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 811-07603
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Mellon Institutional Funds Master Portfolio _____
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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)
Barbara A. McCann
Vice President and Secretary
One Boston Place, Boston, MA 02108
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(Name and address of agent for service)
with a copy to:
Leonard Pierce
Hale & Dorr
Boston, MA
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Registrant's telephone number, including area code: 800-221-4795
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Date of fiscal year end: 09/30/2004
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Date of reporting period: 03/31/2004
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Item 1. Reports to Stockholders.
(Semi-annual Report for the period 10/1/03 through 03/31/04 is filed
herewith)
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Report
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For the Period Ended
March 31, 2004 (Unaudited)
THE BOSTON COMPANY INTERNATIONAL
CORE EQUITY FUND
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MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
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ASSETS
Investment in The Boston Company International Core Equity Portfolio
(Portfolio), at value (Note 1A) $107,170,893
Receivable for Fund shares sold 290,203
Prepaid expenses 15,669
------------
Total assets 107,476,765
LIABILITIES
Payable for Fund shares redeemed $16,229,344
Accrued accounting, custody, and transfer agent fees (Note 2) 4,976
Accrued trustees' fees and expenses (Note 2) 1,000
Accrued expense and other liabilities 7,569
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Total liabilities 16,242,889
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NET ASSETS $ 91,233,876
============
NET ASSETS CONSIST OF:
Paid-in capital $ 73,034,572
Accumulated net realized loss (2,061,731)
Undistributed net investment income 55,148
Net unrealized appreciation 20,205,887
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TOTAL NET ASSETS $ 91,233,876
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SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,430,277
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 26.60
============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
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INVESTMENT INCOME (NOTE 1C)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $100,368) $ 830,913
Interest income allocated from Portfolio (including securities lending income of $19,198) (Note 7) 24,039
Expenses allocated from Portfolio (478,395)
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Net investment income allocated from Portfolio 376,557
EXPENSES
Accounting, custody, and transfer agent fees (Note 2) $ 337
Legal and audit services 15,205
Registration fees 10,312
Trustees' fees and expenses (Note 2) 889
Insurance expense 547
Miscellaneous 14,716
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Total expenses 42,006
-----------
Net investment income 334,551
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REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions and financial futures contracts 6,552,510
Foreign currency transactions and forward foreign currency exchange contracts 175,804
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Net realized gain 6,728,314
Change in unrealized appreciation (depreciation) allocated from portfolio on investments
allocated from Portfolio 7,541,360
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Net realized and unrealized gain on investments 14,269,674
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NET INCREASE IN NET ASSETS FROM OPERATIONS $14,604,225
===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
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SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
----------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 334,551 $ 747,952
Net realized gains (losses) 6,728,314 (763,919)
Change in net unrealized appreciation 7,577,773 16,226,851
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Net increase (decrease) in net assets from investment operations 14,306,087 16,210,884
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DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (887,701) (847,624)
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Total distributions to shareholders (887,701) (847,624)
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FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 14,753,283 18,786,883
Value of shares issued to shareholders in payment of distributions declared 580,413 513,688
Cost of shares redeemed (15,245,505) (8,023,768)
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Net increase (decrease) in net assets from Fund share tranactions 88,191 11,276,803
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Total Increase (Decrease) in Net Assets 13,506,577 26,640,063
NET ASSETS
At beginning of period 77,727,299 51,087,236
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At end of period (including undistributed net investment income
of $55,148 and $608,298) $91,233,876 $77,727,299
============ ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
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PERIOD
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, ------------------------------------------------------------
2004 2003 2002 2001 2000 1999
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NET ASSET VALUE, BEGINNING OF PERIOD $ 21.62 $ 17.10 $ 18.53 $ 23.45 $ 23.77 $ 20.17
-------- -------- -------- --------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income*(1) 0.09 0.23 0.25 0.24 0.24 0.27
Net realized and unrealized
gains (loss) on investments 5.13 4.55 (1.48) (3.63) 1.42 3.98
-------- -------- -------- --------- -------- --------
Total from investment operations 5.22 4.78 (1.23) (3.39) 1.66 4.25
-------- -------- -------- --------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.24) (0.26) (0.20) (0.20) (0.43) (0.33)
From net realized gains on investments -- -- -- (1.33) (1.55) (0.32)
-------- -------- -------- --------- -------- --------
Total distributions to shareholders (0.24) (0.26) (0.20) (1.53) (1.98) (0.65)
-------- -------- -------- --------- -------- --------
Net Asset Value, End of Year $ 26.60 $ 21.62 $ 17.10 $ 18.53 $ 23.45 $ 23.77
======== ======== ========= ========= ======== ========
TOTAL RETURN(+) 24.25% 28.23% (6.77)% (15.40)% 7.07% 21.26%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.12%(++) 1.16% 1.00% 1.00% 1.00% 1.00%
Net Investment Income
(to average daily net assets)* 0.72%(++) 1.21% 1.29% 1.13% 0.98% 1.20%
Portfolio Turnover(2) 17% 87% 74% 112% 195%
Net Assets, End of Period (000's omitted) $ 91,234 $ 77,727 $ 51,087 $ 48,227 $ 39,230 $ 39,018
- ----------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose 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) N/A $0.19 $0.18 $0.16 $0.15 $0.18
Ratios (to average daily net assets):
Expenses N/A 1.34% 1.33% 1.37% 1.36% 1.41%
Net investment income N/A 1.03% 0.96% 0.76% 0.62% 0.79%
(1) Calculated based on average shares outstanding.
(2) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 27, 2003. The portfolio turnover for
the period since the Fund transferred substantially all of its investable
assets to the Portfolio is shown in the Portfolio's financial statements
which are included elsewhere in this report.
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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(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. The
Boston Company International Core Equity 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 Boston
Company International Core Equity Portfolio (the "Portfolio"), a subtrust
of Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"),
which is organized as a New York trust, and has the same investment
objective as the Fund. The Portfolio seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in equity
securities of companies located in the foreign countries represented in the
MSCI Europe, Australia, Far East Index and Canada. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (approximately 98.9% at March 31, 2004).
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 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. INVESTMENT RISK
The Fund's investment in the Portfolio involves certain additional risks
due to the fact that the Portfolio may invest in foreign securities that
were 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 have been 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.
D. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on 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. 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, passive foreign
investment companies (PFICs), post-October loss deferrals, wash sales and
capital loss carryovers.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY 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 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 AND OTHER TRANSACTIONS WITH AFFILIATES:
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 for
such services. See Note 2 of the Portfolio's Notes to Financial Statements
which are included elsewhere in this report. The Boston Company Asset
Management, LLC ("TBCAM") 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 1.25% of the
Fund's average daily net assets for the for the period ended March 31,
2004. Pursuant to this agreement, for this period ended March 31, 2004,
TBCAM was not required to reimburse the Fund as the Fund operated below the
agreed expense limit. This agreement is temporary and voluntary and may be
discontinued or revised by TBCAM at any time.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Pursuant to this agreement the Fund was
charged $121 during the period ended March 31, 2004.
The Fund imposes 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. For the period ended March 31, 2004, 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 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) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2004, aggregated $14,753,283 and $15,543,643.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY 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
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
Shares sold 570,483 1,283,041
Shares issued to shareholders in payment
of distributions declared 24,615 15,660
Shares redeemed (759,395) (914,343)
-------- ---------
Net increase (164,297) 384,358
======== =========
At March 31, 2004, two shareholders of record held approximately 24% and
20% of the total outstanding shares of the Fund, respectively. Investment
activities 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.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
EQUITIES--79.8%
AUSTRALIA--4.1%
Boral Ltd. 202,300 $ 979,998
Caltex Australia Ltd. 49,000 269,294
Insurance Australia Group Ltd. 264,000 961,191
Oil Search Ltd. 342,400 301,817
QBE Insurance Group Ltd. 69,200 593,007
West Australian Newspaper Holdings Ltd. (a) 82,800 403,010
Westpac Banking Corp. 43,800 589,201
WMC Resources Ltd. 93,900 368,510
----------
4,466,028
----------
AUSTRIA--1.3%
Boehler-Uddeholm AG (a) 6,200 505,756
OMV AG (a) 4,900 929,139
----------
1,434,895
----------
BELGIUM--0.4%
Delhaize Group (a) 8,400 389,928
----------
DENMARK--0.8%
AP Moller--Maersk A/S (a) 66 471,631
TDC A/S (a) 11,300 413,091
----------
884,722
----------
FINLAND--1.9%
Fortum Oyj (a) 36,000 368,799
Kesko Oyj, Class B (a) 19,100 336,305
Nokia Oyj (a) 53,400 1,096,734
Rautaruukki Oyj (a) 30,600 246,412
----------
2,048,250
----------
FRANCE--7.7%
Aventis SA (a) 5,200 400,493
Banca Intesa Spa 240,120 795,325
Banque National De Paris (a) 13,300 814,393
Bouygues SA (a) 9,900 341,316
Essilor International SA 7,300 444,840
Groupe Danone (a) 2,400 394,213
Guyenne et Gascogne SA (a) 2,600 300,770
Imerys SA 1,100 262,353
Renault SA 10,200 707,714
Sagem SA 4,566 508,801
Societe Generale, Class A (a) 15,000 1,283,630
Total SA 7,455 1,371,394
Vinci SA 7,400 711,618
----------
8,336,860
----------
GERMANY--5.5%
Continental AG (a) 25,600 1,009,311
Deutsche Bank AG Registered Shares 3,400 283,211
Deutsche Telekom AG 34,600 622,856
E.ON AG (a) 13,800 910,768
Hannover Rueckversicherung AG (a) 13,000 435,708
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
GERMANY (CONTINUED)
Merck KGaA (a) 7,200 $ 336,352
Puma AG Rudolf Dassler Sport (a) 2,700 596,085
SAP AG (a) 3,500 554,424
Siemens AG 7,100 525,146
ThyssenKrupp AG 34,900 649,741
-----------
5,923,602
-----------
GREECE--0.9%
Alpha Bank AE 30,500 941,120
-----------
HONG KONG--1.0%
China Unicom Ltd. 454,000 410,757
DAH Sing Financial 32,400 228,690
Esprit Holdings Ltd. 106,000 444,830
-----------
1,084,277
-----------
IRELAND--1.2%
Anglo Irish Bank Corp. PLC 47,600 761,928
CRH PLC 25,800 526,480
-----------
1,288,408
-----------
ITALY--1.4%
Tim Spa 83,800 474,642
Mediaset Spa 31,900 354,685
Ente Nazionale Idrocarburi Spa 34,000 684,898
-----------
1,514,225
-----------
JAPAN--17.9%
Asahi Breweries Ltd. 39,000 451,410
Bank of Yokohama Ltd. (a)* 48,000 281,703
Casino Computer Co., Ltd. (a) 50,000 593,594
Citizen Electronics Co., Ltd. 15,600 964,902
Daito Trust Construction Co., Ltd. 17,000 661,872
Eisai Co. Ltd. (a) 19,200 519,217
Fuji Soft ABC, Inc. 10,200 435,270
Hinos Motors Ltd. 60,000 432,106
Ito-Yokado Co. Ltd. 7,000 318,182
KDDI Corp. 129 726,151
Keyence Corp. 1,200 291,830
Kirin Beverage Corp. 13,400 296,835
Kobe Steel Ltd. 392,000 597,699
Kyushu Electric Power Co., Inc. (a) 12,900 237,267
Mitsubishi Corp. 51,000 601,554
Mitsubishi Tokyo Financial Group, Inc. 88 869,198
Nissan Motor Co. Ltd. 93,700 1,046,802
Nisshin Seifun Group, Inc. (a) 42,000 410,012
NOK Corp. 12,700 467,664
Nomura Holdings, Inc. 20,000 363,445
NSK Ltd. (a) 62,000 305,006
NTT Corp. 96 543,153
Ono Pharmaceutical Co. Ltd. 11,100 504,545
Ricoh Co. Ltd. 24,000 492,520
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
Sanyo Shinpan Finance Co., Ltd. 6,100 $ 327,580
Seiko Epson Corp. 12,400 499,425
Seino Transportation Co., Ltd. 68,000 697,085
Sharp Corp. (a) 30,000 534,810
Sumitomo Electric Industries Ltd. (a) 75,000 681,099
Sumitomo Mitsui Financial Group, Inc. (a) 124 915,612
Sumitomo Rubber Industries, Inc. 69,000 517,434
Takeda Chemical Industries Ltd. (a) 10,800 480,552
TDK Corp. 12,800 975,834
Tokyo Gas Corp., Ltd. (a) 158,000 596,970
Toyota Motor Corp. 18,600 692,058
-----------
19,330,396
-----------
NETHERLANDS--3.6%
ABN Amro Holding NV 41,400 925,211
ASM Lithography Holding NV* 17,900 328,620
Hunter Douglas NV 5,900 297,924
Ing Groep NV 38,900 856,409
Koninklijke Philips Electronics NV (a) 15,000 434,587
Royal KPN NV 58,200 455,052
Wereldhave NV 7,600 619,024
-----------
3,916,827
-----------
NEW ZEALAND--0.4%
Fletcher Building Ltd. 148,000 437,902
-----------
NORWAY--1.7%
Norsk Hydro ASA (a) 10,000 631,173
Orkla ASA (a) 8,500 244,653
Storebrand ASA (a) 32,200 198,063
Telenor ASA (a) 95,800 666,250
Yara International ASA (a) 11,800 85,856
-----------
1,825,995
-----------
SINGAPORE--1.9%
Fraser and Neave Ltd. 50,930 444,245
Keppel Corp., Ltd. 160,900 701,739
Neptune Orient Lines Ltd. 289,000 378,128
Want Want Holdings Ltd. 384,000 487,680
-----------
2,011,792
-----------
SPAIN--2.6%
Actividades Construccion y Servicios SA (a) 11,300 553,765
Corp. Mapfre SA (a)* 43,000 517,811
Corp. Mapfre SA Rights (a) 50,900 20,055
Gamesa Corp. Tecnologica SA (a) 16,000 656,628
Iberdrola SA 12,700 262,710
Repsol YPF SA 39,800 826,237
-----------
2,837,206
-----------
SWEDEN--1.1%
Skandinaviska Enskilda Banken AB (a) 40,700 596,750
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
SWEDEN (CONTINUED)
Trelleborg AB, Class B 17,000 $ 309,033
Volvo AB, Class B (a) 7,600 250,598
-----------
1,156,381
-----------
SWITZERLAND--5.0%
Baloise Holdings Ltd. 5,600 234,993
Credit Suisse Group 26,300 912,415
Geberit AG (a) 870 478,521
Logitech International SA* 7,200 326,885
Micronas Semiconductor Holdings AG Registered Shares* 11,400 539,640
Novartis AG (a) 15,170 644,971
Saurer AG 9,500 418,919
Serono SA 750 463,490
Swiss Life Holding 1,900 293,544
UBS AG Registered Shares (a) 11,100 825,439
Zurich Financial Services AG 1,900 299,923
-----------
5,438,740
-----------
UNITED KINGDOM--19.5%
Aggregate Industries PLC 355,800 558,104
Alliance Unichem PLC 35,400 379,224
Anglo American PLC 18,600 445,188
AstraZeneca PLC 8,900 414,379
Atkins WS PLC 26,500 287,057
Aviva PLC 54,300 529,084
Balfour Beatty PLC 99,000 474,092
Barclays PLC 137,300 1,214,292
Barratt Developments PLC 51,700 593,433
BP PLC 164,400 1,383,430
British Airways PLC* 97,900 499,538
BT Group PLC 115,400 376,938
Cattles PLC 87,900 548,272
Centrica PLC 193,600 815,468
Dixons Group PLC 177,400 504,156
Galen Holdings PLC 49,500 754,072
George Wimpey PLC 95,700 772,646
HBOS PLC 42,300 576,086
Inchcape PLC 26,200 708,320
Johnston Press PLC 40,800 394,532
Kelda Group PLC 32,900 273,667
Northern Rock PLC 42,800 613,304
Reckitt Benckiser PLC 37,200 923,327
Royal Bank of Scotland Group PLC 53,008 1,621,872
Sage Group PLC 75,000 249,475
Shell Transport & Trading Co. PLC 64,700 424,458
Shire Pharmaceuticals Group PLC* 58,700 575,206
Tesco PLC 242,100 1,097,941
Vodafone Group PLC 943,800 2,242,424
Whitbread PLC 24,100 322,882
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
Wolseley PLC 32,400 $ 504,935
------------
21,077,802
------------
TOTAL EQUITIES (Cost $66,204,434) 86,345,356
------------
PREFERRED STOCKS--0.2%
Unipol Spa 95,400 244,916
------------
TOTAL PREFERRED STOCKS (Cost $189,899) 244,916
------------
PAR
RATE MATURITY VALUE
---- -------- -----
SHORT-TERM INVESTMENTS--0.8%
U.S. GOVERNMENT--0.4%
U.S. Treasury Bill (++) 0.91% 6/17/2004 420,000 419,183
------------
INVESTMENT COMPANIES--0.4%
Dreyfus Institutional Preferred Plus (+) 368,618 368,618
------------
TOTAL SHORT-TERM INVESTMENTS (Cost $787,801) 787,801
------------
INVESTMENT OF CASH COLLATERAL--20.9%
Dreyfus Institutional Preferred Money Market Fund
(cost $22,543,716)(+) 22,543,716 22,543,716
------------
TOTAL INVESTMENTS--101.7% (COST $89,725,850) 109,921,789
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(1.7)% (1,861,074)
------------
NET ASSETS--100.0% $108,060,715
============
NOTES TO SCHEDULE OF INVESTMENTS:
* Non-income producing security
(+) Affiliated fund that is available only to investment companies and other
accounts managed by TBCAM or its affiliates. The effective yield is
0.98%. A complete listing of the fund's holdings as of its most recent
fiscal year end is available.
(++) Denotes all or part of security segregated as collateral.
(a) Security, or a portion thereof, was on loan at March 31, 2004.
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- --------------------------------------------------------------------------------
Basic Materials 3.2%
Communications 8.5%
Consumer, Cyclical 10.4%
Consumer, Non-cyclical 11.1%
Diversified 0.6%
Energy 6.9%
Financial 20.6%
Industrial 11.0%
Technology 4.1%
Utilities 3.6%
Short-Term Investments 20.9%
Security Lending Cash Collateral 0.8%
-----
Total Investments 101.7%
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
STATEMENT OF ASSETS & LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (including securities on loan
valued at $21,098,659 (Note 6)) (Note 1A) (identified cost, $66,813,516) $ 87,009,455
Affiliated investment (Note 1G) (identified cost, $22,912,334) 22,912,334
Foreign currency, at value (identified cost, $4,217,637) 4,228,625
Receivable for investments sold 16,101,865
Interest and dividends receivable 623,624
Prepaid expenses 403
------------
Total assets 130,876,306
------------
LIABILITIES
Liability for securities on loan (Note 6) $ 22,543,716
Payable for investments purchased 218,153
Payable for variation margin on open financial futures contracts (Note 5) 7,830
Accrued accounting and custody fees (Note 2) 32,229
Accrued trustees' fees and expenses (Note 2) 1,867
Accrued expenses and other liabilities 11,796
------------
Total liabilities 22,815,591
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $108,060,715
============
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income (net of foreign withholding taxes of $101,065) $ 836,621
Interest income (including securities lending income of $19,361 (Note 6)) 24,216
-----------
Total investment Income 860,837
EXPENSES
Investment advisory fee (Note 2) $ 373,280
Accounting and custody fees (Note 2) 79,193
Legal and audit services 21,907
Trustees' fees and expenses (Note 2) 6,133
Insurance expense 4,936
Miscellaneous 1,104
----------
Total expenses 486,553
-----------
Net investment income 374,284
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 6,567,736
Financial futures contracts 239,210
Foreign currency transactions and forward foreign currency exchange contracts (60,582)
----------
Net realized gain 6,746,364
Change in unrealized appreciation (depreciation)
Investment securities, financial futures contracts, foreign currency
and forward foreign currency exchange contracts 7,595,823
-----------
Net realized and unrealized gain 14,342,187
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $14,716,471
===========
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM
JANUARY 28, 2003
SIX MONTHS ENDED (COMMENCEMENT OF
MARCH 31, 2004 OPERATIONS) TO
(UNAUDITED) SEPTEMBER 30, 2003
---------------- -------------------
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS
Net investment income $ 374,284 $ 797,821
Net realized gains 6,746,364 1,041,685
Change in net unrealized appreciation 7,595,823 13,981,959
------------ -----------
Net increase in net assets from investment operations 14,716,471 15,821,465
------------ -----------
CAPITAL TRANSACTIONS
Assets contributed by The Boston Company International Core Equity Fund (including
unrealized appreciation of $0 and $1,307,052) -- 55,577,761
Contributions 15,550,036 10,906,317
In kind transfer into the Portfolio 4,430,220 --
Withdrawals (4,296,340) (4,645,215)
------------ -----------
Net increase (decrease) in net assets from capital tranactions 15,683,916 61,838,863
------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 30,400,387 77,660,328
NET ASSETS
At beginning of period 77,660,328 --
------------ -----------
At end of period $108,060,715 $77,660,328
============ ===========
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD FROM
JANUARY 28, 2003
SIX MONTHS ENDED (COMMENCEMENT OF
MARCH 31, 2004 OPERATIONS) TO
(UNAUDITED) SEPTEMBER 30, 2003
--------------------------------------------
TOTAL RETURN(+) 24.29% 22.46%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.04%(++) 1.17%(++)
Net Investment Income (to average daily net assets)* 0.80%(++) 1.81%(++)
Portfolio Turnover 46%(+++) 63%
Net Assets, End of Period (000's omitted) $ 108,061 $ 77,660
- ----------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its 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:
Ratios (to average daily net assets):
Expenses N/A 1.20%(++)
Net investment income N/A 1.78%(++)
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
(+++) Not annualized.
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY 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. The Boston
Company International Core Equity Portfolio (the "Portfolio"), a separate
diversified investment series of the Portfolio Trust, commenced operations
on January 28, 2003.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of companies
that are located in the foreign countries represented in the MSCI Europe,
Australia, Far East Index and Canada.
At March 31, 2004, there were two funds, The Boston Company International
Core Equity Fund and Dreyfus Premier International Equity Fund invested in
the Portfolio. The value of the funds' investment in the Portfolio reflects
the funds' proportionate interests in the net assets of the Portfolio. At
March 31, 2004, The Boston Company International Core Equity Fund and the
Dreyfus Premier International Equity Fund held approximately 98.9% and 1.1%
interests in the Portfolio, respectively.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
Portolio's shares may change on days when shareholders are not able to buy
or sell them. Many securities markets and exchanges outside the U.S. close
prior to the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect the events that occur after such close but before the close of the
New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market),
the Portfolio may value its assets by a method the Trustees believe
accurately reflects the fair value. The Trustees have adopted fair value
pricing procedures, which, among other things, require the Portfolio to
fair value such secutities if there has been a movement in the U.S. market
that exceeds a specified threshold. Although the threshold may be revised
from time to time and the number of days on which fair value prices will be
used will depend on market activity, it is possible that fair value prices
for foreign securities will be used by each fund to a significant extent.
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. 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.
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 Portfolio's books and the
U.S. dollar equivalent amounts usually received or paid.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. 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.
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. 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.
G. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM") or its
affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Portfolio's average daily net assets.
The Portfolio compensates Mellon Bank, N.A. under a custody, administration
and accounting services agreement for providing custody, fund
administration and fund accounting services for the Portfolio. Pursuant to
this agreement the Portfolio was charged $71,439 during the period ended
March 31, 2004.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM 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 period ended March 31, 2004 were $40,321,218 and
$47,552,772, respectively. For the period ended March 31, 2004, the
Portfolio did not purchase or sell any long-term U.S. Government
securities.
(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 March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $67,468,473
===========
Gross unrealized appreciation $20,847,667
Gross unrealized depreciation (922,714)
-----------
Net unrealized appreciation $19,924,953
===========
(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 the Portfolio Trust's registration statement.
The Portfolio may trade 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.
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.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Portfolio did not enter into option transactions during the period
ended March 31, 2004.
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 March 31, 2004, the Portfolio held the following forward foreign
currency exchange contracts:
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS
-----------------------------------------------------------------------------------------------------------------
Euro 59,000 3/17/2004 $ 74,092 $ 72,155 $(1,937)
South African Rand 730,000 1/27/2004 108,792 103,620 (5,172)
-------- -------- -------
Total $182,884 $175,775 $(7,109)
======== ======== =======
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 March, 31, 2004, the Portfolio held the following futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (187 contracts) Long 6/17/2004 $3,730,100 $(16,119)
Topix Futures (12 contracts) Long 6/17/2004 1,357,307 56,581
---------
$ 40,462
=========
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL CORE EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) SECURITY LENDING:
The Portfolio may lend its securities to financial institutions which the
Portfolio 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.
The Portfolio loaned securities during the period ended March 31, 2004
resulting in security lending income. At March 31, 2004 the Portfolio had
$21,098,659 worth of securities on loan.
(7) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (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 0.060 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 period ended March 31, 2004, the
commitment fee was $1,277 for the Portfolio.
During the period ended March 31, 2004, the Portfolio had no borrowings
under the credit facility.
23
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 March 31, 2004. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585
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 None
c/o Decision Resources, Inc. 11/3/1986 and Chief Executive
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street Associates 11/3/1986 Associates (family
400 Essex Street investment trust 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, Mertens 29 None
P.O. Box 233 11/3/1986 House, Inc.; Trustee
New London, NH 03257 and Chairman of the
4/11/35 Board, Visiting Nurse
Alliance of Vermont
& New Hampshire
Interested 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 Trustee, President Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset and Chief and Chief Operating
Management Company LLC, Executive Officer Officer, Mellon Institutional
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial Officer,
Mellon Institutional
Asset Management
24
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
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Secretary Secretary Senior Vice President 29 None
c/o Standish Mellon Asset since 2003 and Head of Operations
Management, Mellon Institutional Asset
One Boston Place Management, formerly
Boston, MA 02108 First Vice President,
2/20/61 Mellon Institutional Asset
Management and Mellon
Global Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None
c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish
Management, Treasurer since Mellon Asset Management
One Boston Place 2002
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
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
c/o Standish Mellon Asset President Fund Operations since
Management, 1999; Shareholder
One Boston Place Representative, Standish
Boston, MA 02108 Mellon Asset Management
1/19/71
25
THIS PAGE INTENTIONALLY LEFT BLANK
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.standishmellon.com
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
THE BOSTON COMPANY
Financial Report LARGE CAP CORE FUND
- --------------------------------------------------------------------------------
For the Period Ended
March 31, 2004 (Unaudited)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in The Boston Company Large Cap Core Portfolio (Portfolio), at value (Note 1A) $60,831,458
Receivable for Fund shares sold 1,817
Prepaid expenses 10,670
-----------
Total assets 60,843,945
LIABILITIES
Payable for Fund shares redeemed $500,000
Accrued accounting, custody and transfer agent fees (Note 2) 3,165
Accrued Trustees' fees and expenses (Note 2) 962
Accrued expenses and other liabilities 10,126
--------
Total liabilities 514,253
-----------
NET ASSETS $60,329,692
===========
NET ASSETS CONSIST OF:
Paid-in capital $56,703,146
Accumulated net realized loss (2,519,595)
Undistributed net investment income 217,578
Net unrealized appreciation 5,928,563
-----------
TOTAL NET ASSETS $60,329,692
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,688,734
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 35.72
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $1,174) $ 463,145
Interest income allocated from Portfolio 5,670
Expenses allocated from Portfolio (217,684)
----------
Net investment income allocated from Portfolio 251,131
EXPENSES
Accounting, custody, and transfer agent fees (Note 2) $ 4,357
Legal and audit services 7,961
Registration fees 10,376
Trustees' fees and expenses (Note 2) 961
Insurance expense 514
Miscellaneous 5,235
----------
Total expenses 29,404
Deduct:
Reimbursement of Fund operating expenses (Note 2) (6,986)
----------
Net expenses 22,418
----------
Net investment income 228,713
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 3,920,220
Financial futures contracts 94,235
----------
Net realized gain 4,014,455
Change in unrealized appreciation (depreciation) allocated from portfolio on investments
allocated from Portfolio 4,060,741
----------
Net realized and unrealized gain (loss) on investments 8,075,196
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,303,909
==========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 228,713 $ 679,484
Net realized gains (loss) 4,014,455 (3,244,390)
Change in net unrealized appreciation 4,060,741 12,889,324
----------- ------------
Net increase in net assets from investment operations 8,303,909 10,324,418
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (320,238) (675,158)
----------- ------------
Total distributions to shareholders (320,238) (675,158)
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 4,882,010 11,259,233
Value of shares issued to shareholders in payment of distributions declared 224,551 566,287
Cost of shares redeemed (16,910,184) (12,354,505)
----------- ------------
Net decrease in net assets from Fund share tranactions (11,803,623) (528,985)
----------- ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,819,952) 9,120,275
NET ASSETS
At beginning of period 64,149,644 55,029,369
----------- ------------
At end of period (including undistributed net investment income
of $217,578 and $309,103) $ 60,329,692 $ 64,149,644
============ ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 --------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
------- ------- ------- ------- ------- --------
NET ASSET VALUE, BEGINNING OF PERIOD $ 31.43 $ 26.13 $ 34.00 $ 41.71 $ 37.79 $ 37.47
------- ------- ------- ------- ------- --------
FROM INVESTMENT OPERATIONS:
Net investment income* (1) 0.13 0.36 0.32 0.39 0.29 0.29
Net realized and unrealized
gains (loss) on investments 4.35 5.30 (5.77)(2) (2.77) 5.73 4.49
------- ------- ------- ------- ------- --------
Total from investment operations 4.48 5.66 (5.45) (2.38) 6.02 4.78
------- ------- ------- ------- ------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.19) (0.36) (0.21) (0.29) (0.23) (0.23)
From net realized gains on investments -- -- (2.21) (5.04) (1.87) (4.23)
------- ------- ------- ------- ------- --------
Total distributions to shareholders (0.19) (0.36) (2.42) (5.33) (2.10) (4.46)
------- ------- ------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 35.72 $ 31.43 $ 26.13 $ 34.00 $ 41.71 $ 37.79
======= ======= ======= ======= ======= ========
TOTAL RETURN(+) 14.29% 21.76% (17.70)% (7.18)% 16.52% 12.29%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.79%(++) 0.71% 0.71% 0.71% 0.71% 0.66%
Net Investment Income
(to average daily net assets) 0.75%(++) 1.23% 0.96% 1.00% 0.76% 0.74%
Net Assets, End of Period (000's omitted) $60,330 $64,150 $55,029 $75,489 $93,315 $130,556
- -----------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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) $ 0.12 $ 0.29 $ 0.27 $ 0.38 $ 0.28 N/A
Ratios (to average daily net assets):
Expenses 0.83%(++) 0.93% 0.83% 0.73% 0.73% N/A
Net investment income 0.71%(++) 1.01% 0.84% 0.98% 0.74% N/A
(1) Calculated based on average shares outstanding.
(2) Amount includes litigation proceeds received by the Fund of $0.02.
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE 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. The
Boston Company Large Cap Core Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest of The Boston
Company Large Cap Core 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 seeks to achieve its objective by investing,
under normal circumstances, at least 80% of net assets in equity securities
in companies that appear to be undervalued relative to underlying business
fundamentals. 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 March 31, 2004). 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 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 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. 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 wash sales, post-October losses and realized and
unrealized gains or losses on futures.
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 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.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY LARGE CAP CORE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 AND TRANSACTIONS WITH AFFILIATES:
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 TBCAM
for such services. See Note 2 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report. Effective November
1, 2003, TBCAM 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 0.90% of the Fund's
average daily net assets for the period ended March 31, 2004. Prior to that
the voluntary expense limitation was 0.71% of the Funds average daily net
assets. Pursuant to this agreement, for the period ended March 31, 2004,
TBCAM voluntarily reimbursed the Fund for $6,986 of its operating expenses.
This agreement is temporary and voluntary and may be discontinued or
revised by TBCAM at any time.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Pursuant to this agreement the Fund was
charged $121 during the period ended March 31, 2004.
No director, officer or employee of TBCAM 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 TBCAM 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
period ended March 31, 2004, aggregated $5,105,140 and $16,769,763,
respectively.
(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:
PERIOD ENDED YEAR ENDED
MARCH 31, 2004 SEPTEMBER 30, 2003
-------------- -------------------
Shares sold 140,483 358,946
Shares issued to shareholders in payment
of distributions declared 6,711 19,336
Shares redeemed (499,809) (443,179)
-------- --------
Net decrease (352,615) (64,897)
======== ========
At March 31, 2004, four shareholders of record held approximately 11%, 10%,
8% and 6% of the total outstanding shares of the Fund, respectively.
Investment activities 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
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
EQUITIES--99.3%
BASIC MATERIALS--2.6%
Alcoa, Inc. 8,300 $ 287,927
Dow Chemical Co. 14,500 584,060
El Du Pont de Nemours & Co. 8,400 354,648
Sherwin-Williams Corp. 8,700 334,341
----------
1,560,976
----------
COMMUNICATIONS--8.9%
Cisco Systems, Inc.* 53,200 1,251,264
Comcast Corp.* 14,406 414,028
Qualcomm, Inc. 4,500 298,890
SBC Communications, Inc. 19,100 468,714
Symantec Corp.* 8,000 370,400
Tribune Company 5,700 287,508
Verizon Communications, Inc. 23,400 855,036
Viacom, Inc. Class B 14,000 548,940
Walt Disney Co 35,500 887,145
----------
5,381,925
----------
CONSUMER CYCLICAL--10.6%
BorgWarner, Inc. 4,700 398,701
Carnival Corp. 6,900 309,879
Coach, Inc.* 9,500 389,405
Costco Wholesale Corp.* 11,900 446,964
CVS Corp. 16,500 582,450
Lowe's Companies, Inc. 5,400 303,102
McDonalds Corp. 32,800 937,096
Paccar, Inc. 9,900 556,776
Petco Animal Supplies, Inc. 14,900 419,882
Staples, Inc. 22,600 573,814
Wal-Mart Stores, Inc. 19,700 1,175,893
Williams-Sonoma, Inc.* 9,500 324,900
----------
6,418,862
----------
CONSUMER NONCYCLICAL--20.4%
Amgen, Inc.* 9,600 558,432
Archer-Daniels-Midland Co. 26,600 448,742
Becton Dickinson & Co. 10,200 494,496
Boston Scientific Corp.* 8,400 355,992
Cendant Corp. 17,300 421,947
Coca-Cola Enterprises, Inc. 27,200 657,424
Davita, Inc.* 10,100 482,275
Dean Foods Corp.* 12,600 420,840
Hillenbrand Industries 7,800 529,542
Johnson & Johnson 8,500 431,120
Kellogg Co. 10,800 423,792
Kimberly-Clark Corp. 7,100 448,010
Millipore Corp.* 5,900 303,142
Mylan Laboratories, Inc. 12,900 293,217
Pepsico, Inc. 11,300 608,505
Pfizer, Inc. 56,320 1,974,016
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
Pharmaceutical Resources, Inc.* 5,100 $ 289,986
Procter & Gamble Co. 12,000 1,258,560
Steris Corp.* 11,400 294,120
Varian Medical Systems, Inc.* 4,700 405,657
Watson Pharmaceuticals, Inc.* 6,300 269,577
Wellpoint Health Networks, Inc.* 6,000 682,320
Wyeth 6,800 255,340
----------
12,307,052
----------
ENERGY--6.9%
Anadarko Petroleum Corp. 5,300 274,858
BP PLC Sponsored ADR 13,290 680,448
Chesapeake Energy Corp. 28,100 376,540
ChevronTexaco Corp. 2,966 260,355
ConocoPhillips 7,800 544,518
Devon Energy Corp. 6,000 348,900
Exxon Mobil Corp. 32,804 1,364,318
Pride International, Inc.* 18,600 317,316
----------
4,167,253
----------
FINANCIAL--21.5%
Ace Ltd. 14,500 618,570
Affiliated Managers Group* 7,800 425,724
American International Group 10,849 774,076
Axis Capital Holdings Ltd. 8,800 260,040
Bank of America Corp. 13,400 1,085,132
Boston Properties, Inc., REIT 5,700 309,567
Captial One Financial Corp. 8,700 656,241
Citigroup, Inc. 36,966 1,911,142
Fannie Mae 5,600 416,360
Franklin Resources, Inc. 10,400 579,072
Freddie Mac 4,500 265,770
Goldman Sachs Group, Inc 9,300 970,455
JP Morgan Chase & Co. 18,900 792,855
Lincoln National Corp. 14,500 686,140
Merrill Lynch & Co., Inc. 5,300 315,668
Morgan Stanley 5,700 326,610
New York Community Bancorp 13,688 469,225
Wachovia Corp. 32,200 1,513,400
Wells Fargo & Company 10,100 572,367
----------
12,948,414
----------
INDUSTRIAL--11.8%
Agilent Technologies, Inc. 11,600 366,908
Black & Decker Corp. 5,800 330,252
Caterpillar, Inc. 7,100 561,397
Deere & Co. 7,200 499,032
Eaton Corp. 11,800 663,042
Energizer Holdings, Inc.* 8,400 392,196
FedEx Corp. 3,600 270,576
Fisher Scientific International* 14,300 787,072
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
INDUSTRIAL (CONTINUED)
General Electric Corp. 46,000 $ 1,403,920
Ingersoll-Rand Co., Class A 8,600 581,790
Norfolk Sourthern Corp. 20,300 448,427
Textron, Inc. 5,200 276,380
United Technologies Corp. 6,200 535,060
-----------
7,116,052
-----------
TECHNOLOGY--13.6%
Analog Devices, Inc 4,900 235,249
Cognizant Technology Solutions Corp.* 9,000 407,250
Cypress Semiconductor Corp 18,900 386,883
Dell, Inc.* 30,200 1,015,324
EMC Corp./Massachusetts* 33,000 449,130
Fairchild Semiconductor International* 26,200 629,586
Intel Corp. 50,900 1,384,480
International Business Machines Corp 6,900 633,696
Lam Research Corp.* 10,200 257,142
Microsoft Corp. 62,200 1,553,134
National Semiconductor Corp.* 14,400 639,792
Peoplesoft, Inc.* 13,800 255,162
Texas Instruments, Inc. 11,800 344,796
-----------
8,191,624
-----------
UTILITIES--3.0%
Constellation Energy Group, Inc. 15,400 615,230
Entergy Corp. 8,300 493,850
Exelon Corp. 9,600 661,153
-----------
1,770,233
-----------
TOTAL EQUITIES (Cost $52,703,351) 59,862,391
-----------
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ---------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.8%
U.S. GOVERNMENT--0.2%
U.S. Treasury Bill (++) 0.91% 6/17/2004 150,000 $ 149,708
-----------
INVESTMENT COMPANIES--1.6%
Dreyfus Institutional Preferred Plus(+) 964,362 964,362
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $1,114,070) 1,114,070
-----------
TOTAL INVESTMENTS--101.1% (COST $53,817,421) 60,976,461
OTHER ASSETS, LESS LIABILITIES--(1.1)% (145,003)
-----------
NET ASSETS--100.0% $60,831,458
===========
NOTES TO SCHEDULE OF INVESTMENTS:
ADR--American Depository Receipt
REIT--Real Estate Investment Trust
* Non-income producing security
(+) Affiliated fund that is available only to investment companies and other
accounts managed by TBCAM or its affiliates. The effective yield is 0.98%.
A complete listing of the fund's holdings as of its most recent fiscal year
end is available.
(++) Denotes all or part of security segregated as collateral.
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost $52,853,059) $60,012,099
Affiliated investment (Note 1E) (identified cost $964,362) 964,362
Cash 17
Interest and dividends receivable 39,603
Prepaid expenses 2,038
-----------
Total assets 61,018,119
-----------
LIABILITIES
Payable for investments purchased $129,872
Payable for variation margin on open financial futures contracts (Note 5) 1,160
Accrued accounting and custody fees (Note 2) 15,263
Accrued Trustees' fees and expenses (Note 2) 2,434
Accrued expenses and other liabilities 37,932
--------
Total liabilities 186,661
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $60,831,458
===========
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income (net of foreign withholding taxes of $1,174) $ 463,145
Interest income 5,670
----------
Total investment Income 468,815
EXPENSES
Investment advisory fee (Note 2) $ 152,905
Accounting and custody fees (Note 2) 40,682
Legal and audit services 12,956
Trustees' fees and expenses (Note 2) 4,538
Insurance expense 4,635
Miscellaneous 6,042
----------
Total expenses 221,758
----------
Deduct:
Waiver of investment advisory fee (Note 2) (3,826)
----------
Net expenses 217,932
----------
Net investment income 250,883
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions $3,920,220
Financial futures contracts 94,235
----------
Net realized gain 4,014,455
Change in unrealized appreciation (depreciation)
Investment securities and financial futures contracts 4,060,771
----------
Net realized and unrealized gain 8,075,226
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $8,326,109
==========
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 250,883 $ 679,488
Net realized gains (losses) 4,014,455 (3,244,400)
Change in net unrealized appreciation (depreciation) 4,060,771 12,889,366
------------ ------------
Net increase in net assets from investment operations 8,326,109 10,324,454
------------ ------------
CAPITAL TRANSACTIONS
Contributions 5,105,140 11,278,147
Withdrawls (16,769,763) (12,440,045)
------------ ------------
Net increase (decrease) in net assets from capital tranactions (11,664,623) (1,161,898)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,338,514) 9,162,556
NET ASSETS
At beginning of period 64,169,972 55,007,416
------------ ------------
At end of period $ 60,831,458 $ 64,169,972
============ ============
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
---------------- --------- --------- -------- -------- --------
TOTAL RETURN (+) 14.33% 21.76% (17.69)% (7.11)% 16.59% 12.35%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.72%(++) 0.71% 0.70% 0.64% 0.64% 0.60%
Net Investment Income
(to average daily net assets)* 0.82%(++) 1.23% 0.97% 1.06% 0.83% 0.81%
Portfolio Turnover 30%(+++) 104% 80% 62% 92% 90%
Net Assets, End of Period (000's omitted) $ 60,831 $ 64,170 $ 55,007 $124,213 $146,105 $190,857
- ----------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its
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:
Ratios (to average daily net assets):
Expenses 0.73%(++) 0.77% 0.72% N/A N/A N/A
Net investment income 0.81%(++) 1.17% 0.95% N/A N/A N/A
(+) Total return for the Portfolio has been calculated based on the total
return for the investor Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as as set out in the notes to
the financial statements. Total return would have been lower in the
absense of these waivers. Returns for periods of less than one year have
not been annualized.
(++) Computed on an annualized basis.
(+++) Not annualized.
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE 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. The Boston
Company Large Cap Core Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
At March 31, 2004, there was one fund, The Boston Company Large Cap Core
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 March
31, 2004 was approximately 100%.
The objective of the Portfolio is long-term growth of capital. The
Portfolio seeks to achieve its objective by investing, under normal
circumstances, of at least 80% of net assets in equity and equity-related
securities of companies which appear to be undervalued relative to current
earnings growth.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. 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. SECURITIES TRANSACTION 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.
C. 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.
D. 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.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
E. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM").
(2) INVESTMENT ADVISORY FEE AND TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM for overall investment advisory
and administrative services is paid monthly at the annual rate of 0.50% of
the Portfolio's average daily net assets. Effective November 1, 2003, TBCAM
voluntarily agreed to limit the Portfolio's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.90% of the Porfolio's average daily net assets for the period ended March
31, 2004. Prior to November 1, 2003 the voluntary expense limitation was
0.71% of the Portfolio's average daily net assets. Pursuant to this
agreement, for the period ended March 31, 2004, TBCAM voluntarily waived
$3,826 of its investment advisory fees. This agreement is voluntary and
temporary and may be discontinued or revised by TBCAM at any time.
The Portfolio compensates Mellon Bank, N.A. under a custody, administration
and accounting services agreement for providing custody, fund
administration and fund accounting services for the Portfolio. Pursuant to
this agreement the Portfolio was charged $37,801 during the period ended
March 31, 2004.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM 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 period ended March 31, 2004, were $18,046,118 and
$28,365,639, respectively. For the period ended March 31, 2004, 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 March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $54,052,681
===========
Gross unrealized appreciation 7,670,640
Gross unrealized depreciation (757,420)
-----------
Net unrealized appreciation $ 6,913,220
===========
(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 the Portfolio Trust's registration statement. The Portfolio may trade
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
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY LARGE CAP CORE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The Portfolio entered into no such transactions during the period ended
March 31, 2004.
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 March 31, 2004, the Portfolio held the following financial futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED LOSS
----------------------------------------------------------------------------------------------------------------
S&P 500 (2 contracts) Long 6/17/2004 $573,000 $10,560
=======
(6) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (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 0.060 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 period ended March 31, 2004, the commitment fee was $1,070 for the
Portfolio.
During the period ended March 31, 2004, the Portfolio had no borrowings
under the credit facility.
18
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 March 31, 2004. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585
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 None
c/o Decision Resources, Inc. 11/3/1986 and Chief Executive
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street Associates 11/3/1986 Associates (family
400 Essex Street investment trust 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, Mertens 29 None
P.O. Box 233 11/3/1986 House, Inc.; Trustee
New London, NH 03257 and Chairman of the
4/11/35 Board, Visiting Nurse
Alliance of Vermont
& New Hampshire
Interested 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 Trustee, President Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset and Chief and Chief Operating
Management Company LLC, Executive Officer Officer, Mellon Institutional
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial Officer,
Mellon Institutional
Asset Management
19
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
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Secretary Secretary Senior Vice President 29 None
c/o Standish Mellon Asset since 2003 and Head of Operations
Management, Mellon Institutional Asset
One Boston Place Management, formerly
Boston, MA 02108 First Vice President,
2/20/61 Mellon Institutional Asset
Management and Mellon
Global Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None
c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish
Management, Treasurer since Mellon Asset Management
One Boston Place 2002
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
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
c/o Standish Mellon Asset President Fund Operations since
Management, 1999; Shareholder
One Boston Place Representative, Standish
Boston, MA 02108 Mellon Asset Management
1/19/71
20
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THIS PAGE INTENTIONALLY LEFT BLANK
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.standishmellon.com
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
THE BOSTON COMPANY INTERNATIONAL
Financial Report SMALL CAP FUND
- --------------------------------------------------------------------------------
For the Period Ended
March 31, 2004 (Unaudited)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in The Boston Company International Small Cap Portfolio (Portfolio),
at value (Note 1A) $ 136,190,048
Receivable for Fund shares sold 3,008,081
Prepaid expenses 13,264
--------------
Total assets 139,211,393
LIABILITIES
Accrued accounting, custody and transfer agent fees (Note 2) $ 3,379
Accrued Trustees' fees and expenses (Note 2) 1,000
Accrued expenses and other liabilities 8,600
-----------
Total liabilities 12,979
--------------
NET ASSETS $ 139,198,414
==============
NET ASSETS CONSIST OF:
Paid-in capital $ 96,337,092
Accumulated net realized gain 3,466,335
Undistributed net investment income 112,379
Net unrealized appreciation 39,282,608
--------------
TOTAL NET ASSETS $ 139,198,414
==============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 8,991,786
==============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 15.48
==============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $117,455) $ 913,733
Interest income allocated from Portfolio (including securities lending income of $56,262) 61,700
Expenses allocated from Portfolio (680,606)
-------------
Net investment income allocated from Portfolio 294,827
EXPENSES
Accounting, custody, and transfer agent fees (Note 2) $ 4,245
Legal and audit services 16,371
Registration fees 11,553
Trustees' fees and expenses (Note 2) 1,034
Insurance expense 516
Miscellaneous 6,226
-----------
Total expenses 39,945
-------------
Net investment income 254,882
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 5,482,470
Foreign currency transactions and forward foreign currency exchange contracts 155,773
-----------
Net realized gain 5,638,243
Change in unrealized appreciation (depreciation) allocated from portfolio on investments
allocated from Portfolio 22,208,876
-------------
Net realized and unrealized gain on investments 27,847,119
-------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 28,102,001
=============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 254,882 $ 539,070
Net realized gains 5,638,243 1,815,495
Change in net unrealized appreciation 22,208,876 16,959,328
------------ -----------
Net increase in net assets from investment operations 28,102,001 19,313,893
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1F)
From net investment income (567,711) (487,612)
------------ -----------
Total distributions to shareholders (567,711) (487,612)
------------ -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 23,202,559 44,415,601
Value of shares issued to shareholders in payment of distributions declared 443,772 370,146
Cost of shares redeemed (1,552,204) (7,812,410)
------------ -----------
Net increase (decrease) in net assets from Fund share tranactions 22,094,127 36,973,337
------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 49,628,417 55,799,618
NET ASSETS
At beginning of period 89,569,997 33,770,379
------------ -----------
At end of period (including undistributed net investment income of
$112,379 and $425,208) $139,198,414 $89,569,997
============ ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 2000
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT OF
MARCH 31, 2004 -------------------------------------- OPERATIONS) TO
UNAUDITED 2003 2002 2001 SEPTEMBER 30, 2000
---------------- ------- ------- -------- ------------------
NET ASSET VALUE, BEGINNING OF YEAR $ 12.05 $ 8.91 $ 8.55 $ 10.65 $ 10.00
-------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income *(1) 0.04 0.10 0.09 0.11 0.09
Net realized and unrealized gains (loss)
on investments 3.46 3.13 0.38(2) (1.89) 0.63
-------- ------- ------- ------- -------
Total from investment operations 3.50 3.23 0.47 (1.78) 0.72
-------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.07) (0.09) (0.11) (0.08) (0.07)
From net realized gains on investments -- -- -- (0.24) --
-------- ------- ------- ------- -------
Total distributions to shareholders (0.07) (0.09) (0.11) (0.32) (0.07)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 15.48 $ 12.05 $ 8.91 $ 8.55 $ 10.65
======== ======= ======= ======= =======
TOTAL RETURN (+) 29.18% 36.47% 5.39% (17.13)% 7.19%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.28%(++) 1.39% 1.25% 1.25% 1.25%
Net Investment Income (to average
daily net assets)* 0.45%(++) 1.01% 0.96% 1.10% 1.21%
Portfolio Turnover(3) N/A 15%(+++) 69% 89% 70%(+++)
Net Assets, End of Period (000's omitted) $139,199 $89,570 $33,770 $22,386 $17,092
- ----------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its
investment advisory fee and/or reimbursed the Fund and Portfolio for a portion of its perating 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) N/A $ 0.08 $ 0.04 $ 0.04 $ 0.01
Ratios (to average daily net assets):
Expenses N/A 1.65% 1.82% 1.98% 2.29%
Net investment income N/A 0.75% 0.39% 0.37% 0.17%
(1) Calculated based on average shares outstadning.
(2) The amount shown for a share outstanding does not corresond with the
aggregate net realized and unrealized gain/loss for the period due to
timimg of purchases and redemptions of Fund shares in relation to the
flucuating market values of the fund.
(3) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 28, 2003. The portfolio turnover for
the period since the Fund transferrd substantially all of its investable
assets to the Portfolio is shown in the Portfolio's financial statements
which are included elsewhere in this report.
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
(+++) Not annualized
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP 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. The
Boston Company International Small Cap 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 The
Boston Company International Small Cap Portfolio (the Portfolio), a
subtrust of Mellon Institutional Funds Master Portfolio (the Portfolio
Trust), which is organized as a New York trust, and has the same investment
objective as the Fund. The Portfolio seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in equity
securities in companies that are located in foreign countries represented
in the Citigroup Extended Market Ex-U.S. (EMI-U.S.) Index. The Portfolio
may invest up to 25% of its assets in emerging market countries. The value
of the Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio (approximately 99% at March 31,
2004). 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 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. 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 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. 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, passive foreign
investment companies (PFICs) and capital loss carryovers.
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.
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.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY INTERNATIONAL SMALL CAP FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
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 The
Boston Company Asset Management, LLC (TBCAM) for such services. See Note 2
of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly-owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Pursuant to this agreement the Fund was
charged $121 during the period ended March 31, 2004.
The Fund imposes 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. For the period ended March 31, 2004, the Fund received no
redemption fees.
No director, officer or employee of TBCAM 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 TBCAM 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
period ended March 31, 2004, aggregated $23,646,331 and $1,552,204,
respectively.
(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:
PERIOD ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
-------------- ------------------
Shares sold 1,637,764 4,394,538
Shares issued to shareholders in payment
of distributions declared 33,773 36,828
Shares redeemed (110,951) (788,597)
--------- ---------
Net increase 1,560,586 3,642,769
========= =========
At March 31, 2004, five shareholder of record held approximately 31%, 10%,
9%, 7% and 6% of the total outstanding shares of the Fund. Investment
activities 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
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -------------------------------------------------------------------------------
EQUITIES--92.9%
AUSTRALIA--3.2%
Australian Stock Exchange Ltd. 62,000 $ 786,981
Boral Ltd. 227,000 1,099,652
Oil Search Ltd. 660,500 587,277
Perpetual Trustees Australia Ltd. 14,200 479,453
Promina Group Ltd. 177,000 503,338
Southern Cross Broadcasting (Australia) Ltd. 55,600 457,711
West Australian Newspaper Holdings Ltd. (a) 125,700 611,816
----------
4,526,228
----------
AUSTRIA--0.5%
Boehler-Uddeholm AG 8,500 693,376
----------
BELGIUM--1.8%
Colruyt SA 5,124 570,350
Delhaize Group (a) 8,900 413,138
Mobistar SA* 14,700 966,546
Umicore (a) 8,700 531,331
----------
2,481,365
----------
CANADA--5.6%
Aber Diamond Corp.* 14,400 459,071
Astral Media, Inc. 25,400 557,031
CHC Helicopter Corp 19,400 534,330
Ensign Resource Service Group, Inc. 34,100 583,262
Home Capital Group, Inc. 59,800 1,141,570
Inmet Mining Corp.* 52,400 804,246
Penn West Petroleum Ltd. 10,400 486,805
QLT, Inc.* 27,700 703,922
Research in Motion Ltd.* 7,500 700,977
Rogers Wireless Communications, Inc.* 29,700 786,270
Tundra Semiconductor Corp. Ltd.* 23,000 456,628
Wheaton River Minerals Ltd.* 196,200 671,179
----------
7,885,291
----------
DENMARK--1.0%
Bryggerigruppen AS 7,000 466,636
GN Store Nord A/S (a) 61,000 445,992
Jyske Bank A/S* 8,600 458,067
----------
1,370,695
----------
FINLAND--1.6%
Kesko Oyj (a) 30,200 531,749
Nokian Renkaat Oyj (a) 8,700 701,228
Rautaruukki Oyj (a) 64,000 515,373
YIT-Yhtyma Oyj (a) 28,200 534,729
----------
2,283,079
----------
FRANCE--7.5%
Alten* 36,700 594,683
Ciments Francais 6,300 472,801
Clarins (a) 6,355 395,941
CNP Assurances 8,950 517,946
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
FRANCE (CONTINUED)
Eiffage 5,011 $ 773,107
Essilor International SA 8,600 524,059
Euler Hermes SA 11,800 650,914
Gecina SA 5,304 417,319
Guyenne et Gascogne SA (a) 3,400 393,314
Imerys SA 2,700 643,958
Legardere S.C.A 9,400 536,234
Natexis Banques Populaires (a) 4,900 574,980
Neopost SA 10,900 588,116
Oberthur Card Systems SA* 63,700 533,350
Pernod-Ricard SA 3,500 426,645
Pierre & Vacances 5,100 499,545
SEB SA 4,070 522,688
Trigano SA 8,700 449,917
Vallourec 4,020 361,337
Vinci SA 7,600 730,850
-----------
10,607,704
-----------
GERMANY--4.7%
Aareal Bank AG (a) 10,800 357,717
AWD Holding AG 12,300 400,736
Continental AG (a) 22,900 902,861
Hannover Rueckversicherung AG (a) 17,050 571,448
Mobilcom AG 36,600 746,737
Puma AG Rudolf Dassler Sport (a) 6,900 1,523,327
Stada Arzneimittel AG 8,830 449,790
ThyssenKrupp AG 34,100 634,848
United Internet AG Registered Shares 26,714 582,863
Vossloh AG 8,300 445,378
-----------
6,615,705
-----------
GREECE--0.4%
Germanos SA 21,900 577,061
-----------
HONG KONG--2.1%
DAH Sing Financial 89,200 629,604
Golden Meditech Co., Ltd. 1,440,000 628,321
Skyworth Digital Holdings Ltd. 1,764,000 605,567
Wing Lung Bank 72,300 503,359
Xinao Gas Holdings Ltd.* 1,238,000 643,451
-----------
3,010,302
-----------
IRELAND--1.3%
Anglo Irish Bank Corp. PLC 60,000 960,414
Fyffes PLC* 253,800 487,506
Grafton Group PLC 56,600 400,727
-----------
1,848,647
-----------
ITALY--2.7%
Autostrada Torino-Milano Spa 35,900 499,501
Banco Popolare di Verona e Novara Scrl 38,100 621,122
Cassa di Risparmio di Firenze 219,300 394,235
Davide Campari-Milano Spa 8,400 378,034
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -------------------------------------------------------------------------------
ITALY (CONTINUED)
ERG Spa 90,100 $ 474,824
Fondiaria-Sai Spa 18,300 431,503
Merloni Elettrodomestici Spa 33,100 591,778
Milano Assicurazioni Spa 109,100 423,155
-----------
3,814,152
-----------
JAPAN--19.2%
Alpine Electronics, Inc. (a) 40,000 556,195
Arrk Corp (a) 24,200 1,072,152
Casino Computer Co., Ltd. (a) 72,000 854,776
Central Glass Co., Ltd. 120,000 945,915
Citizen Electronics Co., Ltd. 17,400 1,076,237
CMK Corp (a) 52,000 836,249
Don Quijote Co., Ltd. (a) 8,400 555,811
Doshisha Co., Ltd. 20,100 674,626
Fuji Soft ABC, Inc. 21,300 908,947
Fujirebio, Inc. (a) 39,000 483,573
Glory Ltd. (a) 32,000 553,893
Hitachi Construction Machinery Co., Ltd. 38,000 624,588
Index Corp. (a) 150 825,662
Kawasaki Kisen Kaisha Ltd. (a) 159,000 823,360
Kirin Beverage Corp 31,500 697,785
Kissei Pharmaceutical Co., Ltd. 31,000 671,845
Kobe Steel Ltd. 376,000 573,303
Koyo Seiko Co., Ltd. (a) 64,000 668,354
Kuroda Electric Co., Ltd. 12,600 518,354
Mitsui Trust Holdings, Inc. (a) 82,200 566,761
Nippon Shokubai Ltd. 114,000 892,060
Nissan Chemical Industries Ltd. (a) 77,000 671,203
Nissen Co., Ltd. 33,300 670,598
Nisshin Seifun Group, Inc. (a) 72,000 702,877
Nitori Co., Ltd. 9,000 605,006
Pentax Corp. (a) 126,000 738,262
Ricoh Leasing Co., Ltd. 34,700 961,671
Sanyo Shinpan Finance Co., Ltd. 12,200 655,159
Seino Transportation Co., Ltd. 86,000 881,607
Showa Corp. 47,000 489,921
Sodick Co., Ltd. (a) 67,000 603,951
Sumisho Lease Co., Ltd. 29,100 1,160,875
Sumitomo Rubber Industries, Inc. 114,000 854,891
Tamron Co., Ltd. 13,000 710,587
Toho Gas Co., Ltd. 117,000 426,352
Tokyo Tatemono Co., Ltd. 85,000 559,168
USS Co., Ltd. 10,800 896,891
-----------
26,969,465
-----------
NETHERLANDS--3.6%
ASM International NV* 25,300 556,684
Corio NV 21,100 934,256
Hunter Douglas NV 12,900 651,393
Koninklijke BAM Groep NV 19,500 633,873
Koninklijke Wessanen NV (a) 47,500 657,391
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
NETHERLANDS (CONTINUED)
Stork NV 32,000 $ 615,059
VNU NV 12,200 350,009
Wereldhave NV 7,800 635,315
----------
5,033,980
----------
NEW ZEALAND--0.4%
Fisher & Paykel Appliances Holdings Ltd. 176,000 508,993
----------
NORWAY--0.9%
Tandberg Television ASA (a) * 118,900 726,144
TGS Nopec Geophysical Co. ASA* 29,000 522,215
----------
1,248,359
----------
PORTUGAL--0.4%
Banco BPI SA Registered Shares (a) 150,000 589,177
----------
SINGAPORE--2.7%
First Engineering Ltd. 850,000 543,374
Fraser & Neave Ltd. 88,300 770,211
Jurong Technologies Industrial 790,000 660,772
Neptune Orient Lines Ltd. 512,000 669,901
Sembcorp Industries Ltd. 664,000 610,921
Want Want Holdings Ltd. 399,000 506,731
----------
3,761,910
----------
SOUTH KOREA--1.8%
Hanjin Shipping Co., Ltd. 24,800 437,583
Honam Petrochemical Corp. 11,600 472,329
Hyundai Mipo Dockyard 40,200 601,944
Korean Reinsurance Co. 12,100 482,093
You Eal Electronics Co., Ltd. 17,500 540,171
----------
2,534,120
----------
SPAIN--4.2%
ACS Actividades de Construccion y Servicios SA (a) 12,900 632,174
Bankinter SA (a) 8,200 323,800
Corp Mapfre SA (a) 40,300 485,297
Corp Mapfre SA Right (a) 40,300 15,879
Enagas 57,200 664,158
Gamesa Corp. Tecnologica SA (a) 24,800 1,017,773
Grupo Empresarial Ence SA (a) 16,600 455,803
Immobiliaria Urbis SA (a) 62,000 721,419
Indra Sistemas SA 38,000 496,903
Red Electrica de Espana (a) 33,400 565,475
TPI Telefonica Publicidad e Informacion SA 74,500 535,714
----------
5,914,395
----------
SWEDEN--1.3%
Billerud AB (a) 43,600 685,553
Elekta AB* 26,859 506,074
Getinge AB, Class B (a) 61,600 662,067
----------
1,853,694
----------
SWITZERLAND--4.8%
Actelion NV* 5,000 541,331
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -------------------------------------------------------------------------------
SWITZERLAND (CONTINUED)
Geberit AG (a) 1,520 $ 836,036
Lindt & Spruengli AG (a) 54 543,030
Logitech International SA* 9,810 445,381
Micronas Semiconductor Holdings AG Registered Shares* 18,400 870,997
Rieter Holding AG 2,500 632,211
Saurer AG 16,240 716,131
Sika AG (a) 1,440 705,548
Straumann Holding AG (a) 3,100 536,510
Verwalt & Privat-Bank AG (a) 3,700 584,795
Vontobel Holding AG (a) 16,700 356,330
----------
6,768,300
----------
UNITED KINGDOM--21.2%
Acambis PLC* 75,900 490,931
Aga Foodservice Group PLC 97,100 430,052
Aggregate Industries PLC 594,800 932,997
Alliance Unichem PLC 48,600 520,630
Atkins WS PLC 61,800 669,448
Balfour Beatty PLC 166,600 797,816
Barratt Developments PLC 45,200 518,823
BPB PLC 78,900 517,615
British Airways PLC* 139,300 710,783
Cairn Energy PLC* 63,900 1,035,347
Cattles PLC 139,800 871,996
Close Brothers Group PLC 46,600 687,965
Crest Nicholson 64,300 406,704
Dairy Crest Group PLC 60,900 447,292
DS Smith PLC 144,600 448,299
Eidos PLC* 193,700 568,352
EMAP PLC 31,400 502,388
Enterprise Inns PLC 83,400 941,137
FirstGroup PLC 126,300 625,221
Friends Provident PLC 203,300 544,934
Galen Holdings PLC 63,200 962,775
George Wimpey PLC 82,800 668,496
Hilton Group PLC 205,200 859,595
HMV Group PLC 166,400 678,635
ICAP PLC 142,000 746,833
Inchcape PLC 30,700 829,978
iSOFT Group PLC 93,206 605,017
Johnston Press PLC 67,600 653,685
Kelda Group PLC 42,900 356,848
Kensington Group PLC 132,300 1,149,930
Kidde PLC 291,800 551,950
Kier Group PLC 56,600 722,896
LogicaCMG PLC 94,200 445,456
Mcbride PLC 344,300 856,862
McCarthy & Stone PLC 68,000 752,296
Meggitt PLC 95,000 418,560
Mothercare PLC 86,200 544,031
Next PLC 26,500 699,314
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------
UNITED KINGDOM (CONTINUED)
Northern Rock PLC 44,000 $ 630,499
Speedy Hire PLC 65,400 512,929
Taylor Nelson Sofres PLC 104,500 377,011
Travis Perkins PLC 21,200 543,802
Ultra Electronics Holdings PLC 42,300 458,215
United Business Media PLC 60,700 554,478
Viridian Group PLC 41,300 420,707
Whitbread PLC 35,900 480,974
Wolseley PLC 43,400 676,362
------------
29,826,864
------------
TOTAL EQUITIES (Cost $91,726,803) 130,722,862
------------
PREFERRED STOCKS--1.2%
Krones AG 4,600 442,923
Porsche AG 1,150 695,282
Rhoen Klinikum AG 10,700 457,301
------------
TOTAL PREFERRED STOCKS (Cost $1,162,762) 1,595,506
------------
PAR
RATE MATURITY VALUE
------ ---------- -------
SHORT-TERM INVESTMENTS--2.9%
U.S. GOVERNMENT--0.1%
U.S. Treasury Bill (++) 0.91% 6/17/2004 200,000 199,611
------------
INVESTMENT COMPANIES--2.8%
Dreyfus Institutional Preferred Plus (+) 3,946,475 3,946,475
------------
TOTAL SHORT TERM INVESTMENTS (Cost $4,146,086) 4,146,086
------------
INVESTMENT OF CASH COLLATERAL--14.4%
Dreyfus Institutional Preferred Money Market Fund
(cost $19,996,699 19,996,699 19,996,699
------------
TOTAL INVESTMENTS--111.4% (COST $117,032,350) 156,461,153
LIABILITIES IN EXCESS OF OTHER ASSETS--(11.4)% (17,485,601)
------------
NET ASSETS--100.0% $138,975,552
============
NOTES TO SCHEDULE OF INVESTMENTS:
* Non-income producing security
(+) Affiliated fund that is available only to investment companies and other
accounts managed by TBCAM or its affiliates. The effective yield is 0.98%.
A complete listing of the fund's holdings as of its most recent fiscal year
end is available.
(++) Denotes all or part of security segregated as collateral.
(a) Security, or a portion thereof, was on loan at March 31, 2004.
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- --------------------------------------------------------------------------------
Basic Materials 6.7%
Communications 7.2%
Consumer, Cyclical 16.9%
Consumer, Non-cyclical 13.9%
Energy 3.3%
Financial 18.2%
Industrial 20.2%
Technology 5.5%
Utilities 2.2%
Short-Term Investments 2.9%
Investment of Cash Collateral from Security Lending 14.4%
-----
Total Investments 111.4%
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (including securities on loan
valued at $18,525,201 (Note 6)) (Note 1A) (identified cost $93,089,176) $132,517,979
Affiliated investment (Note 1H) (identified cost $ 23,943,174) 23,943,174
Foreign currency, at value (identified cost, $3,604,041) 3,607,181
Receivable for investments sold 1,309,744
Interest and dividends receivable 477,036
Unrealized appreciation on foreign currency exchange contracts (Note 5) 2,718
Prepaid expenses 4,580
------------
Total assets 161,862,412
LIABILITIES
Liability for securities on loan (Note 6) $19,996,699
Payable for investments purchased 2,833,309
Payable for variation margin on open financial futures contracts (Note 5) 5,260
Accrued accounting and custody fees (Note 2) 31,995
Accrued Trustees' fees and expenses (Note 2) 3,485
Accrued expenses and other liabilities 16,112
-----------
Total liabilities 22,886,860
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $138,975,552
============
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income (net of foreign withholding taxes of $118,691) $ 923,963
Interest income (including securities lending income of $56,505) 62,001
-----------
Total investment Income 985,964
EXPENSES
Investment advisory fee (Note 2) $ 571,420
Accounting and custody fees (Note 2) 86,324
Legal and audit services 16,394
Trustees' fees and expenses (Note 2) 6,914
Insurance expense 4,516
Miscellaneous 1,053
----------
Total expenses 686,621
-----------
Net investment income 299,343
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions $5,541,550
Foreign currency transactions and forward foreign currency exchange contracts 157,346
----------
Net realized gain 5,698,896
Change in unrealized appreciation (depreciation)
Investment securities 22,362,151
-----------
Net realized and unrealized gain 28,061,047
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $28,360,390
===========
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
JANUARY 28, 2003
SIX MONTHS ENDED (COMMENCEMENT OF
MARCH 31, 2004 OPERATIONS TO
(UNAUDITED) SEPTEMBER 30, 2003
------------------ --------------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 299,343 $ 531,792
Net realized gains 5,698,896 2,795,189
Change in net unrealized appreciation 22,362,151 15,196,221
------------ -----------
Net increase in net assets from investment operations 28,360,390 18,523,202
------------ -----------
CAPITAL TRANSACTIONS
Assets contributed by Standish International Small Cap Fund (including unrealized
appreciation of $0 and $1,891,429) -- 39,701,792
Contributions 26,850,484 35,896,110
Withdrawals (5,780,213) (4,576,213)
------------ -----------
Net increase in net assets from capital tranactions 21,070,271 71,021,689
------------ -----------
TOTAL INCREASE IN NET ASSETS 49,430,661 89,544,891
NET ASSETS
At beginning of period 89,544,891 --
------------ -----------
At end of period $138,975,552 $89,544,891
============ ===========
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
JANUARY 28, 2003
SIX MONTHS ENDED (COMMENCEMENT OF
MARCH 31, 2004 OPERATIONS TO
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
TOTAL RETURN(+) 29.22%(+++) 36.44%(+++)
RATIOS:
Expenses (to average daily net assets)* 1.20%(++) 1.46%(++)
Net Investment Income (to average daily net assets)* 0.53%(++) 1.29%(++)
Portfolio Turnover 32%(+++) 46%(+++)
Net Assets, End of Period (000's omitted) $138,976 $89,545.00
- ----------------------
* For the period indicated, the investment advisor voluntarily agreed not to impose 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 N/A 1.49%(++)
Net investment income N/A 1.26%(++)
(+) Total return for the Portfolio includes performance of The Boston Compan
International Small Cap Fund prior to its conversion to a master-feeder
structure and contribution of its investments to the Portfolio. Total
return would have been lower in the absence of expense waivers.
(++) Computed on an annualized basis.
(+++) Not annualized.
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP 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. The Boston
Company International Small Cap Portfolio (the "Portfolio"), a separate
diversified investment series of the Portfolio Trust, commenced operations
on January 28, 2003.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of companies
that are located in foreign countries represented in the Citigroup Extended
Market Ex-U.S. (EMI-U.S.) Index. The Portfolio may invest up to 25% of its
assets in emerging market countries.
At March 31, 2004, there were two funds, The Boston Company International
Small Cap Fund and Dreyfus Premier International Small Cap Fund invested in
the Portfolio. The value of the funds' investment in the Portfolio reflects
the funds' proportionate interests in the net assets of the Portfolio. At
March 31, 2004, The Boston Company International Small Cap Fund and the
Dreyfus Premier International Small Cap Fund held approximately 99% and 1%
interests in the Portfolio, respectively.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
Portolio's shares may change on days when shareholders are not able to buy
or sell them. Many securities markets and exchanges outside the U.S. close
prior to the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect the events that occur after such close but before the close of the
New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market),
the Portfolio may value its assets by a method the Trustees believe
accurately reflects the fair value. The Trustees have adopted fair value
pricing procedures, which, among other things, require the Portfolio to
fair value such secutities if there has been a movement in the U.S. market
that exceeds a specified threshold. Although the threshold may be revised
from time to time and the number of days on which fair value prices will be
used will depend on market activity, it is possible that fair value prices
for foreign securities will be used by each fund to a significant extent.
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. 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.
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 Portfolio's books and the
U.S. dollar equivalent amounts usually received or paid.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
C. 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.
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. 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.
G. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by the fund manager
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to The Boston Company Asset Management,
LLC ("TBCAM") for overall investment advisory, administrative services, and
general office facilities, is paid monthly at the annual rate of 1.00% of
the Portfolio's average daily net assets.
The Fund compensates Mellon Bank, N.A., under a custody, administration and
accounting services agreement for providing custody, fund administration
and fund accounting services for the fund. Pursuant to this agreement the
Fund was charged $85,546 during the period ended March 31, 2004.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM 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.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP 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 period ended March 31, 2004 were $52,835,465 and
$35,279,651, respectively. For the period ended March 31, 2004, 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 March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $97,160,937
===========
Gross unrealized appreciation 39,793,319
Gross unrealized depreciation (489,804)
-----------
Net unrealized appreciation $39,303,515
===========
(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 the Portfolio Trust's registration statement.
The Portfolio may trade 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.
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 did not enter into option transactions during the period
ended March 31, 2004.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 March 31, 2004, the Portfolio held the following forward foreign
currency exchange contracts:
LOCAL PRINCIPAL CONTRACT MARKET AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
--------------------------------------------------------------------------------------------------------------------------
Danish Krone 2,791,300 4/2/2004 $ 461,105 $ 461,105 --
Hong Kong Dollar 1,425,000 4/1/2004 182,880 182,880 --
South Korean Won 625,091,614 4/1/2004 544,600 547,318 $2,718
Swedish Krona 1,018,500 4/2/2004 135,044 135,044 --
---------- ---------- ------
$1,323,629 $1,326,347 $2,718
========== ========== ======
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 March 31, 2004, the Portfolio held the following futures contracts:
EXPIRATION UNDERLYING FACE UNREALIZED GAIN
CONTRACT POSITION DATE AMOUNT AT VALUE (LOSS)
---------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro
(126 contracts) Long 6/17/2004 $2,513,330 $(10,480)
Topix Futures (6 contracts) Long 6/17/2004 678,654 35,401
$ 24,921
========
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY INTERNATIONAL SMALL CAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) SECURITY LENDING:
The Portfolio may lend its securities to financial institutions which the
Portfolio 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.
The Portfolio loaned securities during the period ended March 31, 2004
resulting in security lending income. At March 31, 2004, the Portfolio had
$18,525,201 worth of securities on loan.
(7) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (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 0.060 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 period ended March 31, 2004, the
commitment fee was $1,267 for the Portfolio.
During the period ended March 31, 2004, the Portfolio had no borrowings
under the credit facility.
23
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 March 31, 2004. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585
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 None
c/o Decision Resources, Inc. 11/3/1986 and Chief Executive
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street Associates 11/3/1986 Associates (family
400 Essex Street investment trust 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, Mertens 29 None
P.O. Box 233 11/3/1986 House, Inc.; Trustee
New London, NH 03257 and Chairman of the
4/11/35 Board, Visiting Nurse
Alliance of Vermont
& New Hampshire
Interested 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 Trustee, President Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset and Chief and Chief Operating
Management Company LLC, Executive Officer Officer, Mellon Institutional
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial Officer,
Mellon Institutional
Asset Management
24
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
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Secretary Secretary Senior Vice President 29 None
c/o Standish Mellon Asset since 2003 and Head of Operations
Management, Mellon Institutional Asset
One Boston Place Management, formerly
Boston, MA 02108 First Vice President,
2/20/61 Mellon Institutional Asset
Management and Mellon
Global Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None
c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish
Management, Treasurer since Mellon Asset Management
One Boston Place 2002
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
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
c/o Standish Mellon Asset President Fund Operations since
Management, 1999; Shareholder
One Boston Place Representative, Standish
Boston, MA 02108 Mellon Asset Management
1/19/71
25
THIS PAGE INTENTIONALLY LEFT BLANK
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.standishmellon.com
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
THE BOSTON COMPANY SMALL CAP
Financial Report GROWTH FUND
- --------------------------------------------------------------------------------
For the Period Ended
March 31, 2004 (Unaudited)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in The Boston Company Small Cap Growth Portfolio (Portfolio), at value (Note 1A) $ 36,605,781
Receivable for Fund shares sold 21,681
Prepaid expenses 783
------------
Total assets 36,628,245
LIABILITIES
Accrued Trustees' fees and expenses (Note 2) $ 2,055
Accrued expenses and other liabilities 1,312
-------
Total liabilities 3,367
------------
NET ASSETS $36,624,878
============
NET ASSETS CONSIST OF:
Paid-in capital $ 51,710,869
Accumulated net realized loss (20,764,765)
Undistributed net investment loss (167,451)
Net unrealized appreciation 5,846,225
------------
TOTAL NET ASSETS $ 36,624,878
============
NET ASSETS ATTRIBUTABLE TO:
Institutional Class $ 22,183,317
============
Service Class $ 14,441,561
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING
Institutional Class 555,447
============
Service Class 364,915
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding)
Institutional Class $ 39.94
============
Service Class $ 39.58
============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income allocated from Portfolio $ 36,315
Interest income allocated from Portfolio 9,068
Expenses allocated from Portfolio (194,784)
-----------
Net investment loss allocated from Portfolio (149,401)
EXPENSES
Accounting and custody fees (Note 2) $ 1,503
Legal and audit services 13,446
Registration fees 9,560
Service Fees--Service Class (Note 3) 15,016
Transfer agent fees--Institutional Class (Note 2) 3,913
Transfer agent fees--Service Class (Note 2) 3,833
Trustees' fees and expenses (Note 2) 1,002
Miscellaneous 7,859
-----------
Total expenses 56,132
Deduct:
Reimbursement of Fund operating expenses--Institutional Class (Note 2) (23,049)
Reimbursement of Fund operating expenses--Service Class (Note 2) (15,005)
-----------
Total expense deductions (38,054)
-----------
Net expenses 18,078
------------
Net investment loss (167,479)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 4,757,111
Financial futures contracts (40,244)
-----------
Net realized gain 4,716,867
Change in unrealized appreciation (depreciation) allocated from portfolio
on investments and financial futures contracts allocated from Portfolio 2,414,001
------------
Net realized and unrealized gain (loss) on investments 7,130,868
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 6,963,389
============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment loss $ (167,479) $ (127,333)
Net realized gains 4,716,867 2,646,711
Change in net unrealized appreciation 2,414,001 4,670,966
----------- ------------
Net increase in net assets from investment operations 6,963,389 7,190,344
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 5)
Net proceeds from sale of shares
Institutional Class 373,542 9,023,694
Service Class 4,850,927 2,573,894
Redemption fees credited to capital
Institutional Class 10 --
Cost of shares redeemed
Institutional Class (4,054,853) (11,987,346)
Service Class (1,596,355) (1,209,938)
----------- ------------
Net decrease in net assets from Fund share tranactions (426,729) (1,599,696)
----------- ------------
TOTAL INCREASE IN NET ASSETS 6,536,660 5,590,648
NET ASSETS
At beginning of period 30,088,218 24,497,570
----------- ------------
At end of period (including undistributed net investment income of $0 and $28) $36,624,878 $ 30,088,218
=========== ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 ----------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 32.41 $ 24.78 $ 29.28 $ 60.87 $ 38.28 $ 22.22
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (1) (0.16) (0.11) (0.16) (0.19) (0.43) (0.24)
Net realized and unrealized
gains (loss) on investments 7.69 7.74 (4.34) (25.66) 26.82 16.30
------- ------- ------- ------- ------- -------
Total from investment operations 7.53 7.63 (4.5) (25.85) 26.39 16.06
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments -- -- -- (5.74) (3.80) --
------- ------- ------- ------- ------- -------
Total distributions to shareholders -- -- -- (5.74) (3.80) --
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 39.94 $ 32.41 $ 24.78 $ 29.28 $ 60.87 $ 38.28
======= ======= ======= ======= ======= =======
TOTAL RETURN(+) 23.20% 30.79% (15.37)% (45.36)% 71.60% 72.14
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.13%(++) 1.00% 1.00% 1.00% 0.98% 1.00
Net Investment Income (Loss)
(to average daily net assets)* (0.87)%(++) (0.42)% (0.52)% (0.48)% (0.70)% (0.73)%
Net Assets, End of Period (000's omitted) $22,183 $21,168 $18,780 $31,365 $82,840 $44,031
- ------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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) $ (0.20) $ (0.30) $ (0.25) $ (0.28) N/A $ (0.30)
Ratios (to average daily net assets):
Expenses 1.34%(++) 1.66% 1.29% 1.20% N/A 1.18%
Net investment income (loss) (1.08)%(++) (1.08)% (0.81)% (0.68)% N/A (0.91)%
(1) Calculated based on average shares outstanding.
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS--SERVICE CLASS
- --------------------------------------------------------------------------------
FOR THE FOR THE PERIOD
SIX MONTHS MAY 8, 2000
ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT
MARCH 31, 2004 ---------------------------- OF OPERATIONS) TO
(UNAUDITED) 2003 2002 2001 SEPTEMBER 30, 2000
-------------- ------ ------ ------ ------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 32.16 $24.65 $29.19 $60.83 $59.04
------- ------ ------ ------ ------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (1) (0.20) (0.19) (0.23) (0.29) (0.21)
Net realized and unrealized
gains (loss) on investments 7.62 7.70 (4.31) (25.63) 2.00
------- ------ ------ ------ ------
Total from investment operations 7.42 7.51 (4.54) (25.92) 1.79
------- ------ ------ ------ ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments -- -- -- (5.72) --
------- ------ ------ ------ ------
Total distributions to shareholders -- -- -- (5.72) --
------- ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $ 39.58 $32.16 $24.65 $29.19 $60.83
======= ====== ====== ====== ======
TOTAL RETURN((+)) 23.06% 30.47% (15.55)% (45.49)% 3.03%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.38%(++) 1.25% 1.25% 1.25% 1.23%
Net Investment Income (Loss)
(to average daily net assets)* (1.12)%(++) (0.68)% (0.74)% (0.75)% (0.84)%
Net Assets, End of Period (000's omitted) $14,442 $8,921 $5,718 $6,156 $8,031
- ---------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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) $ (0.25) $(0.40) $(0.35) $(0.41) $(0.24)
Ratios (to average daily net assets):
Expenses 1.63%(++) 2.00% 1.66% 1.55% 1.36%
Net investment income (loss) (1.37)%(++) (1.43)% (1.15)% (1.05)% (0.97)%
(1) Calculated based on average shares outstanding.
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH 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. The
Boston Company Small Cap Growth Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest in The Boston
Company Small Cap Growth Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as the
Fund. The Portfolio seeks to achieve its investment objective by investing,
under normal circumstances, at least 80% of its net assets in equity
securities of small cap U.S. 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 March 31, 2004). 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 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 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 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. 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 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. 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 losses deferred due to wash sales, capital loss
carryovers and realized and unrealized gains or losses on futures.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP GROWTH 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 undistributed
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. The calculation of net investment income per share in the financial
highlights table excludes these reclassifications.
D. 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.
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 AND OTHER TRANSACTIONS WITH AFFILIATES:
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 The
Boston Company Asset Management, LLC ("TBCAM") for such services. See Note
2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. TBCAM voluntarily agreed to limit the total
operating expenses of the Portfolio's expenses (excluding brokerage
commissions, taxes and extraordinary expenses) to 1.00% of the
Institutional Class' average daily net assets for the period from October
1, 2003 through October 31, 2003, and to 1.20% for the period from November
1, 2003 through March 31, 2004. The total operating expenses of the Service
Class and its pro rata share of the Portfolio's expenses (excluding
brokerage commissions, taxes and extraordinary expenses) were limited 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 period ended March 31, 2004, TBCAM
reimbursed the Institutional Class $23,049 and the Service Class $15,005
for class-specific and Fund operating expenses. This agreement was
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Pursuant to this agreement the Fund was
charged $242 during the period ended March 31, 2004.
The Fund imposes 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. For the period ended March 31, 2004, the Fund received $10
in redemption fees.
No director, officer or employee of TBCAM 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 TBCAM 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
THE BOSTON COMPANY SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(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 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) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2004 aggregated $5,224,469 and $5,509,798
respectively.
(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:
PERIOD ENDED YEAR ENDED
Institutional Class: MARCH 31, 2004 SEPTEMBER 30, 2003
-------------- ------------------
Shares sold 9,904 337,618
Shares redeemed (107,521) (442,332)
-------- --------
Net decrease (97,617) (104,714)
======== ========
PERIOD ENDED YEAR ENDED
Service Class: MARCH 31, 2004 SEPTEMBER 30, 2003
-------------- ------------------
Shares sold 130,232 90,258
Shares redeemed (42,722) (44,827)
-------- --------
Net increase 87,510 45,431
======== ========
At March 31, 2004, three shareholders held of record approximately 17%, 12%
and 5% of the total outstanding shares of the Institutional Class and one
shareholder held of record approximately 100% of the total outstanding
shares of the Service class. Investment activity of these shareholders
could have a material impact on the Fund.
(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.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------------
EQUITIES-96.2%
BASIC MATERIALS--1.3%
Cabot Microelectronics Corp.* 6,400 $ 270,336
Glamis Gold Ltd.* 11,400 205,314
-------------
475,650
-------------
COMMUNICATIONS--5.6%
Entravision Communications Corp.* 23,900 214,383
Foundry Networks, Inc.* 6,150 105,596
Internet Security Systems* 16,900 298,116
Ipass, Inc.* 23,800 260,134
Network Associates, Inc. (a)* 26,400 475,200
SafeNet, Inc.* 4,800 180,192
Scientific-Atlanta, Inc 5,350 173,019
Verisign, Inc.* 21,700 360,003
-------------
2,066,643
-------------
CONSUMER CYCLICAL--14.3%
Aeropostale, Inc.* 7,100 257,446
Brookstone, Inc.* 13,150 361,757
Cache, Inc.* 9,200 303,324
Circuit City Stores, Inc. 20,200 228,260
Dick's Sporting Goods, Inc.* 4,200 244,188
Digital Theater Systems, Inc. 9,800 251,174
Ethan Allen Interiors, Inc. 6,600 272,316
Ingram Micro,Inc., Class A* 20,500 371,050
Linens N Things, Inc.* 13,400 474,494
Lions Gate Entertainment Corp.* 76,600 478,750
MSC Industrial Direct Co., Inc 23,800 712,810
99 Cents Only Stores* 10,800 263,736
Nu Skin Enterprises, Inc. 14,100 284,115
O'Reilly Automotive, Inc.* 4,900 196,196
Panera Bread Co.* 7,500 291,900
Rare Hospitality International, Inc.* 9,200 255,300
-------------
5,246,816
-------------
CONSUMER NONCYCLICAL--38.0%
Able Laboratories, Inc.* 17,800 347,634
Advanced Neuromodulation Systems, Inc.* 5,900 212,931
American Medical Systems Holdings, Inc.* 6,600 174,900
BearingPoint, Inc.* 18,200 195,104
Celgene Corp.* 6,900 328,785
Connetics Corp.* 17,600 390,192
Cooper Cos, Inc. 9,900 534,600
Covance, Inc.* 16,600 571,704
Coventry Health Care, Inc.* 4,450 188,369
Delta & Pine Land Co. 11,800 294,410
DeVry, Inc.* 13,700 413,055
Digene Corp.* 4,500 154,620
Discovery Laboratories, Inc.* 26,900 327,911
Dytax Corp.* 9,000 92,610
Elizabeth Arden, Inc.* 12,600 266,112
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
Forrester Research, Inc.* 26,700 $ 505,965
Fossil, Inc.* 8,100 270,135
Hain Celestial Group, Inc.* 21,400 472,726
Heidrick & Struggles International* 7,900 189,047
Inveresk Research Group, Inc.* 7,100 201,782
Iron Mountain, Inc.* 4,650 207,530
Jarden Corp.* 8,700 308,937
John B. Sanfilippo & Son, Inc.* 3,800 139,460
Kroll Inc.* 14,800 397,380
K-V Pharmaceutical Co., Class A* 8,100 198,936
Matria Healthcare, Inc.* 11,300 286,116
Medarex, Inc.* 21,800 195,546
Medicines Co. (a)* 8,450 272,175
Nabi Biopharmaceuticals* 12,300 191,265
Navigant Consulting, Inc.* 17,700 358,071
NBTY, Inc.* 10,800 401,544
Nektar Therapeutics* 22,700 489,866
OraSure Technologies, Inc.* 22,200 229,992
Orthofix International NV* 10,650 526,536
Pharmaceutical Resources, Inc.* 4,600 261,556
Resmed, Inc.* 4,000 180,760
Respironics, Inc.* 7,400 399,748
Select Medical Corp. 11,900 198,730
Steris Corp.* 11,100 286,380
Sunopta, Inc.* 17,500 173,075
Sylvan Learning Systems, Inc.* 11,800 414,298
Telik, Inc.* 7,800 209,352
The Yankee Candle Co.* 21,300 587,454
Triad Hospitals* 5,650 174,133
VCA Antech, Inc.* 8,700 309,981
Vicuron Pharmaceuticals, Inc.* 8,300 188,825
VISX, Inc.* 9,700 189,344
-------------
13,909,582
-------------
ENERGY--7.6%
Arch Coal, Inc. 13,000 408,070
Consol Energy, Inc. (a) 14,600 391,280
FMC Technologies, Inc.* 17,400 470,322
Frontier Oil Corp. 18,100 350,778
Maverick Tube Corp.* 11,900 280,245
Patina Oil & Gas Corp. 8,200 215,250
Patterson-UTI Energy, Inc.* 13,300 470,953
Peabody Energy Corp. 4,600 213,946
-------------
2,800,844
-------------
FINANCIAL--8.2%
Affiliated Managers Group* 3,450 188,301
Bristol West Holdings, Inc. 6,900 140,760
Capital Lease Funding, Inc. REIT 10,580 135,636
Cathay General Bancorp 5,000 317,400
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
City National Corp., Class A 2,900 $ 173,710
Commerical Capital Bancorp, Inc.* 5,300 121,476
First Community Bancorp, Inc., Class A 5,300 198,167
First Midwest Bancorp, Inc. 6,400 218,496
Franklin Bank Corp. 9,810 182,368
Investors Financial Services Corp. (a) 4,600 190,072
Knight Trading Group* 15,500 196,230
Mercantile Bank Corp. 4,700 166,850
New York Community Bancorp 12,977 444,852
Southwest Bancorporation of Texas 3,700 139,601
Triad Guaranty, Inc.* 3,800 200,450
--------------
3,014,369
--------------
INDUSTRIAL--8.8%
Central Freight Lines, Inc. 13,800 181,470
CUNO, Inc.* 4,600 206,448
Cymer, Inc.* 9,600 370,656
Fisher Scientific International* 11,300 621,952
Kemet Corp.* 33,100 474,654
Old Dominion Frieght Line* 5,700 192,090
SCS Transportation, Inc.* 17,600 383,680
UTI Worldwide, Inc. 10,900 487,121
Waste Connections* 7,400 294,520
--------------
3,212,591
--------------
TECHNOLOGY--12.4%
Applied Micro Circuits Corp.* 33,800 194,350
Cypress Semiconductor Corp.* 19,460 398,346
Fairchild Semiconductor International* 22,800 547,884
Helix Technology Corp. 11,900 288,575
Hutchinson Technology, Inc.* 12,700 356,362
Lam Research Corp.* 10,900 274,789
Lawson Software, Inc.* 41,300 342,790
ManTech International Corp., Class A* 9,600 196,704
Manugistics Group, Inc.* 31,400 215,090
Mentor Graphics Corp.* 22,900 408,078
Packeteer, Inc.* 27,200 359,040
Quest Software, Inc.* 23,100 377,685
Zoran Corp.* 32,700 567,669
--------------
4,527,362
--------------
TOTAL EQUITIES (Cost $29,414,227) 35,253,857
--------------
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR
SECURITY RATE MATURITY VALUE VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--2.9%
U.S. GOVERNMENT--0.5%
U.S. Treasury Bill (++) 0.91% 6/17/2004 190,000 $ 189,630
-----------
INVESTMENT COMPANIES--2.4%
Dreyfus Institutional Preferred Plus (+) 865,798 865,798
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $1,055,428) 1,055,428
-----------
INVESTMENT OF CASH COLLATERAL--2.8%
Dreyfus Institutional Preferred Money Market Fund
(cost $1,005,930)(+) 1,005,930 1,005,930
-----------
TOTAL INVESTMENTS--101.9% (COST $31,475,585) 37,315,215
LIABILITIES IN EXCESS OF OTHER ASSETS--1.9% (709,434)
-----------
NET ASSETS--100.0% $36,605,781
===========
NOTES TO SCHEDULE OF INVESTMENTS:
* Non-income producing security
REIT Real Estate Investment Trust
(+) Affiliated fund that is available only to investment companies and other
accounts managed by TBCAM or it affiliates. The effective yield is 0.98%.
A complete listing of the fund's holdings as of its most recent fiscal
year end is available.
(++) Denotes all or part of security segregated as collateral.
(a) Security, or a portion thereof, was on loan at March 31, 2004.
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (identified cost $29,603,857)
(including securities on loan valued at $979,164) (Note 6) $35,443,487
Affiliated investments (Note 1E) (identified cost $1,871,728) 1,871,728
Cash 119
Receivable for investments sold 952,096
Interest and dividends receivable 5,866
Receivable for variation margin on
open financial futures contracts (Note 5) 1,945
Prepaid expenses 3,630
-----------
Total assets 38,278,871
LIABILITIES
Liability for securities on loan (Note 6) $1,005,930
Payable for investments purchased 622,226
Accrued accounting and custody fees (Note 2) 8,836
Accrued Trustees' fees and expenses (Note 2) 804
Accrued expenses and other liabilities 35,294
----------
Total liabilities 1,673,090
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $36,605,781
===========
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income $ 36,315
Interest income (including securities lending income of $2,715) (Note 6) 9,068
----------
Total investment Income 45,383
----------
EXPENSES
Investment advisory fee (Note 2) $ 138,896
Accounting and custody fees (Note 2) 34,629
Legal and audit services 24,035
Trustees' fees and expenses (Note 2) 2,093
Insurance expense 3,476
Miscellaneous 1,671
-----------
204,800
Total expenses
Deduct:
Waiver of investment advisory fee (Note 2) (10,016)
-----------
Net expenses 194,784
----------
Net investment income (149,401)
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 4,757,111
Financial futures contracts (40,244)
-----------
Net realized gain (loss) 4,716,867
Change in unrealized appreciation (depreciation)
Investment securities and futures variation margin 2,413,899
----------
Net realized and unrealized gain (loss) 7,130,766
----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $6,981,365
==========
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment loss $ (149,401) $ (110,593)
Net realized gains 4,716,867 2,646,730
Change in net unrealized appreciation 2,413,899 4,670,997
----------- -----------
Net increase in net assets from investment operations 6,981,365 7,207,134
----------- -----------
CAPITAL TRANSACTIONS
Contributions 5,224,469 11,400,746
Withdrawals (5,509,798) (13,197,733)
----------- -----------
Net increase (decrease) in net assets from capital tranactions (285,329) (1,796,987)
----------- -----------
Total Increase in Net Assets 6,696,036 5,410,147
NET ASSETS
At beginning of period 29,909,745 24,499,598
----------- -----------
At end of period $36,605,781 $29,909,745
=========== ===========
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 ---------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------------------
TOTAL RETURN(+) 23.21% 30.73% (15.37)% (45.36)% 71.67% 72.19%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.12%(++) 1.00% 1.00% 1.00% 0.91% 0.95%
Net Investment Income (Loss)
(to average daily net assets)* (0.86)%(++) (0.42)% (0.51)% (0.49)% (0.63)% (0.67)%
Portfolio Turnover 85%(+++) 261% 239% 191% 305% 242%
Net Assets, End of Period (000's omitted) $36,606 $29,910 $24,500 $37,590 $91,114 $43,932
- -----------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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:
Ratios (to average daily net assets):
Expenses** 1.18%(++) 1.28% 1.18% 1.08% N/A N/A
Net investment income (loss)** (0.92)%(++) (0.70)% (0.69)% (0.57)% N/A N/A
(+) Total return would have been lower in the absence of expense waivers,
returns for periods of less than one year have not been annualized.
(++) Computed on an annualized basis.
(+++) Not annualized.
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH 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. The Boston
Company Small Cap Growth Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of its net assets in equity securities of small
cap U.S. companies.
At March 31, 2004, there was one Fund, The Boston Company Small Cap Growth
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 March
31, 2004 was approximately 100%.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. 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. 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 amortizaion 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.
C. 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.
D. 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.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
E. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM") or its
affiliates are described as "affiliated" in the Act.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM, a wholly-owned subsidiary of
Mellon Financial Corporation, for overall investment advisory and
administrative services is paid monthly at the annual rate of 0.80% of the
Portfolio's average daily net assets. TBCAM voluntarily agreed to limit the
total operating expenses of the Portfolio (excluding brokerage commissions,
taxes and extraordinary expenses) to 1.00% of the Portfolio's average daily
net assets for the period from October 1, 2003 through October 31, 2003,
and to 1.20% for the period from November 1, 2003 through March 31, 2004.
Pursuant to this agreement, for the period ended March 31, 2004, TBCAM did
not impose $10,016 of its investment advisory fee. This agreement was
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
The Portfolio compensates Mellon Bank, N.A. under a custody, administration
and accounting services agreement for providing custody, fund
administration and fund accounting services for the Portfolio. Pursuant to
this agreement the Portfolio was charged $43,403 during the period ended
March 31, 2004.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM 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 period ended March 31, 2004, were $27,770,048 and
$27,885,914, respectively. For the period ended March 31, 2004, 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 March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $30,535,161
===========
Gross unrealized appreciation 6,196,367
Gross unrealized depreciation (422,243)
-----------
Net unrealized appreciation $ 5,774,124
===========
(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 the Portfolio Trust's registration statement.
The Portfolio may trade the following financial instruments with
off-balance sheet risk:
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
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 did not enter into option transactions during the Period
ended March 31, 2004.
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 March 31, 2004, the Portfolio held the following financial futures
contracts:
UNDERLYING FACE
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE UNREALIZED GAIN
---------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index
(1 contracts) Long 6/17/2004 $288,700 $6,595
(6) SECURITY LENDING:
The Portfolio may lend its securities to financial institutions which the
Portfolio 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.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The Portfolio loaned securities during the period ended March 31, 2004
resulting in security lending income. At March 31, 2004, the Portfolio had
$979,164 worth of securities on loan.
(7) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (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 .060 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 period ended March 31, 2004, the commitment fee was $499 for the
Portfolio.
During the period ended March 31, 2004, the Portfolio had borrowings under
the credit facility. As a result of these borrowings the Portfolio incurred
$30 of interest expense.
21
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 March 31, 2004. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585
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 None
c/o Decision Resources, Inc. 11/3/1986 and Chief Executive
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street Associates 11/3/1986 Associates (family
400 Essex Street investment trust 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, Mertens 29 None
P.O. Box 233 11/3/1986 House, Inc.; Trustee
New London, NH 03257 and Chairman of the
4/11/35 Board, Visiting Nurse
Alliance of Vermont
& New Hampshire
Interested 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 Trustee, President Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset and Chief and Chief Operating
Management Company LLC, Executive Officer Officer, Mellon Institutional
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial Officer,
Mellon Institutional
Asset Management
22
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
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Secretary Secretary Senior Vice President 29 None
c/o Standish Mellon Asset since 2003 and Head of Operations
Management, Mellon Institutional Asset
One Boston Place Management, formerly
Boston, MA 02108 First Vice President,
2/20/61 Mellon Institutional Asset
Management and Mellon
Global Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None
c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish
Management, Treasurer since Mellon Asset Management
One Boston Place 2002
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
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
c/o Standish Mellon Asset President Fund Operations since
Management, 1999; Shareholder
One Boston Place Representative, Standish
Boston, MA 02108 Mellon Asset Management
1/19/71
23
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.standishmellon.com
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
THE BOSTON COMPANY SMALL CAP
Financial Report VALUE FUND
- --------------------------------------------------------------------------------
For the Period Ended
March 31, 2004 (Unaudited)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in The Boston Company Small Cap Value Portfolio (Portfolio), at value (Note 1A) $ 54,722,036
Receivable for Fund shares sold 160,000
Prepaid expenses 12,414
-------------
Total assets 54,894,450
LIABILITIES
Accrued accounting, custody and transfer agent fees (Note 2) $2,500
Accrued trustees' fees and expenses 1,000
Accrued expenses and other liabilities 7,828
------
Total liabilities 11,328
-------------
NET ASSETS $ 54,883,122
=============
NET ASSETS CONSIST OF:
Paid-in capital $ 36,734,782
Accumulated net realized gain (loss) 8,018,293
Undistributed net investment income (loss) (104,555)
Net unrealized appreciation (depreciation) 10,234,602
-------------
TOTAL NET ASSETS $ 54,883,122
=============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 2,601,830
=============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 21.09
=============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income allocated from Portfolio $ 181,398
Interest income allocated from Portfolio (including securities lending income of $13,900) 18,457
Expenses allocated from Portfolio (275,496)
-------------
Net investment income allocated from Portfolio (75,641)
EXPENSES
Accounting, custody, and transfer agent fees (Note 2) $ 4,390
Legal and audit services 11,629
Registration fees 10,243
Trustees' fees and expenses (Note 2) 43
Insurance expense 426
Miscellaneous 9,159
--------
Total expenses 35,890
-------------
Net investment income (loss) (111,531)
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment security transactions 8,256,301
Change in unrealized appreciation (depreciation) allocated from portfolio on investments
allocated from Portfolio 3,346,527
-------------
Net realized and unrealized gain (loss) on investments 11,602,828
-------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 11,491,297
=============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment loss $ (111,531) $ (18,579)
Net realized gains 8,256,301 4,950,349
Change in net unrealized appreciation 3,346,527 5,875,996
----------- -----------
Net increase in net assets from investment operations 11,491,297 10,807,766
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D)
From net investment income -- (57,917)
From net realized gains on investments (4,564,248) (43,792)
----------- -----------
Total distributions to shareholders (4,564,248) (101,709)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 4,075,120 7,729,570
Value of shares issued to shareholders in payment of distributions declared 4,026,790 71,480
Cost of shares redeemed (5,450,888) (9,136,228)
----------- -----------
Net increase (decrease) in net assets from Fund share tranactions 2,651,022 (1,335,178)
----------- -----------
TOTAL INCREASE IN NET ASSETS 9,578,071 9,370,879
NET ASSETS
At beginning of period 45,305,051 35,934,172
----------- -----------
At end of period (including undistributed net investment income
(loss) of ($104,555) and $6,976) $54,883,122 $45,305,051
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 1, 2000
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30, (COMMENCEMENT
MARCH 31, 2004 ------------------------------------ OF OPERATIONS) TO
(UNAUDITED) 2003 2002 2001 SEPTEMBER 30, 2000
---------------- ------- ------- ------- ------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.49 $ 14.30 $ 13.86 $ 14.01 $11.05
------- ------- ------- ------- ------
FROM INVESTMENT OPERATIONS:
Net investment income (loss)* (1) (0.04) (0.01) 0.05 0.10 0.04
Net realized and unrealized
gains (loss) on investments 4.44 4.24 0.75 0.31 2.94
------- ------- ------- ------- ------
Total from investment operations 4.40 4.23 0.80 0.41 2.98
------- ------- ------- ------- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- (0.02) (0.04) (0.06) (0.02)
From net realized gains on investments (1.80) (0.02) (0.32) (0.50) --
------- ------- ------- ------- ------
Total distributions to shareholders (1.80) (0.04) (0.36) (0.56) (0.02)
------- ------- ------- ------- ------
NET ASSET VALUE, END OF YEAR $ 21.09 $ 18.49 $ 14.30 $ 13.86 $14.01
======= ======= ======= ======= ======
TOTAL RETURN(+) 24.68% 29.64% 5.43% 3.12% 26.98%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)** 1.18% 1.15% 1.00% 1.00% 1.00%
Net Investment Income (Loss)
(to average daily net assets)** (0.42)% (0.05)% 0.32% (0.68)% 0.50%
Portfolio Turnover(2) -- 51% 164% 149% 71%
Net Assets, End of Period (000's omitted) $54,883 $45,305 $35,934 $28,532 $3,764
- -------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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 (loss) per share (1) N/A $ (0.03) $ 0.01 $ 0.05 $(0.26)
Ratios (to average daily net assets):
Expenses** N/A 1.28% 1.24% 1.37% 4.51%
Net investment income (loss)** N/A (0.18)% 0.08% 0.31% (3.01)%
(1) Calculated based on average shares outstanding.
(2) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 28, 2003. The portfolio turnover for
the period since the Fund transferred substantially all of its investable
assets to the Portfolio is shown in the Portfolio's financial statements
which are included elsewhere in this report.
(+) Total return would have been lower in the absense of expense waivers,
returns for periods of less than one year have not been annualized.
** Annualized for periods less than 1 year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE 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. The
Boston Company Small Cap Value 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 The
Boston Company Small Cap Value Portfolio (the "Portfolio"), a subtrust of
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which
is organized as a New York trust, and has the same investment objective as
the Fund. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities of
small cap U.S. 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 97% at March 31, 2004). 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 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. 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 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. 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 realized and unrealized gains or losses on futures
contracts and wash sales.
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.
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.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 AND OTHER TRANSACTIONS WITH AFFILIATES:
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 The
Boston Company Asset Management, LLC ("TBCAM") for such services. See Note
2 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. TBCAM voluntarily agreed to limit the Fund's
total operating expenses of the Fund and its pro rata share of the
Portfolio expenses (excluding brokerage commissions, taxes and
extraordinary expenses) to 1.25% of the Fund's average daily net assets.
For the period ended March 31, 2004 the Fund operated below the agreed upon
expense limit. This agreement was voluntary and temporary and may be
discontinued or revised by TBCAM at any time.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, an affiliate of TBCAM, under a transfer
agency agreement for providing personnel and facilities to perform transfer
agency services for the Fund. Pursuant to this agreement the Fund was
charged $121 during the period ended March 31, 2004.
The Fund imposes 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. For the period ended March 31, 2004, the Fund received no
redemption fees.
No director, officer or employee of TBCAM 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 TBCAM 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
period ended March 31, 2004 aggregated $8,101,910 and $5,492,888,
respectively.
(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
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
Shares sold 202,373 488,251
Shares issued to shareholders in payment
of distributions declared 215,710 4,747
Shares redeemed (267,090) (555,316)
-------- --------
Net increase (decrease) 150,993 (62,318)
======== ========
At March 31, 2004, three shareholders of record held approximately 17%, 12%
and 5% of the total outstanding shares of the Fund, respectively.
Investment activities of these shareholders could have a material impact on
the Fund.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP VALUE 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.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
EQUITIES-99.5%
BASIC MATERIALS--4.9%
Balchem Corp. 12,500 $ 328,750
Cabot Microelectronics Corp.* 9,300 392,832
Compass Minerals International, Inc.* 21,500 352,385
Hecla Mining Co.* 48,800 410,408
Louisana-Pacific Corp. 17,100 441,180
Octel Corp. 13,900 414,915
Reliance Steel & Aluminum Co. 11,400 400,710
-------------
2,741,180
-------------
COMMUNICATIONS--6.7%
Anaren, Inc.* 16,600 261,948
Courier Corp. 11,650 521,338
Gemstar-TV Guide International, Inc.* 84,200 564,982
Macromedia, Inc.* 19,200 385,344
Powerwave Technologies, Inc. (a) * 54,500 425,100
Primus Telecommunications GP* 37,200 312,852
Remec, Inc.* 52,700 400,520
Stratex Networks, Inc.* 57,800 274,550
Surewest Communications 8,500 227,800
Tollgrade Communications, Inc.* 22,600 360,696
-------------
3,735,130
-------------
CONSUMER CYCLICAL--11.0%
Atlantic Coast Airlines Holdings* 39,900 290,073
Big 5 Sporting Goods Corp.* 10,700 270,175
Charming Shoppes, Inc.* 46,100 359,119
Churchill Downs, Inc. 7,200 279,216
Circuit City Stores, Inc. 40,200 454,260
DEB Shops, Inc. 12,800 329,088
Interface, Inc.* 54,800 435,660
Longs Drug Stores Corp. 21,700 408,611
Regis Corp. 8,900 395,516
Rex Stores Corp.* 15,900 250,266
Saks, Inc 23,700 417,120
School Speciality, Inc.* 12,200 433,954
Stanley Furniture Co., Inc. 8,600 333,938
Too, Inc.* 13,100 274,445
Toro Co. 12,800 793,600
Tweeter Home Entertainment Group* 41,400 390,816
-------------
6,115,857
-------------
CONSUMER NONCYCLICAL--17.9%
Amedisys, Inc.* 17,800 434,498
American Italian Pasta Co. 7,300 291,489
Apria Healthcare Group, Inc.* 13,500 404,190
Discovery Partner International* 35,300 217,095
Dollar Thrifty Automotive Group* 32,600 823,802
Epix Medical, Inc.* 10,100 209,575
Green Mountain Coffee Roasters* 20,900 421,344
Hanger Orthopedic Group, Inc.* 17,600 317,680
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- -------------------------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
ICU Medical, Inc. (a)* 11,800 $ 358,366
Immunogen, Inc.* 40,500 272,160
Labor Ready, Inc.* 30,900 417,768
McGrath Rentcorp 11,100 338,439
Medicines Co.* 10,800 347,868
Medsource Technologies, Inc.* 73,000 432,160
Nutraceutical International Corp.* 13,500 291,600
Orthodontic Centers of America (a)* 50,500 398,950
Perrigo Co. 20,600 413,030
Polymedia Corp. 13,800 370,116
Ralcorp Holdings, Inc.* 36,100 1,098,523
Sierra Health Services* 13,220 481,208
United Therapeutics Corp.* 14,700 350,301
VCA Antech, Inc.* 10,500 374,115
Vical, Inc.* 40,300 245,830
Yankee Candle Co., Inc.* 22,400 617,792
-------------
9,927,899
-------------
ENERGY--7.8%
Arch Coal, Inc. 15,500 486,545
Consol Energy, Inc. (a) 11,500 308,200
Dril-Quip, Inc.* 18,800 309,072
FMC Technologies, Inc.* 36,800 994,704
Grant Prideco, Inc.* 27,000 418,500
Hydril* 10,600 277,720
Input/Output, Inc.* 24,800 192,200
Key Energy Services, Inc.* 36,000 396,000
Massey Energy Co. 17,300 381,811
Tetra Technologies, Inc.* 21,150 552,650
-------------
4,317,402
-------------
FINANCIAL--18.2%
Alexandria Real Estate Equities, Inc., REIT 8,600 541,800
American Home Mortgage Investment Corp., REIT 17,800 512,640
Bank of Hawaii Corp. 8,900 412,337
Capital Automotive REIT 8,100 286,011
First Republic Bank 12,200 470,432
Horace Mann Educators Corp. 26,500 416,580
Innkeepers USA Trust, REIT 38,400 350,976
Investment Technology Group, Inc.* 26,900 411,570
Jones Lang Lasalle, Inc.* 14,600 375,366
Knight Trading Group, Inc.* 30,100 381,066
Lasalle Hotel Properties, REIT 17,000 401,200
Meristar Hospitality Corp., REIT* 39,500 274,525
Metris Cos, Inc.* 70,400 566,016
Newcastle Investment Corp., REIT 15,200 512,240
Phoenix Companies, Inc. (a) 30,600 410,346
Piper Jaffray Companies, Inc.* 4,900 265,335
Provident Bancorp, Inc. 23,100 273,735
Provident Financial Services, Inc. 16,700 312,123
Santander BanCorp. 25,400 698,500
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Scottish Annuity & Life Holding 18,300 $ 442,677
SL Green Realty Corp., REIT (a) 10,800 515,160
Southwest Bancorporation of Texas 12,300 464,079
Sterling Bancshares, Inc. 61,200 819,468
-------------
10,114,182
-------------
INDUSTRIAL--21.0%
Apogee Enterprises, Inc. 31,700 390,861
C&D Technologties, Inc. 25,400 424,434
Celadon Group, Inc. (a)* 28,700 477,281
CIRCOR International, Inc. 13,400 302,840
Concord Camera Corp.* 35,600 223,568
Cubic Corp. 12,000 312,000
Dycom Industries, Inc.* 19,900 527,748
Esterline Technologies Corp.* 22,000 546,700
Florida Rock Industries, Inc. 9,900 417,285
Heico Corp. 18,300 287,127
Herley Industries, Inc.* 23,100 436,128
Insituform Technologies, Inc.* 26,600 415,758
Invision Technologies, Inc. 17,500 869,225
Itron, Inc.* 21,600 401,976
Laidlaw International, Inc.* 37,600 547,080
Landstar System, Inc.* 12,400 507,656
Matthews International Corp., Class A 10,500 348,600
NN, Inc. 24,500 285,915
Paxar Corp.* 27,800 410,050
Simpson Manufacturing Co., Inc. 7,700 376,915
Sypris Solutions, Inc. 21,400 363,800
The Brink's Co. 37,700 1,039,766
Trinity Industries, Inc. 15,200 422,560
Waste Connections, Inc. (a)* 24,700 983,060
Worthington Industries 17,500 335,475
-------------
11,653,808
-------------
TECHNOLOGY--10.3%
Borland Software Corp.* 43,600 395,888
Cray, Inc.* 42,600 282,438
Credence Systems Corp. (a)* 24,500 291,060
Digi International, Inc.* 26,700 263,529
eFunds Corp.* 17,300 283,720
EPIQ Systems, Inc.* 16,900 276,822
Mentor Graphics Corp.* 19,100 340,362
Midway Games, Inc. (a)* 54,600 397,488
NetIQ Corp.* 29,500 411,820
Perot Systems Corp., Class A* 73,100 972,230
Richardson Electronics Ltd. 26,900 325,759
Seachange International, Inc.* 15,000 229,500
Sybase, Inc.* 28,300 594,017
THQ, Inc.* 19,400 392,462
Zoran Corp.* 15,000 260,400
-------------
5,717,495
-------------
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
SCHEDULE OF INVESTMENTS--MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------
UTILITIES--1.6%
Cleco Corp. 26,300 $ 500,489
UGI Corp. 11,630 382,858
-------------
883,347
-------------
TOTAL EQUITIES (Cost $44,950,135) 55,206,300
-------------
INVESTMENT OF CASH COLLATERAL--7.1%
Dreyfus Institutional Preferred Money Market Fund
(cost $3,940,100)(+) 3,940,100 3,940,100
-------------
TOTAL INVESTMENTS--106.6% (COST $48,890,235) 59,146,400
LIABILITIES IN EXCESS OF OTHER ASSETS--(6.6)% (3,664,642)
-------------
NET ASSETS--100.0% $ 55,481,758
=============
NOTES TO SCHEDULE OF INVESTMENTS:
REIT Real Estate Investment Trust
* Non-income producing security.
(a) Security, or a portion thereof, was on loan at March 31, 2004.
(+) Affiliated fund that is available only to investment companies and other
accounts managed by TBCAM or its affiliates. The effective yield is 0.98%.
A complete listing of the fund's holdings as of its most recent fiscal
year end is available.
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (including securities on loan
valued at $3,120,266 (Note 6)) (Note 1A) (identified cost $44,950,135) $ 55,206,300
Affiliated investment (Note 1F) (cost--$3,940,100) 3,940,100
Receivable for investments sold 3,110,241
Interest and dividends receivable 28,906
Prepaid expenses 3,435
-------------
Total assets 62,288,982
LIABILITIES
Liability for security lending collateral (Note 6) $3,940,100
Payable for investments purchased 2,625,192
Due to Custodian 210,581
Accrued accounting and custody fees (Note 2) 16,876
Accrued Trustee fees and expenses (Note 2) 1,260
Accrued expenses and other liabilities 13,215
----------
Total liabilities 6,807,224
-------------
NET ASSETS (APPLICABLE TO INVESTORS' BENFICIAL INTEREST) $ 55,481,758
=============
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Dividend income $ 184,616
Interest income (including securities lending income of $14,336) 18,541
-------------
Total investment Income 203,157
EXPENSES
Investment advisory fee (Note 2) $214,071
Accounting and custody fees (Note 2) 41,171
Legal and audit services 14,280
Trustees' fees and expenses (Note 2) 3,798
Insurance expense 3,751
Miscellaneous 734
--------
Total expenses 277,805
-------------
Net investment income (74,648)
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 8,321,333
Change in unrealized appreciation (depreciation)
Investment securities 3,369,995
-------------
Net realized and unrealized gain (loss) 11,691,328
-------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 11,616,680
=============
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
MARCH 31, 2004 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2003
---------------- ------------------
INCREASE (DECREASE) IN NET ASSETS FROM INVESTMENT OPERATIONS
Net investment income (loss) $ (74,648) $ (19,540)
Net realized gains (losses) 8,321,333 4,435,792
Change in net unrealized appreciation (depreciation) 3,369,995 7,419,673
------------ -----------
Net increase (decrease) in net assets from investment operations 11,616,680 11,835,925
------------ -----------
CAPITAL TRANSACTIONS
Assets contributed by Standish Small Cap Value Fund
(including unrealized appreciation/depreciation of $533,503) -- 36,721,319
Contributions 8,587,599 5,115,275
Withdrawals $(10,095,393) (8,299,647)
------------ -----------
Net increase (decrease) in net assets from capital transactions (1,507,794) 33,536,947
------------ -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 10,108,886 45,372,872
NET ASSETS
At beginning of period 45,372,872 --
------------ -----------
At end of period $ 55,481,758 $45,372,872
============ ===========
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
JANUARY 28, 2003
SIX MONTHS ENDED (COMMENCEMENT OF
MARCH 31, 2004 OPERATIONS TO
(UNAUDITED) SEPTEMBER 30,2003
---------------- ------------------
TOTAL RETURN (+) 24.75% 29.85%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)*(++) 1.04% 1.10%
Net Investment Loss (to average daily net assets)*(++) (0.28)% (0.07)%
Portfolio Turnover 83%(+++) 102%(+++)
Net Assets, End of Period (000's omitted) $55,482 $45,373
- ----------------------
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its 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:
Ratios (to average daily net assets):
Expenses (+)(+) N/A 1.10%
Net investment loss (+)(+) N/A (0.07)%
(+) Total return for the Portfolio has been calculated based on the total
return for the investor 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 absense of
expense waivers. Returns for periods of less than one year have not been
annualized.
(++) Computed on an annualized basis.
(+++) Not annualized.
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE 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. The Boston
Company Small Cap Value Portfolio (the "Portfolio"), a separate diversified
investment series of the Portfolio Trust, commenced operations on January
28, 2003.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of small cap
U.S. companies.
At March 31, 2004, there were two funds, The Boston Company Small Cap Value
Fund and Dreyfus Premier Small Cap Equity Fund invested in the Portfolio.
The value of the funds' investment in the Portfolio reflects the funds'
proportionate interests in the net assets of the Portfolio. At March 31,
2004, The Boston Company Small Cap Value Fund and the Dreyfus Premier Small
Cap Equity Fund held approximately 97% and 3% interests in the Portfolio,
respectively.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. 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. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount on long-term debt securities when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities sold are recorded on the
identified cost basis. Dividends representing a return of capital are
reflected as a reduction of cost, when the amount of return of capital is
conclusively determined.
C. 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.
D. 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.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
E. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM") or its
affiliates.
(2) INVESTMENT ADVISORY FEE:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Portfolio's average daily net assets.
The Portfolio compensates Mellon Bank, N.A. under a custody, administration
and accounting services agreement for providing custody, fund
administration and fund accounting services for the Portfolio. Pursuant to
this agreement the Portfolio was charged $37,566 during the period ended
March 31, 2004.
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 period ended March 31, 2004 were $27,770,048 and
$27,885,914, respectively. For the period ended March 31, 2004, 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 March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $44,974,005
===========
Gross unrealized appreciation 10,658,694
Gross unrealized depreciation (426,399)
-----------
Net unrealized appreciation $10,232,295
===========
(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 the Portfolio Trust's registration statement.
The Portfolio may trade 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
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
The Portfolio did not enter into option transactions during the period
ended March 31, 2004.
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 March 31, 2004, the Portfolio held no outstanding financial futures
contracts.
(6) SECURITY LENDING:
The Portfolio may lend its securities to financial institutions which the
Portfolio 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.
The Portfolio loaned securities during the period ended March 31, 2004
resulting in security lending income. At March 31, 2004, the Portfolio had
$3,120,266 worth of securities on loan.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
THE BOSTON COMPANY SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(7) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (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 0.060 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 period ended March 31, 2004, the
commitment fee was $767 for the Portfolio.
During the period ended March 31, 2004, the Portfolio had borrowed under
the credit facility and incurred $30 of interest expense.
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 March 31, 2004. The
Trust's Statement of Additional Information includes additional information
about the Trust's trustees and is available, without charge, upon request by
writing The Mellon Institutional Funds at P.O. Box 8585, Boston, MA 02266-8585
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 None
c/o Decision Resources, Inc. 11/3/1986 and Chief Executive
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 29 None
c/o Essex Street Associates 11/3/1986 Associates (family
400 Essex Street investment trust 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, Mertens 29 None
P.O. Box 233 11/3/1986 House, Inc.; Trustee
New London, NH 03257 and Chairman of the
4/11/35 Board, Visiting Nurse
Alliance of Vermont
& New Hampshire
Interested 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 Trustee, President Since 2003 Senior Vice President 29 None
c/o Standish Mellon Asset and Chief and Chief Operating
Management Company LLC, Executive Officer Officer, Mellon Institutional
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial Officer,
Mellon Institutional
Asset 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
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Secretary Secretary Senior Vice President 29 None
c/o Standish Mellon Asset since 2003 and Head of Operations
Management, Mellon Institutional Asset
One Boston Place Management, formerly
Boston, MA 02108 First Vice President,
2/20/61 Mellon Institutional Asset
Management and Mellon
Global Investments
Steven M. Anderson Vice President Vice President Vice President and Mutual 29 None
c/o Standish Mellon Asset and Treasurer since 1999; Funds Controller, Standish
Management, Treasurer since Mellon Asset Management
One Boston Place 2002
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
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
c/o Standish Mellon Asset President Fund Operations since
Management, 1999; Shareholder
One Boston Place Representative, Standish
Boston, MA 02108 Mellon Asset Management
1/19/71
22
23
[MELLON LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.standishmellon.com
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. Schedule of Investments
Filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to this filing.
Item 8. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to this filing.
Item 9. Submission of Matters to a Vote of Security Holders.
Not applicable to this filing.
Item 10. 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 changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the Registrant's last fiscal
half-year (the Registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
Item 11. Exhibits.
(a)(1) 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) Certification 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.
(Registrant) Mellon Institutional Funds Master Portfolio
By (Signature and Title):_____________________________________________________
Barbara A. McCann, Vice President and Secretary
Date ____________
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): _____________________________________________________
Patrick J. Sheppard, President and Chief Executive
Officer
Date ____________
By (Signature and Title): _____________________________________________________
Steven M. Anderson, Vice President and Treasurer
Date ____________