 3,792
Trustees' fees and expenses (Note 2) 1,813
Miscellaneous 3,364
--------
Total expenses 103,307
Deduct:
Waiver of investment advisory fee (Note 2) (32,715)
Reimbursement of Fund operating expenses (Note 2) (37,876)
--------
Total expense deductions (70,591)
--------
Net expenses 32,716
--------
Net investment income 336,195
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 649,629
--------
Net realized gain 649,629
Change in unrealized appreciation (depreciation)
Investment securities (496,284)
--------
Change in net unrealized appreciation (depreciation) (496,284)
--------
Net realized and unrealized gain 153,345
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $489,540
========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 336,195 $ 1,450,458
Net realized gain 649,629 608,075
Change in net unrealized appreciation (depreciation) (496,284) (41,952)
------------ ------------
Net increase in net assets from investment operations 489,540 2,016,581
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D)
From net investment income (245,622) (1,483,785)
From net realized gains on investments (279,557) (107,413)
------------ ------------
Total distributions to shareholders (525,179) (1,591,198)
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 3,236,027 4,222,335
Value of shares issued to shareholders in payment of
distributions declared 380,057 693,884
Cost of shares redeemed (21,226,985) (24,243,994)
------------ ------------
Net decrease in net assets from Fund share transactions (17,610,901) (19,327,775)
------------ ------------
TOTAL DECREASE IN NET ASSETS (17,646,540) (18,902,392)
NET ASSETS
At beginning of period 22,266,625 41,169,017
------------ ------------
At end of period (including undistributed net investment
income of $84,225 and distributions in excess of net
investment income of $6,348, respectively) $ 4,620,085 $ 22,266,625
============ ============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
2003 -----------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $20.03 $ 19.86 $ 19.57 $ 19.36 $ 19.87 $ 19.95
------ ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.31 0.85 1.13 1.28 1.24 1.25
Net realized and unrealized gain (loss) on
investments 0.11 0.38 0.34 0.21 (0.53) (0.16)
------ ------- ------- ------- ------- -------
Total from investment operations 0.42 1.23 1.47 1.49 0.71 1.09
------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.40) (0.96) (1.18) (1.28) (1.22) (1.17)
From net realized gain on investments (0.23) (0.10) -- -- -- --
------ ------- ------- ------- ------- -------
Total distributions to shareholders (0.63) (1.06) (1.18) (1.28) (1.22) (1.17)
------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $19.82 $ 20.03 $ 19.86 $ 19.57 $ 19.36 $ 19.87
====== ======= ======= ======= ======= =======
TOTAL RETURN+ 2.11%+++ 6.31% 7.66% 7.93% 3.67% 5.58%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.30%++ 0.30% 0.30% 0.30% 0.30% 0.30%
Net Investment Income (to average daily net
assets)* 3.10%++ 4.24% 5.64% 6.66% 6.27% 6.19%
Portfolio Turnover 107%+++ 251% 149% 170% 147% 145%
Net Assets, End of Period (000's omitted) $4,620 $22,267 $41,169 $45,232 $38,109 $26,579
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share(1) $ 0.24 $ 0.75 $ 1.07 $ 1.21 $ 1.12 $ 1.15
Ratios (to average daily net assets):
Expenses 0.95%++ 0.78% 0.60% 0.69% 0.89% 0.81%
Net investment income 2.45%++ 3.76% 5.34% 6.27% 5.68% 5.68%
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to increase net investment income per share by less
than $0.001, decrease net realized and unrealized gains and losses per
share by less than $0.001 and increase the ratio of net investment income
to average net assets by less than 0.01%. Per share data and
ratios/supplemental data for the periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
+ Total return would have been lower in the absense of expense waivers.
++ Computed on an annualized basis.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 96.7%
ASSET BACKED -- 13.3%
Bank One Issuance Trust 2002-A4 A4 2.940% 06/16/2008 $ 100,000 $ 102,732
Capital Auto Receivables Asset Trust 2003-1
A3A 2.750% 04/16/2007 100,000 102,289
Capital One Master Trust 2001-7 A 3.850% 08/15/2007 100,000 102,906
Citibank Credit Card Issuance Trust 2003-A2
A2 2.700% 01/15/2008 100,000 102,084
Daimler Chrysler Auto Trust 2001-A A4 5.400% 03/06/2006 100,000 103,632
Nissan Auto Receivables Owner Trust 2002-C
A3 2.600% 08/15/2006 100,000 101,467
------------
Total Asset Backed (Cost $603,684) 615,110
------------
CORPORATE -- 38.9%
BANKING -- 16.6%
Bank of America Corp. 7.875% 05/16/2005 150,000 167,433
Fifth Third Bank 6.750% 07/15/2005 150,000 164,566
FleetBoston Financial Corp. 7.250% 09/15/2005 100,000 111,120
National City Corp. 7.200% 05/15/2005 150,000 165,026
Northern Trust Co. 6.650% 11/09/2004 150,000 160,537
------------
768,682
------------
CONSUMER CYCLICAL -- 2.3%
Diageo PLC 7.125% 09/15/2004 100,000 106,657
------------
FINANCIAL -- 17.7%
Allstate Corp. Senior Notes 7.875% 05/01/2005 100,000 111,323
American International Group, Inc. 2.850% 12/01/2005 150,000 153,682
Associates Corp. Senior Notes 6.000% 07/15/2005 100,000 108,724
General Electric Capital Corp. 7.500% 05/15/2005 150,000 166,672
Goldman Sachs Group, Inc. 7.625% 08/17/2005 100,000 112,317
Morgan Stanley 6.100% 04/15/2006 150,000 165,620
------------
818,338
------------
PUBLIC UTILITY -- 2.3%
Alabama Power Co. Senior Notes 5.490% 11/01/2005 100,000 108,306
------------
Total Corporate (Cost $1,726,471) 1,801,983
------------
U.S. GOVERNMENT AGENCY -- 24.0%
PASS THRU SECURITIES -- 24.0%
FHLB 2.250% 05/15/2006 300,000 304,094
FHLMC Gold 5.000% 08/01/2007 148,701 153,367
FHLMC Gold 6.000% 07/01/2011 311,009 324,404
FNMA 2.250% 05/15/2006 300,000 304,011
Private Export Funding Corp. 6.860% 04/30/2004 20,000 20,822
------------
1,106,698
------------
Total U.S. Government Agency (Cost $1,084,143) 1,106,698
------------
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE/SHARES (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 20.5%
TREASURY NOTES -- 20.5%
U.S. Treasury Note 1.750% 12/31/2004 $ 300,000 $ 302,602
U.S. Treasury Note 2.000% 05/15/2006 90,000 90,956
U.S. Treasury Note 5.625% 02/15/2006 500,000 552,832
------------
946,390
------------
Total U.S. Treasury Obligations (Cost $940,146) 946,390
------------
TOTAL BONDS AND NOTES (COST $4,354,444) 4,470,181
------------
SHORT-TERM INVESTMENTS -- 24.8%
CASH EQUIVALENTS -- 12.4%
Bank of Montreal Eurodollar Time Deposit(a) 1.150% 07/09/2003 71,582 71,582
Credit Agricole Indosuez Eurodollar Time
Deposit(a) 1.050% 08/26/2003 78,561 78,561
Den Danske Bank Eurodollar Time Deposit(a) 1.040% 07/24/2003 62,849 62,849
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(a) 78,561 78,561
Royal Bank of Canada Eurodollar Time
Deposit(a) 1.300% 07/01/2003 141,411 141,411
Royal Bank of Scotland Eurodollar Time
Deposit(a) 1.125% 07/01/2003 141,411 141,411
------------
574,375
------------
COMMERCIAL PAPER -- 12.4%
CBA Finance, Inc.=/= 1.320% 07/01/2003 170,000 170,000
Eureka Securitization, Inc.=/= 1.320% 07/01/2003 250,000 250,000
UBS Finance, Inc.=/= 1.310% 07/01/2003 150,000 150,000
------------
570,000
------------
REPURCHASE AGREEMENTS -- 0.0%
Tri-party repurchase agreement dated 06/30/03 with Salomon Smith Barney, Inc.
and Investors Bank and Trust Company, due 07/01/03, with a maturity value of
$296 and an effective yield of 0.75%, collateralized by a U.S. Government
Obligation with a rate of 8.75%, a maturity date of 08/15/20 and an
aggregated market value of $306. 296
------------
TOTAL SHORT-TERM INVESTMENTS (COST $1,144,671) 1,144,671
------------
TOTAL INVESTMENTS -- 121.5% (COST
$5,499,115) $ 5,614,852
OTHER ASSETS, LESS LIABILITIES --
(21.5%) (994,767)
-------------
NET ASSETS -- 100.0% $ 4,620,085
=============
NOTES TO SCHEDULE OF INVESTMENTS:
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
(a) Represents investments of security lending collateral (Note 7).
=/= Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Short-Term Fixed Income Fund (the "Fund") is a
separate diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal and liquidity, while seeking a relatively high level
of current income by investing, under normal circumstances, at least 80%
of net assets in fixed income securities of U.S. companies and the U.S.
government.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Short-Term Fixed Income Fund was changed to Standish Mellon
Short-Term Fixed Income Fund. In addition, the name of the Standish,
Ayer & Wood Investment Trust was changed to Mellon Institutional Funds
Investment Trust. The name changes for the Fund and the Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the Fund
and the counterparty. Additionally, procedures have been established by
the Fund to monitor on a daily basis, the market value and accrued
interest of the repurchase agreement's underlying investments to ensure
the existence of a proper level of collateral.
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
debt securities. Realized gains and losses from securities sold are
recorded on the identified cost basis.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
D. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless a
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
of amortization and/or accretion of premiums and discounts on certain
securities and paydown gains and losses.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
E. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expenses and the relative size of the funds.
F. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory, administrative
services, and general office facilities, is paid monthly at the annual
rate of 0.30% of the Fund's average daily net assets. Standish Mellon
voluntarily agreed to limit total Fund operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.30% of the
Fund's average daily net assets for the six months ended June 30, 2003.
Pursuant to this agreement, for the six months ended June 30, 2003,
Standish Mellon voluntarily did not impose $32,715 of its investment
advisory fee and reimbursed the Fund for $37,876 of its operating
expenses. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $17,816,626 $21,579,013
=========== ===========
Investments (non-U.S.Government Securities) $ 3,443,118 $17,450,494
=========== ===========
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 161,931 210,440
Shares issued to shareholders in payment of
distributions declared 19,175 34,932
Shares redeemed (1,059,547) (1,206,262)
------------- ---------------
Net decrease (878,441) (960,890)
============= ===============
At June 30, 2003, three shareholders held of record approximately 54%, 14%
and 13% of the total outstanding shares of the Fund. A significant portion
of the Fund's shares are beneficially owned by fiduciary accounts over
which Standish Mellon and its affiliates have either sole or joint
investment discretion. Investment activity of these shareholders could
have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $5,499,049
=========
Gross unrealized appreciation 116,903
Gross unrealized depreciation (1,100)
---------
Net unrealized appreciation $ 115,803
=========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund trades the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Fund may use options to seek to hedge against risks
of market exposure and changes in securities prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Fund's exposure to the underlying instrument.
Buying puts and writing calls tend to decrease the Fund's exposure to the
underlying instrument, or hedge other Fund investments. Options, both held
and written by the Fund, are reflected in the accompanying Statement of
Assets and Liabilities at market value. The underlying face amount at
value of any open purchased options is shown in the Schedule of
Investments. This amount reflects each contract's exposure to the
underlying instrument at period end. Losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Fund is exercised, the
premium reduces the cost basis of the securities purchased by the Fund.
The Fund, as writer of an option, has no control over whether the
underlying securities may be sold (call) or purchased (put) and as a
result bears the market risk of an unfavorable change in the price of the
security underlying the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale
or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to the margin requirements, the
Fund deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the
value of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Fund. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
The Fund entered into no such transactions during the six months ended
June 30, 2003.
(7) SECURITIES LENDING:
The Fund may lend its securities, through its agent Investors Bank & Trust
Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
least equal to the market value of the securities on loan. The market
value of securities loaned is determined daily and any additional required
collateral is allocated to the Fund on the next business day. For the
duration of a loan, the Fund receives the equivalent of the interest or
dividends paid by the issuer on the securities loaned and also receives
compensation from the investment of the collateral. As with other
extensions of credit, the Fund bears the risk of delay in recovery or even
loss of rights in its securities on loan should the borrower of the
securities fail financially or default on its obligations to the Fund. In
the event of borrower default, the Fund generally has the right to use the
collateral to offset losses incurred. The Fund may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Fund also bears the risk in the event that the
interest and/or dividends received on invested collateral is not
sufficient to meet the Fund's obligations due on the loans.
At June 30, 2003, the Fund loaned securities having a market value of
$562,852. The Fund received cash collateral of $574,375 which is invested,
together with collateral of other Mellon Institutional funds, in
high-grade short-term investments.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. This Fund segregates securities
having a value at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or
the Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the
unit price established at the date the commitment was entered into.
At June 30, 2003, the Fund did not have any delayed delivery transactions.
11
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
12
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, 29 None
c/o Standish Mellon Asset President Mutual Fund
Management, Operations since
One Boston Place 2001; Shareholder
Boston, MA 02108 Representative,
1/19/71 Standish Mellon
Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon Short-Term Asset Reserve
Portfolio ("Portfolio"), at value (Note 1A) $190,036,693
Receivable for Fund shares sold 200,445
Prepaid expenses 6,076
------------
Total assets 190,243,214
LIABILITIES
Payable for Fund shares redeemed $53,496
Distributions payable 25,139
Accrued accounting, custody and transfer agent fees 3,937
Accrued trustees' fees and expenses (Note 2) 492
Accrued expenses and other liabilities 12,278
------
Total liabilities 95,342
------------
NET ASSETS $190,147,872
============
NET ASSETS CONSIST OF:
Paid-in capital $192,064,262
Accumulated net realized loss (2,739,825)
Undistributed net investment income 102,882
Net unrealized appreciation 720,553
------------
TOTAL NET ASSETS $190,147,872
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 9,722,957
============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(Net Assets/Shares outstanding) $ 19.56
============
The accompanying notes are an integral part of the financial statements.
1
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $2,014,177
Expenses allocated from Portfolio (318,330)
----------
Net investment income allocated from Portfolio 1,695,847
EXPENSES
Accounting, custody, and transfer agent fees $ 20,125
Registration fees 8,678
Legal and audit services 8,506
Trustees' fees and expenses (Note 2) 991
Insurance expense 712
Miscellaneous 6,577
--------
Total expenses 45,589
Deduct:
Reimbursement of Fund operating expenses (Note 2) (45,589)
--------
Net expenses 0
----------
Net investment income 1,695,847
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain allocated from Portfolio on:
Investment security transactions 191,989
Financial futures contracts 186,795
--------
Net realized gain 378,784
Change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investment securities (110,661)
Financial futures contracts (161,516)
--------
Change in net unrealized appreciation (depreciation) (272,177)
----------
Net realized and unrealized gain on investments 106,607
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,802,454
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,695,847 $ 4,382,028
Net realized gain 378,784 729,932
Change in net unrealized appreciation (depreciation) (272,177) (433,362)
------------ -------------
Net increase in net assets from investment operations 1,802,454 4,678,598
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (1,694,569) (4,545,684)
------------ -------------
Total distributions to shareholders (1,694,569) (4,545,684)
------------ -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 102,189,946 147,542,518
Value of shares issued to shareholders in payment of
distributions declared 1,518,426 3,926,750
Cost of shares redeemed (60,288,052) (138,921,633)
------------ -------------
Net increase in net assets from Fund share transactions 43,420,320 12,547,635
------------ -------------
TOTAL INCREASE IN NET ASSETS 43,528,205 12,680,549
NET ASSETS
At beginning of period 146,619,667 133,939,118
------------ -------------
At end of period (including undistributed net investment
income of $102,882 and $101,604) $190,147,872 $ 146,619,667
============ =============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2003 ----------------------------------------------------------
(UNAUDITED) 2002 2001(A) 2000 1999 1998
------------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.55 $ 19.55 $ 19.36 $ 19.23 $ 19.44 $ 19.48
-------- -------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income*(1) 0.18 0.58 0.95 1.15 1.08 1.13
Net realized and unrealized gain (loss) on
investments 0.02 0.03 0.21 0.13 (0.21) (0.04)
-------- -------- -------- -------- -------- --------
Total from investment operations 0.20 0.61 1.16 1.28 0.87 1.09
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.19) (0.61) (0.97) (1.15) (1.08) (1.13)
-------- -------- -------- -------- -------- --------
Total distributions to shareholders (0.19) (0.61) (0.97) (1.15) (1.08) (1.13)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 19.56 $ 19.55 $ 19.55 $ 19.36 $ 19.23 $ 19.44
======== ======== ======== ======== ======== ========
TOTAL RETURN+++ 1.01%++ 3.14% 6.14% 6.94% 4.61% 5.75%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.36%+ 0.36% 0.36% 0.36% 0.35% 0.35%
Net Investment Income (to average daily
net assets)* 1.91%+ 2.99% 4.89% 6.07% 5.60% 5.81%
Net Assets, End of Period (000's omitted) $190,148 $146,620 $133,939 $183,858 $301,965 $260,004
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed to
reimburse the Fund for a portion of its operating expenses. If this
voluntary action had not been taken, the investment income per share and
ratios would have been:
Net investment income per share(1) $ 0.18 $ 0.56 $ 0.94 $ 1.15 N/A N/A
Ratios (to average daily net assets):
Expenses 0.42%+ 0.46% 0.41% 0.38% N/A N/A
Net investment income 1.85%+ 2.89% 4.84% 6.05% N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to increase net
investment income per share by $0.001, decrease net realized and unrealized
gains and losses per share by $0.001 and increase the ratio of net
investment income to average net assets by less than 0.01%. Per share data
and ratios/supplemental data for the periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers.
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as
a Massachusetts business trust and is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment
company. Standish Mellon Short-Term Asset Reserve Fund (the "Fund") is a
separate diversified investment series of the Trust.
The objective of the Fund is to achieve a high level of current income
consistent with preserving principal and liquidity. The Fund invests all
of its investable assets in an interest of the Standish Mellon Short-Term
Asset Reserve Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust and which has the same investment objective
as the Fund. The Portfolio Trust seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in
dollar-denominated money market instruments, short-term fixed income
securities and asset-backed securities of U.S. and foreign governments,
banks and companies. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the
Portfolio (approximately 100% at June 30, 2003). The performance of the
Fund is directly affected by the performance of the Portfolio. The
financial statements of the Portfolio are included elsewhere in this
report and should be read in conjunction with the Fund's financial
statements.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Short-Term Asset Reserve Fund was changed to Standish Mellon
Short-Term Asset Reserve Fund. In addition, the name of the Standish,
Ayer & Wood Investment Trust was changed to Mellon Institutional Funds
Investment Trust. The name changes for the Fund and the Trust are
effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation
of financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Currently, the
Fund's net investment income consists of the Fund's pro rata share of the
net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with accounting principles
generally accepted in the United States of America. All realized and
unrealized gains and losses of the Portfolio are allocated pro rata among
the investors in the Portfolio.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared daily and
distributed monthly. The Fund's dividends from short-term and long-term
capital gains, if any, after reduction of capital losses will be declared
and distributed at least annually. In determining the amounts of its
dividends, the Fund will take into account its share of the income, gains
or losses, expenses, and any other tax items of the Portfolio. Dividends
from net investment income and distributions from capital gains, if any,
are reinvested in additional shares of the Fund unless a shareholder
elects to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences, which may result in distribution reclassifications, are
primarily due to differing treatments for capital loss carryforwards and
amortization and/or accretion of premiums and discounts on certain
securities.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
E. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that
may be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The Fund does not directly pay any investment advisory fees, but
indirectly bears its pro rata share of the compensation paid by the
Portfolio to Standish Mellon Asset Management Company LLC ("Standish
Mellon"), a wholly-owned subsidiary of Mellon Financial Corporation, for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. Standish Mellon voluntarily
agreed to limit the total operating expenses of the Fund and its pro rata
share of the Portfolio expenses (excluding brokerage commissions, taxes
and extraordinary expenses) to 0.36% of the Fund's average daily net
assets for the six months ended June 30, 2003. Pursuant to this agreement,
for the six months ended June 30, 2003, Standish Mellon voluntarily
reimbursed the Fund for $45,589 of its operating expenses. This agreement
is voluntary and temporary and may be discontinued or revised by Standish
Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
six months ended June 30, 2003, aggregated $102,013,486 and $60,549,536,
respectively.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- --------------------
Shares sold 5,229,042 7,582,039
Shares issued to shareholders in payment of
distributions declared 77,663 201,591
Shares redeemed (3,083,850) (7,133,587)
---------- ----------
Net increase 2,222,855 650,043
========== ==========
At June 30, 2003, two shareholders held of record approximately 38% and
11% of the total outstanding shares of the Fund. Investment activity of
these shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See coresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
EXPECTED PAR VALUE
SECURITY RATE MATURITY MATURITY VALUE (NOTE 1A)
- -------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 90.1%
ASSET BACKED -- 34.8%
American Express Master Trust 1996-1 A(a) 1.330% 09/19/2003 08/15/2004 $ 1,200,000 $ 1,200,158
American Express Master Trust 2001-1 A(a) 1.270% 10/15/2004 09/15/2005 680,000 680,283
American Express Master Trust 2002-1 A(a) 1.250% 01/14/2005 12/15/2005 2,735,000 2,735,922
Americredit Auto Receivable Trust 1999-B
A4 5.960% 08/05/2004 03/12/2006 265,993 266,173
BMW Vehicle Owner Trust 2002-A A3 3.800% 12/25/2004 05/25/2006 3,479,000 3,552,939
Capital Auto Receivables Asset Trust
2002-2 A3 3.820% 12/15/2004 07/15/2005 4,100,000 4,173,221
Capital One Master Trust 2002-3A A(a) 1.450% 04/19/2005 02/15/2008 3,980,000 3,962,242
Centex Home Equity 2001-B A2 5.350% 08/25/2003 10/25/2022 304,546 304,336
Chase Credit Card Master Trust 2002-2 A(a) 1.230% 03/17/2005 07/16/2007 3,510,000 3,511,893
Chase Funding Mortgage Loan Asset Backed
2003-3 2A2(a) 1.590% 10/27/2006 04/25/2033 1,900,000 1,897,625
Chase Manhattan Auto Owner Trust 2001-A A3 4.550% 04/15/2004 08/15/2005 1,102,176 1,116,156
Chase Manhattan Auto Owner Trust 2002-A A3 3.490% 09/15/2004 03/15/2006 750,000 760,878
Chase Manhattan Auto Owner Trust 2002-B A3 3.580% 12/15/2004 05/15/2006 1,500,000 1,531,687
Citibank Credit Card Issuance Trust
2002-A5 A5(a) 1.159% 09/19/2005 09/17/2007 4,080,000 4,081,619
Daimler Chrysler Master Owner Trust 2002-A
A(a) 1.240% 05/22/2005 05/17/2007 3,950,000 3,952,330
Discover Card Master Trust I 1995-1 A(a) 1.460% 08/20/2004 02/16/2007 3,000,000 3,005,539
Discover Card Master Trust I 2000-5 A(a) 1.360% 05/18/2005 11/15/2007 725,000 726,723
First USA Credit Card Master Trust 1997-2
A(a) 1.270% 05/21/2004 01/17/2007 2,440,000 2,440,348
Fleet Credit Card Master Trust II 2001-C A 3.860% 09/15/2004 03/15/2007 2,725,000 2,807,896
Ford Credit Auto Owner Trust 2002-A A3B(a) 1.300% 03/05/2004 01/15/2006 2,322,372 2,322,711
Gracechurch Card Funding PLC 4 A(a) 1.123% 12/15/2003 06/15/2008 2,000,000 2,000,000
Honda Auto Receivables Owner Trust 2002-1
A3 3.500% 10/15/2004 10/17/2005 3,289,455 3,329,845
MBNA Credit Card Master Trust 2001-A4 A(a) 1.310% 09/18/2004 02/15/2007 2,440,000 2,441,848
MBNA Master Credit Card Trust 1996-J A(a) 1.330% 09/19/2003 02/15/2006 160,000 160,021
MBNA Master Credit Card Trust 1999-H A(a) 1.499% 04/14/2004 09/15/2006 1,500,000 1,501,543
Nissan Auto Receivable Owner Trust 2002-A
A3 3.580% 09/15/2004 09/15/2005 3,590,000 3,635,118
Residential Asset Securities Corp.
1998-KS3 AI6(a) 1.853% 12/03/2004 10/25/2029 595,381 597,936
Residential Asset Securities Corp.
2001-KS2 AI3 5.751% 03/25/2004 03/25/2027 1,533,766 1,550,514
SLMA Student Loan Trust 2002-4 A2(a) 1.440% 03/24/2005 12/15/2009 3,985,000 3,984,276
The Money Store Home Equity Trust 1998-B
AF6 6.315% 09/15/2004 07/15/2026 490,605 500,224
Toyota Auto Receivables Owner Trust 2001-C
A3(a) 1.250% 11/16/2003 12/15/2005 375,080 375,046
Toyota Auto Receivables Owner Trust 2002-A
A3(a) 1.480% 09/15/2004 01/16/2006 800,000 799,822
USAA Auto Owner Trust 2001-1 A3 4.690% 10/15/2003 02/15/2005 332,065 334,126
-------------
Total Asset Backed (Cost $66,295,462) 66,240,998
-------------
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.1%
Mound Financing PLC 3A A1-1(a) 1.429% 02/07/2006 02/08/2008 2,500,000 2,500,000
Permanent Financing PLC 1 3A(a) 1.332% 06/10/2007 1,490,000 1,488,923
-------------
Total Collateralized Mortgage Obligations (Cost $3,990,000) 3,988,923
-------------
CORPORATE -- 30.9%
BANKING -- 8.9%
CS First Boston (USA), Inc. Notes MTN(a) 1.368% 12/19/2003 06/19/2006 2,000,000 1,998,532
First Union Corp.(a) 1.410% 03/31/2005 1,550,000 1,553,875
FleetBoston Financial Corp. Senior
Notes(a) 1.560% 12/03/2004 3,140,000 3,138,222
National City Bank of Indiana(a) 1.199% 09/16/2005 440,000 439,802
Northern Trust Co. 6.650% 11/09/2004 580,000 620,743
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
EXPECTED PAR VALUE
SECURITY RATE MATURITY MATURITY VALUE (NOTE 1A)
- -------------------------------------------------------------------------------------------------------
BANKING (CONTINUED)
US Bancorp Notes MTN 2.625% 03/15/2006 $ 500,000 $ 501,784
US Bancorp Senior Notes 6.875% 12/01/2004 1,500,000 1,615,814
US Bank NA Senior Notes(a) 1.319% 06/14/2005 570,000 569,995
Union Planters Corp. Sub. Notes NCL 6.250% 11/01/2003 2,000,000 2,031,813
Wachovia Corp. Senior Notes(a) 1.709% 08/19/2004 1,680,000 1,680,011
Wells Fargo Financial Senior Notes(a) 1.280% 09/12/2005 2,700,000 2,700,303
-------------
16,850,894
-------------
CONSUMER CYCLICAL -- 2.6%
Daimler Chrysler NA Holding(a) 1.509% 08/21/2003 700,000 700,147
Diageo Capital PLC 6.125% 08/15/2005 2,000,000 2,186,486
Diageo PLC 7.125% 09/15/2004 830,000 885,253
Newell Rubbermaid, Inc. Senior Notes MTN 5.700% 09/22/2003 1,180,000 1,188,925
-------------
4,960,811
-------------
CONSUMER NONCYCLICAL -- 0.3%
Coca-Cola Enterprises 6.625% 08/01/2004 565,000 596,006
-------------
FINANCIAL -- 16.7%
Allstate Corp. Senior Notes 7.875% 05/01/2005 1,500,000 1,669,850
Associates Corp. NA Senior Notes 6.200% 05/16/2005 2,350,000 2,548,044
Associates Corp. Senior Notes 6.000% 07/15/2005 2,700,000 2,935,551
Bear Stearns Co., Inc. Notes MTN(a) 1.500% 05/22/2006 2,000,000 1,995,851
Caterpillar Financial Service Corp. 6.875% 08/01/2004 820,000 865,822
Caterpillar Financial Service Corp.(a) 1.560% 11/04/2004 3,110,000 3,111,712
General Electric Capital Corp. 7.500% 05/15/2005 3,000,000 3,333,431
General Electric Capital Corp. MTN(a) 1.164% 12/15/2004 900,000 899,099
General Electric Capital Corp. MTN(a) 1.244% 03/15/2005 625,000 623,663
Goldman Sachs Group, Inc. 7.625% 08/17/2005 2,420,000 2,718,065
John Deere Capital Corp. Senior Notes
MTN(a) 1.268% 09/17/2003 750,000 749,771
Merrill Lynch & Co. Notes MTN(a) 1.500% 04/28/2005 2,700,000 2,701,841
Morgan Stanley 6.100% 04/15/2006 1,400,000 1,545,788
Morgan Stanley Dean Witter 7.750% 06/15/2005 2,000,000 2,229,242
Morgan Stanley Dean Witter Senior Notes(a) 1.700% 01/31/2006 620,000 620,102
SLM Corp. Notes MTN(a) 1.520% 01/13/2006 700,000 700,500
SLM Corp. Notes MTN(a) 1.520% 01/25/2006 2,500,000 2,501,788
-------------
31,750,120
-------------
PUBLIC UTILITY -- 2.4%
Alabama Power Co. Senior Notes 4.875% 09/01/2004 560,000 581,102
Carolina Power & Light 5.875% 01/15/2004 1,750,000 1,785,533
Consolidated Natural Gas Notes 7.250% 10/01/2004 2,000,000 2,119,528
-------------
4,486,163
-------------
Total Corporate (Cost $58,014,389) 58,643,994
-------------
YANKEE BONDS -- 0.5%
Quebec Province MTN(a) 1.341% 07/02/2004 1,000,000 1,000,000
-------------
Total Yankee Bonds (Cost $1,000,243) 1,000,000
-------------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
EXPECTED PAR VALUE
SECURITY RATE MATURITY MATURITY VALUE/SHARES (NOTE 1A)
- --------------------------------------------------------------------------------------------------------
PUBLIC UTILITY (CONTINUED)
U.S. GOVERNMENT AGENCY -- 0.0%
PASS THRU SECURITIES -- 0.0%
FHLMC(a) 7.105% 02/01/2023 $ 22,380 $ 23,289
-------------
Total U.S. Government Agency (Cost $23,110) 23,289
-------------
U.S. TREASURY OBLIGATIONS -- 21.8%
TREASURY NOTES -- 21.8%
U.S. Treasury Note 1.625% 04/30/2005 3,800,000 3,824,936
U.S. Treasury Note 1.750% 12/31/2004 7,035,000 7,096,008
U.S. Treasury Note 2.000% 05/15/2006 4,250,000 4,295,156
U.S. Treasury Note 2.875% 06/30/2004 20,200,000 20,567,701
U.S. Treasury Note 3.375% 04/30/2004 5,500,000 5,608,064
-------------
41,391,865
-------------
Total U.S. Treasury Obligations (Cost $41,226,799) 41,391,865
-------------
TOTAL BONDS AND NOTES (COST $170,550,003) 171,289,069
-------------
RATE
------
SHORT-TERM INVESTMENTS -- 25.0%
CASH EQUIVALENTS -- 15.5%
Bank of Montreal Eurodollar Time Deposit(b) 1.150% 07/09/2003 3,664,000 3,664,000
Credit Agricole Indosuez Eurodollar Time
Deposit(b) 1.050% 08/26/2003 4,021,260 4,021,260
Den Danske Bank Eurodollar Time Deposit(b) 1.040% 07/24/2003 3,217,008 3,217,008
Goldman Sachs Financial Square Funds - Prime
Obligations Fund(b) 4,021,260 4,021,260
Royal Bank of Canada Eurodollar Time Deposit(b) 1.300% 07/01/2003 7,238,267 7,238,267
Royal Bank of Scotland Eurodollar Time Deposit(b) 1.125% 07/01/2003 7,238,267 7,238,267
-------------
29,400,062
-------------
COMMERCIAL PAPER -- 9.4%
CBA Finance, Inc.=/= 1.320% 07/01/2003 5,000,000 5,000,000
Thunder Bay Fundng, Inc.=/= 1.320% 07/01/2003 8,000,000 8,000,000
UBS Finance, Inc.=/= 1.310% 07/01/2003 4,889,000 4,889,000
-------------
17,889,000
-------------
U.S. GOVERNMENT -- 0.1%
FNMA Discount Note=/= 1.014% 04/02/2004 200,000 198,467
-------------
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
EXPECTED PAR
SECURITY RATE MATURITY MATURITY VALUE
- ---------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 0.0%
Tri-party repurchase agreement dated 06/30/03 with Salomon Smith
Barney, Inc. and Investors Bank and Trust Company, due 07/01/03, with
a maturity value of $818 and an effective yield of 0.75%,
collateralized by a U.S. Government Obligation with a rate of 8.75%, a
maturity date of 08/15/20 and an aggregated market value of $919. $ 818
-------------
TOTAL SHORT-TERM INVESTMENTS (COST $47,488,363) 47,488,347
-------------
TOTAL INVESTMENTS -- 115.1% (COST
$218,038,366) $ 218,777,416
OTHER ASSETS, LESS LIABILITIES --
(15.1%) (28,740,218)
-------------
NET ASSETS -- 100.0% $ 190,037,198
=============
NOTES TO SCHEDULE OF INVESTMENTS:
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
MTN - Medium Term Notes
NCL - Non-callable
SLMA - Student Loan Marketing Association
(a) Variable Rate Security; rate indicated is as of 6/30/03.
(b) Represents investments of security lending collateral (Note 6).
=/= Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (including securities on
loan of $28,377,464 (Note 6)) (identified cost,
$218,038,366) $218,777,416
Cash 1,606
Receivable for investments sold 46
Interest receivable 678,867
Receivable for variation margin on open financial futures
contracts (Note 5) 8,337
Prepaid expenses 6,514
------------
Total assets 219,472,786
LIABILITIES
Payable upon return of securities loaned (Note 6) $29,400,062
Accrued accounting and custody fees 14,601
Accrued trustees' fees and expenses (Note 2) 4,999
Accrued expenses and other liabilities 15,926
----------
Total liabilities 29,435,588
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTERESTS) $190,037,198
============
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of
$5,430 (Note 6)) $2,014,183
----------
EXPENSES
Investment advisory fee (Note 2) $222,213
Accounting and custody fees 66,853
Legal and audit services 17,825
Trustees' fees and expenses (Note 2) 9,739
Insurance expense 7,632
Amortization of organizational expenses (Note 1E) 10
--------
Total expenses 324,272
Deduct:
Waiver of investment advisory fee (Note 2) (5,942)
--------
Net expenses 318,330
----------
Net investment income 1,695,853
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain
Investment security transactions 191,989
Financial futures contracts 186,795
--------
Net realized gain 378,784
Change in unrealized appreciation (depreciation)
Investment securities (110,661)
Financial futures contracts (161,516)
--------
Change in net unrealized appreciation (depreciation) (272,177)
----------
Net realized and unrealized gain 106,607
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,802,460
==========
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2003 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2002
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 1,695,853 $ 4,382,044
Net realized gain 378,784 729,933
Change in net unrealized appreciation (depreciation) (272,177) (433,364)
------------ -------------
Net increase in net assets from investment operations 1,802,460 4,678,613
------------ -------------
CAPITAL TRANSACTIONS
Contributions 102,013,486 147,731,049
Withdrawals (60,549,536) (139,693,946)
------------ -------------
Net increase in net assets from capital transactions 41,463,950 8,037,103
------------ -------------
TOTAL INCREASE IN NET ASSETS 43,266,410 12,715,716
NET ASSETS
At beginning of period 146,770,788 134,055,072
------------ -------------
At end of period $190,037,198 $ 146,770,788
============ =============
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
SIX MONTHS JANUARY 2, 1998
ENDED (COMMENCEMENT OF
JUNE 30, YEAR ENDED DECEMBER 31, OPERATIONS)
2003 ------------------------------------------ TO DECEMBER 31,
(UNAUDITED) 2002 2001(A) 2000 1999 1998
----------- --------- --------- --------- --------- ----------------
TOTAL RETURN+++ 1.01%++ 3.14% 6.15% 6.96% 4.64% 5.79%++
RATIOS:
Expenses (to average daily net
assets)* 0.36%+ 0.36% 0.35% 0.34% 0.32% 0.31%+
Net Investment Income (to average
daily net assets)* 1.91%+ 2.99% 4.89% 6.07% 5.62% 5.83%+
Portfolio Turnover 57%++ 160% 174% 70% 86% 113%++
Net Assets, End of Period (000's
omitted) $190,037 $146,771 $134,055 $180,548 $302,244 $261,738
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed
the Portfolio for a portion of its operating expenses. If this voluntary
action had not been taken, the ratios would have been:
Ratios (to average daily net
assets):
Expenses 0.37%+ 0.38% N/A N/A N/A N/A
Net investment income 1.90%+ 2.97% N/A N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
begun amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to increase the ratio of the net investment income to
average net assets by less than 0.01%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York
on January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Short-Term Asset Reserve Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
At June 30, 2003 there was one fund, Standish Mellon Short-Term Asset
Reserve Fund (the "Fund") invested in the Portfolio. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio. The Fund's proportionate
interest at June 30, 2003 was approximately 100%.
The objective of the Portfolio is to achieve a high level of current
income consistent with preserving principal and liquidity by investing,
under normal circumstances, at least 80% of net assets in
dollar-denominated money market instruments, short-term fixed income
securities and asset-backed securities of U.S. and foreign governments,
banks and companies.
On June 21, 2003, by vote of the Board of Trustees, the name of the
Standish Short-Term Asset Reserve Portfolio was changed to Standish Mellon
Short-Term Asset Reserve Portfolio. In addition, the name of the Standish,
Ayer & Wood Master Portfolio was changed to Mellon Institutional Funds
Master Portfolio. The name changes for the Portfolio and the Master
Portfolio are effective July 1, 2003.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity
and will then be valued at amortized value based upon the value on such
date unless the Trustees determine during such sixty-day period that
amortized value does not represent fair value.
B. REPURCHASE AGREEMENTS
It is the policy of the Portfolio to require the custodian bank to take
possession of, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral in support of repurchase agreement
investments. Collateral for certain tri-party repurchase agreements is
held at the custodian in a segregated account for the benefit of the
Portfolio and the counterparty. Additionally, procedures have been
established by the Portfolio to monitor on a daily basis, the market value
and accrued interest of the repurchase agreement's underlying investments
to ensure the existence of a proper level of collateral.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis.
D. INCOME TAXES
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any
taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since at least one of
the Portfolio's investors is a regulated investment company that invests
all or substantially all of its assets in the Portfolio, the Portfolio
normally must satisfy the source of income and diversification
requirements applicable to regulated investment companies (under the
Internal Revenue Code) in order for its investors to satisfy them. The
Portfolio allocates at least annually among its investors each investor's
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss deduction or
credit.
E. DEFERRED ORGANIZATIONAL EXPENSES
Costs incurred by the Portfolio in connection with its organization and
initial registration are being amortized on a straight-line basis through
January 2003.
F. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve
future claims that may be made against the Portfolio that have not yet
occurred. However, based on experience, the Portfolio expects the risks of
loss to be remote.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon") for overall investment advisory and
administrative services is paid monthly at the annual rate of 0.25% of the
Portfolio's average daily net assets. Standish Mellon voluntarily agreed
to limit the Portfolio's total annual operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.36% of the
Portfolio's average daily net assets for the six months ended June 30,
2003. Pursuant to this agreement, for the six months ended June 30, 2003,
Standish Mellon voluntarily did not impose $5,942 of its investment
advisory fees. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Portfolio for serving as
an officer or Trustee of the Trust. The Trust pays each Trustee who is not
a director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Portfolio Trust pays the legal
fees for the independent counsel of the Trustees.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the six months ended June 30, 2003 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $63,310,317 $48,646,515
=========== ===========
Investments (non-U.S.Government Securities) $67,123,654 $41,545,472
=========== ===========
(4) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2003, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $218,034,914
===========
Gross unrealized appreciation 893,833
Gross unrealized depreciation (151,331)
-----------
Net unrealized appreciation $ 742,502
===========
(5) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in Parts A and B of the Portfolio Trust's registration statement.
The Portfolio trades the following financial instruments with off-balance
sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at
a specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Portfolio's
exposure to the underlying instrument, or hedge other Portfolio
investments. Options, both held and written by the Portfolio, are
reflected in the accompanying Statement of Assets and Liabilities at
market value. The underlying face amount at value of any open purchased
options is shown in the Schedule of Investments. This amount reflects each
contract's exposure to the underlying instrument at period end. Losses may
arise from changes in the value of the underlying instruments if there is
an illiquid secondary market for the contract or if the counterparty does
not perform under the contract's terms.
Premiums received from writing options which expire are treated as
realized gains. Premiums received from writing options which are exercised
or are closed are added to or offset against the proceeds or amount paid
on the transaction to determine the realized gain or loss. Realized gains
and losses on purchased options are included in realized gains and losses
on investment securities, except purchased options on foreign currency
which are included in realized gains and losses on foreign currency
transactions. If a put option written by the Portfolio is exercised, the
premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put)
and as a result bears the market risk of an unfavorable change in the
price of the security underlying the written option.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued
using prices supplied by the dealers.
The Portfolio entered into no such transactions during the six months
ended June 30, 2003.
INTEREST RATE FLOORS
Interest rate floors purchased by the Portfolio entitle the Portfolio to
receive payments on a notional principal amount from the party selling
such floor to the extent that a specified index falls below a
predetermined interest rate amount. Credit and market risk exist with
respect to these instruments. If forecasts of interest rates and other
market factors are incorrect, investment performance will diminish
compared to what performance would have been if these investment
techniques were not used. Even if the forecasts are correct, there are
risks that the positions may correlate imperfectly with the asset or
liability being hedged, a liquid secondary market may not always exist, or
a counterparty to a transaction may not perform. The Portfolio expects to
enter these transactions primarily for hedging purposes including, but not
limited to, preserving a return or spread on a particular investment or
portion of its portfolio, protecting against currency fluctuations, as a
duration management technique or protecting against an increase in the
price of securities the Portfolio anticipates purchasing at a later date.
Interest rate floors are "marked-to-market" daily based on quotations from
market makers and the change, if any, is recorded as unrealized
appreciation or depreciation in the Statement of Operations. Periodic
payments of interest, if any, are reported as additions to interest income
in the Statement of Operations. Realized gains or losses from these
agreements are disclosed in the Statement of Operations.
At June 30, 2003, the Portfolio did not hold any open interest rate floor
agreements.
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at
a fixed price on a future date. Pursuant to margin requirements the
Portfolio deposits either cash or securities in an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Portfolio each day, depending on the daily fluctuations in
the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the Portfolio. There
are several risks in connection with the use of futures contracts as a
hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instruments or indices,
which may not correlate with changes in the value of hedged investments.
Buying futures tends to increase the Portfolio's exposure to the
underlying instrument, while selling futures tends to decrease the
Portfolio's exposure to the underlying instrument or hedge other
investments. In addition, there is the risk that the Portfolio may not be
able to enter into a closing transaction because of an illiquid secondary
market. Losses may arise if there is an illiquid secondary market or if
the counterparty does not perform under the contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in securities prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at the
quoted daily settlement prices established by the exchange on which they
trade.
At June 30, 2003, the Portfolio held the following financials futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN (LOSS)
---------------------------------------------------------------------------------------------
Euro Bond (22 Contracts) Long 3/15/2004 $ 5,432,075 $ (6,985)
Euro Bond (49 Contracts) Long 9/15/2003 12,118,312 13,142
Euro Bond (46 Contracts) Long 12/15/2003 11,370,625 (23,231)
--------
$(17,074)
========
At June 30, 2003, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open futures contracts.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) SECURITIES LENDING:
The Portfolio may lend its securities, through its agent Investors Bank &
Trust Co., to financial institutions which Standish Mellon deems to be
creditworthy. The loans are collateralized at all times with cash or
securities with a market value at least equal to the market value of the
securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Portfolio
on the next business day. For the duration of a loan, the Portfolio
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment
of the collateral. As with other extensions of credit, the Portfolio bears
the risk of delay in recovery or even loss of rights in its securities on
loan should the borrower of the securities fail financially or default on
its obligations to the Portfolio. In the event of borrower default, the
Portfolio generally has the right to use the collateral to offset losses
incurred. The Portfolio may incur a loss in the event it was delayed or
prevented from exercising its rights to dispose of the collateral. The
Portfolio also bears the risk in the event that the interest and/or
dividends received on invested collateral is not sufficient to meet the
Portfolio's obligations due on the loans.
At June 30, 2003, the Portfolio loaned securities having a market value of
$28,377,464. The Portfolio received cash collateral of $29,400,062 which
is invested, together with collateral of other Mellon Institutional funds,
in high-grade short-term investments.
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase securities on a when-issued, delayed delivery
or forward commitment basis. Payment and delivery may take place a month
or more after the date of the transactions. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. Income on the
securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least
equal to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the
forward sale of other securities it owns. Income on the securities will
not be earned until settlement date. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the
value of the security to be purchased declines prior to the settlement
date, which risk is in addition to the risk of the decline in the value of
the Portfolio's other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities, according
to the procedures described under "Investment security valuations" above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is "marked-to-
market" daily and the change in market value is recorded by the Portfolio
as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss from the sale of the securities based
upon the unit price established at the date the commitment was entered
into.
At June 30, 2003, the Portfolio did not have any delayed delivery
transactions.
20
TRUSTEES AND OFFICERS (UNAUDITED)
The following table lists the Trust's trustees and officers; their address and
date of birth; their position with the Trust; the length of time holding that
position with the Trust; their principal occupation(s) during the past five
years; the number of portfolios in the fund complex they oversee; and other
directorships they hold in companies subject to registration or reporting
requirements of the Securities Exchange Act of 1934 (generally called "public
companies") or in registered investment companies as of July 1, 2003. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing Mellon Institutional Funds at P.O. Box 51407, Boston, MA 02205-1407 or
calling toll free 1-800-221-4795. The same persons serve as trustees and
officers of the Portfolio Trust in the same capacities.
INDEPENDENT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE
- ------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the 29 Port Financial
c/o Decision 11/3/1986 Board and Chief Corp.
Resources, Inc. Executive Officer,
1100 Winter Street Decision Resources,
Waltham, MA 02154 Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex 29 None
c/o Essex Street 11/3/1986 Street Associates
Associates (family investment
400 Essex Street trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph 29 None
c/o Harvard University 9/13/1986 Maier, Professor of
Cambridge, MA 02138 Political Economy,
8/5/44 Harvard University
John H. Hewitt Trustee Trustee since Trustee, The Peabody 29 None
P.O. Box 233 11/3/1986 Foundation; Trustee,
New London, NH 03257 Mertens House, Inc.
4/11/35
Richard S. Wood Trustee Trustee since Director and Vice 29 None
c/o Standish Mellon Asset 4/26/1989 Chairman, President
Management, and Chief Investment
One Boston Place, Officer, Standish
Boston, MA 02108 Mellon Asset
5/20/54 Management
21
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME, TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------
Patrick J. Sheppard President and Since 2003 Senior Vice 29 None
c/o Standish Mellon Asset Chief Executive President and Chief
Management Company LLC, Officer Operating Officer,
One Boston Place Mellon Institutional
Boston, MA 02108 Asset Management;
7/24/65 formerly Vice
President and Chief
Financial Officer,
Mellon Institutional
Asset Management
Beverly E. Banfield Vice President and Vice President since Director and 29 None
c/o Standish Mellon Asset Secretary 1996; Secretary Secretary;
Management, since 2002 Compliance Officer,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
7/6/56
Steven M. Anderson Vice President and Vice President since Vice President and 29 None
c/o Standish Mellon Asset Treasurer 1999; Treasurer Mutual Funds
Management, since 2002 Controller, Standish
One Boston Place Mellon Asset
Boston, MA 02108 Management
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
c/o Standish Mellon Asset President Manager, Mutual
Management, Funds Operations,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
8/19/51
Lisa Kane Assistant Vice Since 1999 Vice President and 29 None
c/o Standish Mellon Asset President Client Service
Management, Professional,
One Boston Place Standish Mellon
Boston, MA 02108 Asset Management
6/25/70
Assistant Vice Since 2001 Assistant Manager, 29 None
Cara E. Hultgren, President Mutual Fund
c/o Standish Mellon Asset Operations since
Management, 2001; Shareholder
One Boston Place Representative,
Boston, MA 02108 Standish Mellon
1/19/71 Asset Management
Scott Simonds, Assistant Vice Since 2002 Compliance Analyst, 29 None
c/o Standish Mellon Asset President Boston Partners;
Management, Fund Accountant,
One Boston Place Mellon Financial
Boston, MA 02108 Corp.
8/17/60
22
Item 2. Code of Ethics.
Not applicable to this filing.
Item 3. Audit Committee Financial Expert.
Not applicable to this filing.
Item 4. Principal Accountant Fees and Services.
Not applicable to this filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable to this filing.
Item 6. [Reserved]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to this filing.
Item 8. [Reserved]
Item 9. Controls and Procedures.
(a) The Registrant's Principal Executive Officer and Principal Financial
Officer concluded that the Registrant's disclosure controls and
procedures are effective based on their evaluation of the Registrant's
disclosure controls and procedures as of a date within 90 days prior to
the filing date of this report (the "Evaluation Date").
(b) There were no significant changes in the Registrant's internal
controls or in other factors that could significantly affect internal
controls subsequent to the Evaluation Date, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Item 10. Exhibits.
(a)(1) Code of Ethics Described in Item 2: Not applicable to this
filing.
(a)(2) Certifications of the Principal Executive Officer and Principal
Financial Officer of the Registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940 (17 CFR 270.30a-2(a) are attached
hereto as Exhibit 99CERT.302
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 are attached hereto as Exhibit 99CERT.906.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Standish, Ayer & Wood Investment Trust
By (Signature and Title): \s\Denise B. Kneeland
By: Denise B. Kneeland
Title: Assistant Vice President
Date 9/3/03
----------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities, and on the
dates indicated.
By (Signature and Title): \s\Patrick J. Sheppard
By: Patrick J. Sheppard
Title: President and Chief Executive Officer
Date 9/3/03
----------
By (Signature and Title): \s\Steven M. Anderson
By: Steven M. Anderson
Title: Vice President and Treasurer
Date 9/3/03
------