UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04813
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Mellon Institutional Funds Investment Trust _____
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(Exact name of registrant as specified in charter)
One Boston Place, Boston, MA 02108
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(Address of principal executive offices) (Zip code)
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: 12/31/2004
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Date of reporting period: 06/30/2004
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Item 1. Reports to Stockholders.
[LOGO] Mellon
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Mellon Institutional Funds
Financial Statements STANDISH MELLON
FIXED INCOME FUND
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SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
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ASSETS
Investment in Standish Mellon Fixed Income Portfolio ("Portfolio"), at value (Note 1A) $ 470,270,685
Receivable for Fund shares sold 675,073
Prepaid expenses 25,223
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Total assets 470,970,981
LIABILITIES $10,237,842
Payable for Fund shares redeemed 2,079
Accrued transfer agent fees (Note 2) 46,020
Accrued expenses and other liabilities -----------
Total liabilities 10,285,941
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NET ASSETS $ 460,685,040
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NET ASSETS CONSIST OF:
Paid-in capital $ 645,361,540
Accumulated net realized loss (189,408,710)
Undistributed net investment income 438,078
Net unrealized appreciation 4,294,132
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TOTAL NET ASSETS $ 460,685,040
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SHARES OF BENEFICIAL INTEREST OUTSTANDING 23,385,274
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NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $19.70
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The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
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INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $11,908,893
Dividend income allocated from Portfolio 85,552
Expenses allocated from Portfolio (1,228,024)
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Net investment income allocated from Portfolio 10,766,421
EXPENSES
Transfer agent fees (Note 2) $ 3,527
Registration fees 18,623
Legal and audit fees 57,546
Trustees' fees and expenses (Note 2) 994
Insurance expense 1,187
Miscellaneous 16,797
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Total expenses 98,674
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Net investment income 10,667,747
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REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment transactions 9,615,494
Change in unrealized appreciation (depreciation) allocated from portfolio
on investments allocated from Portfolio 16,490,825)
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Net realized and unrealized loss on investments (6,875,331)
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,792,416
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The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
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PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
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INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 10,667,747 $ 29,885,520
Net realized gains 9,615,494 15,573,883
Change in net unrealized appreciation (16,490,825) (4,658,158)
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Net increase in net assets from investment operations 3,792,416 40,801,245
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DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (12,907,011) (25,303,177)
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Total distributions to shareholders (12,907,011) (25,303,177)
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FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 25,270,556 24,407,420
Value of shares issued to shareholders in payment of distributions declared 8,829,947 18,529,816
Cost of shares redeemed (160,090,205) (403,886,019)
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Net decrease in net assets from Fund share transactions (125,989,702) (360,948,783)
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TOTAL DECREASE IN NET ASSETS (135,104,297) (345,450,715)
NET ASSETS
At beginning of period 595,789,337 941,240,052
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At end of period (including undistributed net investment income
of $438,078 and $2,677,342) $ 460,685,040 $ 595,789,337
============= =============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
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PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 --------------------------------------------------------------------
(UNAUDITED) 2003 2002 2001(A) 2000 1999
------------- -------- -------- ---------- ---------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.08 $ 19.70 $ 18.93 $ 18.92 $ 18.55 $ 20.13
-------- -------- -------- ---------- ---------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income*(1) 0.38 0.75 0.93 1.22 1.35 1.34
Net realized and unrealized gains
(loss) on investments (0.26) 0.28 0.71 0.10 0.47 (1.47)
-------- -------- -------- ---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.12 1.03 1.64 1.32 1.82 (0.13)
-------- -------- -------- ---------- ---------- ----------
Less Distributions to Shareholders:
From net investment income (0.50) (0.65) (0.87) (1.31) (1.45) (1.42)
From net realized gains on investments -- -- -- -- -- (0.03)
-------- -------- -------- ---------- ---------- ----------
Total distributions to shareholders (0.50) (0.65) (0.87) (1.31) (1.45) (1.45)
-------- -------- -------- ---------- ---------- ----------
NET ASSET VALUE, END OF YEAR $ 19.70 $ 20.08 $ 19.70 $ 18.93 $ 18.92 $ 18.55
======== ======== ======== ========== ========== ==========
TOTAL RETURN+ 0.63%(2) 5.24% 8.89% 7.16% 10.21% (0.70)%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.46%++ 0.42% 0.38% 0.38% 0.37% 0.36%
Net Investment Income
(to average daily net assets)* 3.73%++ 3.76% 4.86% 6.35% 7.23% 6.85%
Net Assets, End of Period (000's omitted) $460,685 $595,789 $941,240 $1,475,570 $2,220,981 $2,910,545
- --------------
* For the periods indicated, the investment advisor voluntarily agreed not t
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 $ 0.73 $ 0.93 N/A N/A N/A
Ratios (to average daily net assets):
Expenses N/A 0.45% 0.42% N/A N/A N/A
Net investment income N/A 3.73% 4.82% N/A N/A N/A
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease net investment income per share by
$0.004, increase net realized and unrealized gains and losses per share by
$0.004 and decrease the ratio of net investment income to average net
assets from 6.37% to 6.35%. Per share data and ratios/supplemental data for
the periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
(1) Calculated based on average shares outstanding.
(2) Not annualized.
+ Total return would have been lower in the absence of expense waivers.
++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME 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.
Standish Mellon Fixed Income Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve a high level of current income,
consistent with conserving principal and liquidity, and secondarily to seek
capital appreciation when changes in interest rates and economic conditions
indicate that capital appreciation may be available without significant
risk to principal. The Fund seeks to achieve its objective by investing all
of its investable assets in an interest of the Standish Mellon Fixed Income
Portfolio (the "Portfolio"), a subtrust of Mellon Institutional Funds
Master Portfolio (the "Portfolio Trust"), which is organized as a New York
trust and which has the same investment objective as the Fund. The
Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in fixed income securities issued
by U.S. and foreign governments and companies. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (approximately 100% at June 30, 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 generally accepted
accounting principles. All realized and unrealized gains and losses of the
Portfolio are allocated pro rata among the investors in the Portfolio. The
Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. In determining the amounts of its dividends,
the Fund will take into account its share of the income, gains or losses,
expenses, and any other tax items of the Portfolio. Dividends from net
investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
for foreign currency transactions, options, futures, interest rate floor,
capital loss carryforwards, losses deferred due to wash sales, paydown
gains and losses, and amortization and/or accretion of premiums and
discounts on certain securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON FIXED INCOME 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
Standish Mellon Asset Management Company LLC ("Standish Mellon"), a
wholly-owned subsidiary of Mellon Financial Corporation, for such services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
On February 23, 2004, the Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly-owned subsidiary of Dreyfus, which is an affiliate
of Standish Mellon, to provide transfer agent services to the Fund.
Pursuant to this agreement the Fund was charged $2,079 during the period
ended June 30, 2004. At June 30, 2004, $2,079 was due to Dreyfus Transfer,
Inc.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended June 30, 2004, aggregated $34,100,503 and $178,729,348
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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
-------------- ------------------
Shares sold 1,252,723 1,222,331
Shares issued to shareholders in payment
of distributions declared 440,984 928,677
Shares redeemed (7,981,105) (20,268,022)
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Net decrease (6,287,398) (18,117,014)
========== ===========
At June 30, 2004, one shareholder of record held approximately 13% of the
total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
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PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
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BONDS AND NOTES--113.3%
ASSET BACKED--23.6%
Advanta Mortgage Loan Trust 1997-4 M1 7.040% 1/25/29 $1,550,925 $ 1,548,107
Advanta Mortgage Loan Trust 1999-3 A4 7.750 10/25/26 900,404 941,042
American Express Credit Account Master Trust 2000-2 B(a) 1.450 9/17/07 1,250,000 1,251,058
American Express Master Trust 2002-1 A(a) 1.170 12/15/05 4,400,000 4,402,512
Americredit Automobile Receivables Trust 2001-D A3(a) 1.450 9/12/06 744,461 744,629
BMW Vehicle Owner Trust 2004-A A4 3.320 2/25/09 4,100,000 4,062,091
Capital Receivables Asset Trust 2003-2 A3A 1.440 2/15/07 625,000 620,891
Capital Auto Receivables Asset Trust 2004-1 A4 2.640 11/17/08 2,000,000 1,948,456
Capital One Master Trust 2001-2 C(a) 144A 2.200 1/15/09 2,000,000 2,010,122
Capital One Multi-Asset Execution Trust 2002-B1 B1(a) 1.780 7/15/08 5,840,000 5,869,588
Capital One Multi-Asset Execution Trust 2003-B2 B2 3.500 2/17/09 725,000 728,606
Capital One Multi-Asset Execution Trust 2004-C1 C1 3.400 11/16/09 2,950,000 2,902,688
Capital One Prime Auto Receivables Trust 2004-1 A3 2.020 11/15/07 630,000 622,895
Chase Credit Card Master Trust 2000-3 A(a) 1.230 1/15/08 2,480,000 2,483,533
Chase Credit Card Master Trust 2002-2 C(a) 2.000 7/16/07 2,985,000 2,996,528
Chase Credit Card Master Trust 2002-6 B(a) 1.450 1/15/08 2,245,000 2,251,065
Chase Credit Card Master Trust 2002-8 A(a) 1.160 3/17/08 1,900,000 1,900,987
Chase Credit Card Master Trust 2004-2 C(a) 1.660 9/15/09 1,000,000 1,000,313
Chase Funding Mortgage Loan Asset-Backed Certificates 2001-1 2A1(a) 1.340 12/25/30 2,147,360 2,148,759
Chase Funding Mortgage Loan Asset-Backed Certificates 2003-4 2A1(a) 1.220 2/25/21 4,060,343 4,060,320
Citibank Credit Card Master Trust I 1997-6 B (b) 0.000 8/15/06 4,500,000 4,499,469
Citibank Credit Card Master Trust I 1999-7 B 6.900 11/15/06 3,285,000 3,346,036
Citibank Credit Card Issuance Trust 2000-C1 C1 7.450 9/15/07 3,250,000 3,427,119
Citibank Credit Card Issuance Trust 2001-C3 C3 6.650 5/15/08 1,410,000 1,489,948
Citibank Credit Card issuance Trust 2002-A2 A2(a) 1.280 2/15/07 4,545,000 4,544,926
Citifinancial Mortgage Securities, Inc. 2003-2 AV1(a) 1.200 5/25/33 72,793 72,790
Daimler Chrysler Auto Trust 2003-A A4 2.880 10/8/09 500,000 496,547
Daimler Chrysler Auto Trust 2004-A A4 2.580 4/8/09 2,700,000 2,633,012
John Deere Owner Trust 2004-A A1 1.140 5/13/05 3,445,131 3,438,655
First USA Credit Card Master Trust 1997-7 B(a) 1.400 5/17/07 9,430,000 9,433,956
First USA Credit Card Master Trust 1998-4(a) 144A 1.600 3/18/08 1,875,000 1,875,126
Ford Credit Auto Owner Trust 2004-A A4 3.540 11/15/08 1,465,000 1,461,346
Harley-Davidson Motorcycle Trust 2001-3 B 3.720 10/15/09 1,782,008 1,795,452
Honda Auto Receivables Owner Trust 2004-1 A1 1.139 4/21/05 3,270,937 3,268,030
Honda Auto Receivables Owner Trust 2004-1 A3 2.400 2/21/08 1,383,000 1,366,430
Honda Auto Receivables Owner Trust 2003-4 A3 2.190 5/15/07 1,000,000 993,570
MBNA Master Credit Card Trust 2000-A C 144A 7.900 7/16/07 2,145,000 2,214,216
MBNA Master Credit Card Trust 2000-C C(a) 144A 2.040 7/15/07 4,400,000 4,410,881
MBNA Master Credit Card Trust USA 1997-J A(a) 1.360 2/15/07 3,250,000 3,250,607
Morgan Stanley Auto Loan Trust 2004-HB1 A1 1.330 5/15/06 1,022,582 1,021,511
Nissan Auto Receivables Owner Trust 2003-C A5 3.210 3/16/09 600,000 592,299
Residential Asset Securities Corp. 2003-KS11 AI1(a) 1.270 9/25/21 2,361,966 2,361,400
USAA Auto Owner Trust 2004-1 A3 2.060 4/15/08 2,775,000 2,733,731
Vanderbilt Mortgage Finance 1999-A 1A6 6.750 3/7/29 1,110,000 1,109,989
Whole Loan Auto Trust 2003-1 2A2 (a) 1.400 4/15/06 1,834,927 1,832,449
Granite Mortgages PLC 2003-3 1A1 (a) 1.230 1/20/19 2,988,881 2,988,881
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Total Asset Backed (Cost $111,690,804) 111,152,566
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The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE(1A)
- ------------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--5.8%
Bear Stearns Commercial Mortgage Securities 2003-T12 A3 4.240% 8/13/39 $1,890,000 $ 1,827,596
Calwest Industrial Trust 2002-CALW A 144A 6.127 2/15/17 1,120,000 1,195,399
Capco America Securitization Corp. 1998-D7 A1B 6.260 10/15/30 1,165,000 1,252,119
Fannie Mae Grantor Trust 2001-T6 B 6.088 5/25/11 3,983,000 4,247,032
FNMA Grantor Trust 2002-T11 A 4.769 4/25/12 1,470,107 1,497,418
GNMA 2003-48 AC 2.712 2/16/20 2,947,197 2,848,385
GNMA 2003-72 A 3.206 4/16/18 2,511,626 2,459,183
GNMA 2003-88 AC 2.914 6/16/18 1,794,450 1,743,453
GNMA 2003-96 B 3.607 8/16/18 615,000 606,499
GNMA 2004-12 A 3.110 1/16/19 1,280,552 1,243,877
GNMA 2004-25 AC 3.377 1/16/23 885,000 860,563
GNMA 2004-43 A 2.822 12/16/19 1,420,000 1,375,980
GNMA 2004-51 A 4.069 9/16/16 2,100,000 2,100,000
Permanent Financing PLC 3 1A NCL (a) 1.140 12/10/04 3,400,000 3,399,408
Prudential Home Mortgage 1993-B 3B 144A(a) 7.500 4/28/23 165,054 165,673
Structured Asset Mortgage Investments, Inc. 1998-2 B 6.750 4/30/30 308,873 308,873
-----------
Total Collateralized Mortgage Obligations (Cost $27,846,513) 27,131,458
-----------
CORPORATE--35.0%
BASIC MATERIALS--2.4%
Alcan, Inc. 6.125 12/15/33 1,800,000 1,741,608
Cabot Corp. 144A 5.250 9/1/13 900,000 874,887
Georgia Pacific Corp. 144A 8.000 1/15/24 980,000 980,000
ICI Wilmington, Inc. 4.375 12/1/08 1,700,000 1,667,601
International Flavors & Fragrances, Inc. 6.450 5/15/06 950,000 1,003,709
International Paper Co. 6.750 9/1/11 600,000 650,317
International Paper Co. 5.300 4/1/15 675,000 642,545
International Steel Group, Inc. 144A 6.500 4/15/14 1,045,000 979,688
RPM International, Inc. 144A 6.250 12/15/13 1,145,000 1,148,989
Weyerhaeuser Co.* 7.250 7/1/13 1,165,000 1,293,193
-----------
10,982,537
-----------
COMMUNICATIONS--4.0%
AT&T Wireless Services, Inc. 7.875 3/1/11 1,360,000 1,546,950
AT&T Wireless Services, Inc. 8.750 3/1/31 555,000 676,639
Comcast Corp. 5.500 3/15/11 325,000 328,102
Cox Communications, Inc. 7.750 11/1/10 875,000 991,876
Echostar DBS Corp. 10.375 10/1/07 1,750,000 1,870,313
Echostar DBS Corp.* 5.750 10/1/08 1,160,000 1,144,050
Liberty Media Corp.* 5.700 5/15/13 1,900,000 1,871,730
News America, Inc. 7.625 11/30/28 910,000 1,023,453
Sprint Capital Corp. 8.375 3/15/12 2,425,000 2,787,123
TCI Communications, Inc. 7.875 2/15/26 825,000 931,048
Time Warner, Inc. 6.750 4/15/11 1,925,000 2,073,213
Univision Communications, Inc. 7.850 7/15/11 917,000 1,057,487
Verizon Global Funding Corp.* 4.375 6/1/13 2,050,000 1,881,533
Verizon Global Funding Corp.* 7.750 6/15/32 575,000 646,504
-----------
18,830,021
-----------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL--2.6%
Caesars Entertainment, Inc.* 8.500% 11/15/06 $ 520,000 $ 564,200
Caesars Entertainment, Inc. 8.875 9/15/08 900,000 976,500
Coast Hotels & Casinos, Inc. 9.500 4/1/09 940,000 987,000
DaimlerChrysler NA Holding Corp. 8.500 1/18/31 325,000 373,401
D.R. Horton, Inc. 5.000 1/15/09 1,000,000 981,250
Horseshoe Gaming Holding Corp. 8.625 5/15/09 495,000 516,038
MGM Mirage 6.950 2/1/05 720,000 734,400
Mohegan Tribal Gaming Authority 8.125 1/1/06 1,355,000 1,429,525
Mohegan Tribal Gaming Authority 6.375 7/15/09 965,000 967,413
Mohegan Tribal Gaming Authority 8.375 7/1/11 1,035,000 1,117,800
Pulte Homes, Inc.* 5.250 1/15/14 700,000 660,944
Station Casinos 6.000 4/1/12 850,000 822,375
Yum! Brands, Inc. 8.875 4/15/11 1,483,000 1,789,576
Yum! Brands, Inc. 7.650 5/15/08 275,000 307,058
-----------
12,227,480
-----------
CONSUMER NONCYCLICAL--3.3%
Altria Group, Inc. 7.000 11/4/13 2,200,000 2,240,311
Aramark Services, Inc. 7.000 7/15/06 2,290,000 2,439,913
Aramark Services, Inc. 7.000 5/1/07 1,225,000 1,322,309
Archer-Daniels-Midland Co. 5.935 10/1/32 1,100,000 1,071,247
RR Donnelley & Sons Co. 144A 4.950 4/1/14 1,290,000 1,228,494
Erac USA Finance Co. 144A 7.950 12/15/09 1,000,000 1,150,613
Kroger Co. 7.250 6/1/09 600,000 666,545
Kroger Co. 8.000 9/15/29 955,000 1,110,113
Laboratory Corp. of America Holdings 5.500 2/1/13 895,000 901,036
Safeway, Inc. 6.150 3/1/06 1,470,000 1,537,006
Stater Brothers Holdings 144A* 8.125 6/15/12 865,000 868,244
Wyeth 5.500 3/15/13 555,000 535,636
Wyeth 6.450 2/1/24 325,000 309,056
Wyeth 6.500 2/1/34 275,000 259,200
-----------
15,639,723
-----------
ENERGY--1.7%
Amerada Hess Corp. 7.300 8/15/31 980,000 995,028
CenterPoint Energy Resources Corp. 7.750 2/15/11 600,000 666,646
CenterPoint Energy Resources Corp. 7.875 4/1/13 375,000 419,591
Halliburton Co. 5.500 10/15/10 705,000 713,241
Occidental Petroleum Corp. 8.450 2/15/29 370,000 471,001
Southern Natural Gas Co.* 6.700 10/1/07 1,910,000 1,972,075
Tosco Corp. 7.250 1/1/07 615,000 667,284
Tosco Corp. 7.800 1/1/27 201,000 237,806
Tosco Corp. 8.125 2/15/30 450,000 555,021
XTO Energy, Inc.* 7.500 4/15/12 1,220,000 1,376,602
-----------
8,074,295
-----------
FINANCIAL--13.5%
Ace Ina Holdings, Inc. 5.875 6/15/14 305,000 308,566
Amsouth Bank NA 4.850 4/1/13 1,100,000 1,060,806
Archstone-Smith Operating Trust 5.000 8/15/07 850,000 874,521
ASIF Global Financing 144A 3.850 11/26/07 870,000 873,611
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Banco Nacional de Desenvolvimento Economic(a)* 9.622% 6/16/08 $1,325,000 $1,344,875
Bank of America Corp.* 7.400 1/15/11 2,100,000 2,379,968
Bear Stearns Cos., Inc. 4.500 10/28/10 905,000 887,244
Boeing Capital Corp. 4.750 8/25/08 350,000 356,488
Boeing Capital Corp. 4.750 8/25/08 350,000 356,488
Boeing Capital Corp. 7.375 9/27/10 780,000 881,975
Boston Properties LP 5.625 4/15/15 675,000 659,067
Chevy Chase Bank FSB 6.875 12/1/13 1,370,000 1,370,000
Citigroup, Inc. 5.625 8/27/12 1,305,000 1,341,423
City National Corp. 5.125 2/15/13 940,000 912,709
Credit Suisse First Boston USA, Inc. 6.125 11/15/11 950,000 999,901
Duke Really LP 5.875 8/15/12 1,150,000 1,184,167
Duke Realty LP* 7.750 11/15/09 915,000 1,045,572
Duke Realty LP 6.950 3/15/11 25,000 27,418
EOP Operating LP 7.000 7/15/11 1,100,000 1,198,905
ERP Operating LP 6.625 3/15/12 450,000 486,273
First Industrial LP 5.250 6/15/09 640,000 644,390
First Industrial LP 144A 6.420 6/1/14 400,000 409,815
Ford Motor Credit Co. 6.500 1/25/07 2,635,000 2,768,666
Ford Motor Credit Co. 7.200 6/15/07 2,290,000 2,435,046
General Electric Capital Corp. 6.125 2/22/11 2,500,000 2,677,348
General Motors Acceptance Corp. 6.150 4/5/07 1,650,000 1,723,102
General Motors Acceptance Corp. 8.000 11/1/31 1,235,000 1,265,365
Glencore Funding LLC 144A 6.000 4/15/14 1,320,000 1,224,353
Goldman Sachs Group, Inc.* 3.875 1/15/09 650,000 633,841
Goldman Sachs Group, Inc.* 5.700 9/1/12 750,000 760,790
Healthcare Realty Trust, Inc. 8.125 5/1/11 540,000 620,849
Household Finance Corp. 6.400 6/17/08 335,000 360,369
Household Finance Corp.* 6.375 10/15/11 2,078,000 2,218,072
Jefferies Group, Inc. 7.750 3/15/12 1,920,000 2,175,654
JP Morgan Chase & Co. 5.750 1/2/13 1,485,000 1,509,295
Leucadia National Corp. 7.000 8/15/13 1,340,000 1,324,925
MassMutual Global Funding II 144A 3.800 4/15/09 650,000 637,997
Morgan Stanley 4.750 4/1/14 1,350,000 1,245,538
National City Bank 6.200 12/15/11 1,300,000 1,385,807
National City Corp. 6.875 5/15/19 675,000 740,888
Nationwide Mutual Insurance Co. 144A 8.250 12/1/31 1,000,000 1,179,004
Principal Life Income Funding Trusts(a) 1.152 10/14/05 1,935,000 1,939,909
Protective Life Secured Trust 4.000 4/1/11 790,000 747,701
Regions Financial Corp.* 6.375 5/15/12 1,000,000 1,069,961
Simon Property Group LP 6.375 11/15/07 1,400,000 1,498,522
SLM Corp. 5.000 10/1/13 2,600,000 2,510,700
Southtrust Corp. 5.800 6/15/14 330,000 336,242
Union Planters Corp. 4.375 12/1/10 525,000 508,520
Union Planters Corp. 7.750 3/1/11 1,965,000 2,268,247
US Bank National Association 6.375 8/1/11 890,000 961,430
Wachovia Corp. 4.875 2/15/14 650,000 620,885
Washington Mutual, Inc.* 4.625 4/1/14 1,500,000 1,368,050
Wells Fargo & Co.* 5.000 11/15/14 480,000 463,908
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Wells Fargo & Co. 6.375% 8/1/11 $ 850,000 $ 920,529
Zions Bancorp 6.000 9/15/15 1,145,000 1,154,445
-----------
63,465,419
-----------
INDUSTRIAL--4.0%
Allied Waste North America 7.625 1/1/06 2,190,000 2,296,763
Allied Waste North America 8.875 4/1/08 810,000 886,950
American Standard, Inc. 7.375 2/1/08 500,000 540,000
Ball Corp. 7.750 8/1/06 200,000 213,000
Ball Corp. 6.875 12/15/12 740,000 751,100
CSX Corp. 6.250 10/15/08 865,000 922,856
Fedex Corp. 144A 2.650 4/1/07 1,090,000 1,058,490
L-3 Communications Corp. 7.625 6/15/12 1,450,000 1,529,750
Lockheed Martin Corp. 8.200 12/1/09 990,000 1,160,104
Norfolk Southern Corp. 7.050 5/1/37 1,500,000 1,589,094
Northrop Grumman Corp. 7.125 2/15/11 545,000 612,454
Raytheon Co. 6.750 8/15/07 425,000 460,280
Raytheon Co. 5.500 11/15/12 380,000 383,462
Sealed Air Corp. 144A 5.625 7/15/13 570,000 563,056
Tyco International Group SA 6.125 11/1/08 1,895,000 2,016,049
Union Pacific Corp. 3.875 2/15/09 1,400,000 1,360,995
Waste Management, Inc. 7.375 8/1/10 275,000 308,971
Waste Management, Inc. 7.000 7/15/28 900,000 934,196
Waste Management, Inc. 7.375 5/15/29 35,000 37,926
Waste Management, Inc. 6.875 5/15/09 1,220,000 1,339,519
-----------
18,965,015
-----------
UTILITIES--3.5%
AES Corp. 144A 10.000 7/15/05 532,703 544,689
Appalachian Power Co. 5.950 5/15/33 450,000 414,935
Consumers Energy Co. 6.250 9/15/06 625,000 656,625
Consumers Energy Co. 5.375 4/15/13 995,000 974,364
Dominion Resources, Inc.* 5.700 9/17/12 1,025,000 1,042,547
Dominion Resources, Inc. 5.250 8/1/33 845,000 806,258
First Energy Corp. 7.375 11/15/31 400,000 416,913
FirstEnergy Corp. 6.450 11/15/11 1,110,000 1,150,802
Indianapolis Power & Light 144A 6.600 1/1/34 285,000 279,058
Keyspan Corp. 8.000 11/15/30 635,000 782,982
Monongahela Power 144A 6.700 6/15/14 260,000 262,481
Niagara Mohawk Power Corp. 7.750 10/1/08 1,000,000 1,125,660
Nisource Finance Corp. 7.875 11/15/10 750,000 859,795
Pacific Gas & Electric Co. 3.600 3/1/09 550,000 529,426
Pepco Holdings, Inc. 5.500 8/15/07 850,000 877,493
Progress Energy, Inc. 7.000 10/30/31 600,000 617,452
Public Service Co. of Colorado 4.375 10/1/08 930,000 932,300
Southern California Edison Co.(a) 1.440 1/13/06 1,550,000 1,552,020
Southern California Edison Co. 8.000 2/15/07 1,100,000 1,215,129
TXU Corp.* 6.375 1/1/08 1,105,000 1,170,823
-----------
16,211,752
-----------
Total Corporate (Cost $164,316,371) 164,396,242
-----------
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL OBLIGATIONS--1.0%
Golden State Tobacco Securitization Corp. 5.000% 6/1/21 $1,820,000 $ 1,782,453
Illinois Power Co.* 7.500 6/15/09 1,190,000 1,300,075
Sacramento County California Pension Funding(b) 0.000 7/10/30 1,675,000 1,566,125
-----------
Total Municipal Obligations (Cost $4,616,451) 4,648,653
-----------
SOVEREIGN BONDS--2.9%
Republic of Brazil 12.000 4/15/10 2,335,000 2,469,263
Republic of Bulgaria 144A 8.250 1/15/15 835,000 971,731
United Mexican States* 6.375 1/16/13 750,000 748,500
United Mexican States* 6.625 3/3/15 1,360,000 1,343,000
United Mexican States 8.300 8/15/31 1,370,000 1,433,705
Russian Federation 8.250 3/31/10 955,000 1,026,625
Russian Federation 10.000 6/26/07 1,315,000 1,475,868
Republic of South Africa* 6.500 6/2/14 1,250,000 1,256,250
Republic of El Salvador 9.500 8/15/06 1,200,000 1,308,000
Republic of El Salvador 144A* 8.500 7/25/11 870,000 939,600
Ukraine Government Senior Notes 11.000 3/15/07 467,608 502,679
-----------
Total Sovereign Bonds (Cost $13,766,797) 13,475,221
-----------
YANKEE BONDS--8.0%
Abbey National PLC 7.950 10/26/29 723,000 857,916
Amvescap PLC 6.600 5/15/05 1,440,000 1,483,127
British Sky Broadcasting PLC 6.875 2/23/09 115,000 125,596
British Sky Broadcasting PLC 8.200 7/15/09 3,555,000 4,095,964
Carnival Corp. 6.650 1/15/28 1,860,000 1,857,757
Celulosa Arauco Constitution 5.125 7/9/13 935,000 877,641
Deutsche Telekom International Finance BV 8.000 6/15/10 700,000 817,991
Deutsche Telekom International Finance BV 8.250 6/15/30 965,000 1,174,536
Domtar Inc.* 5.375 12/1/13 1,540,000 1,464,386
Donohue Forest Products 7.625 5/15/07 1,560,000 1,608,031
Eircom Funding* 8.250 8/15/13 215,000 223,600
French Telecom 9.000 3/1/11 440,000 509,881
HBOS PLC 144A 5.375 11/1/13 1,200,000 1,156,452
Hutchison Whampoa Ltd. 144A 5.450 11/24/10 1,160,000 1,138,575
Koninklijike KPN NV 8.000 10/1/10 950,000 1,099,978
Nordea Bank Sweden AB 144A 5.250 11/30/12 1,660,000 1,649,125
Northern Rock PLC 144A 5.600 4/30/14 640,000 621,837
Pearson Dollar Finance PLC 144A 4.700 6/1/09 875,000 876,139
Rio Tinto Finance USA Ltd 2.625 9/30/08 2,330,000 2,185,580
Rogers Cable, Inc.* 6.250 6/15/13 550,000 517,782
Rogers Wireless Communications, Inc. 144A 6.375 3/1/14 465,000 427,800
Royal Caribbean Cruises Ltd.* 8.750 2/2/11 2,235,000 2,475,263
Sappi Papier Holding AG 144A 6.750 6/15/12 1,076,000 1,148,230
St. George Bank Ltd. 144A 5.300 10/15/15 890,000 865,647
Teck Cominco Ltd. 7.000 9/15/12 1,465,000 1,566,656
Telecom Italia Capital SA 144A* 4.000 11/15/08 1,775,000 1,743,661
Telus Corp. 8.000 6/1/11 1,590,000 1,807,134
TXU Australia Holdings Ltd. 144A 6.150 11/15/13 500,000 520,886
Tyco International Group SA 6.750 2/15/11 1,920,000 2,086,236
UPM-Kymmene Corp. Senior Notes 144A 5.625 12/1/14 580,000 573,588
-----------
Total Yankee Bonds (Cost $36,925,568) 37,556,995
-----------
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
NON-AGENCY--2.3%
PASS THRU SECURITIES--2.3%
DLJ Commercial Mortgage Corp. 1998-CF2 B1 7.286% 11/12/31 $2,350,000 $ 2,542,184
First Chicago/Lennar Trust 1997-CHL1 D(a) 144A 7.902 4/29/39 3,995,968 4,159,553
GMAC Commercial Mortgage Securities, Inc. 1996-C1 F non-ERISA 144A 7.860 11/15/06 2,375,000 2,535,835
JP Morgan Commercial Mortgage Finance Corp. 1997-C5 A3 7.088 9/15/29 1,385,000 1,497,704
------------
Total Non-Agency (Cost $10,213,542) 10,735,276
------------
U.S. GOVERNMENT AGENCY--21.8%
PASS THRU SECURITIES--21.8%
FHLMC 7.000 11/1/31 251,179 265,611
FHLMC 7.000 11/1/31 289,487 306,120
FHLMC 6.000 10/1/33 3,071,284 3,140,764
FHLMC 5.500 1/1/34 1,074,340 1,071,254
FHLMC 5.500 3/1/34 426,282 425,057
FNMA 3.640 6/1/10 2,665,000 2,508,359
FNMA 3.530 7/1/10 1,210,825 1,149,614
FNMA 5.703 5/25/11 1,475,686 1,553,600
FNMA 5.139 12/25/11 1,107,191 1,145,968
FNMA 8.500 6/1/12 62,061 66,127
FNMA 5.000 7/1/18 1,176,673 1,180,861
FNMA 5.000 1/1/19 588,864 590,866
FNMA 7.500 11/1/29 1,933 2,072
FNMA 5.500 5/1/33 1,343,196 1,340,650
FNMA 5.500 1/1/34 943,293 941,504
FNMA 5.500 1/1/34 2,436,770 2,432,151
FNMA (TBA)# 5.000 7/1/19 7,775,000 7,782,293
FNMA (TBA)# 5.000 7/1/19 11,000,000 11,247,500
FNMA (TBA)# 5.500 7/1/19 23,745,000 23,626,275
FNMA (TBA)# 6.500 7/1/19 16,075,000 16,733,078
FNMA (TBA)# 6.000 8/1/19 24,400,000 24,804,113
GNMA 9.000 2/15/21 21,389 24,154
GNMA 6.500 8/15/32 379,913 397,429
------------
Total U.S. Government Agency (Cost $102,274,299) 102,735,420
------------
U.S. TREASURY OBLIGATIONS--5.1%
TREASURY BONDS--3.9%
United States Treasury Bond 6.250 5/15/30 16,420,000 18,384,620
TREASURY NOTES--1.2%
United States Treasury Note* 1.875 1/31/06 220,000 217,903
United States Treasury Note* 3.250 8/15/08 105,000 103,700
United States Treasury Note* 4.000 11/15/12 5,565,000 5,387,833
------------
Total U.S. Treasury Obligations (Cost $24,532,272) 24,094,056
------------
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN DOMINATED--7.9%
EURO--7.9%
Deutsche Bundesrepublik 5.250% 1/4/2011 EUR 4,980,000 $ 6,530,157
Deutsche Bundesrepublik 4.500 1/4/2013 4,755,000 5,920,160
Deutsche Bundesrepublik 5.625 1/4/2028 3,632,205 4,863,080
Deutsche Bundesrepublik 4.125 7/4/2008 14,915,000 18,630,039
Telecom Italia Capital SA 144A 5.250 11/15/2013 840,000 812,540
-----------
Total Foreign Denominated (Cost $31,559,724) 36,755,976
-------------
TOTAL BONDS AND NOTES (Cost $527,742,341) 532,681,863
-------------
CONVERTIBLE PREFERRED STOCKS--0.5% SHARES
------------
Equity Office Properties Trust 144A CVT Pfd REIT 50,600 2,580,600
-------------
2,580,600
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $2,513,200)
PURCHASED OPTIONS--0.0% CONTRACT SIZE
-------------
U.S. Treasury Note 3.25% Call, Strike Price 100.59, 07/26/2004 116,700 456
U.S. Treasury Note 4.00% Put, Strike Price 96.80, 08/05/2004 112,950 151,692
U.S. Treasury Note 4.00% Call, Strike Price 97.828, 11/29/04 116,250 64,028
U.S. Treasury Note 3.00% Call, Strike Price 101.10, 02/18/2005 232,150 16,323
-------------
TOTAL PURCHASED OPTIONS (Cost $559,006) 232,499
-------------
SHORT-TERM INVESTMENTS--3.1%
U.S.GOVERNMENT AGENCY--0.4% PAR VALUE
------------
FNMA Discount Note+ 1.250 7/30/04 $ 2,100,000 2,097,885
-------------
U.S. TREASURY BILLS--0.3%
U.S. Treasury Bill 0.990 7/15/04 700,000 699,729
U.S. Treasury Bill 0.996 9/2/04 675,000 673,642
-------------
1,373,371
-------------
INVESTMENT COMPANIES--2.4%
Dreyfus Institutional Preferred Plus++ 1.000 11,223,103 11,223,103
-------------
TOTAL SHORT TERM INVESTMENTS (Cost $14,694,359) 14,694,359
-------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--7.2%
INVESTMENT COMPANIES--7.2%
Dreyfus Cash Management Plus Fund++ (Cost $33,992,101) 1.000 33,992,101 33,992,101
-------------
TOTAL INVESTMENTS--124.2% (Cost $579,501,007) 584,181,422
LIABILITIES IN EXCESS OF OTHER ASSETS--(24.2%) (113,910,737)
-------------
NET ASSETS--100.0% $ 470,270,685
=============
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
144A- Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
* Security, or a portion of thereof, was on loan at June 30, 2004.
FHLMC--Federal Home Loan Mortgage Company
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
NCL--Non-callable
REIT--Real Estate Investment Trust
TBA--To Be Announced
EUR--Euro
# Delayed Delivery contract.
(a) Variable Rate Security; rate indicated as of 6/30/04.
(b) Zero coupon security.
+ Rate noted is yield to maturity
+ Affiliated institutional money market fund. The effective yield is 1.00%.
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.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (Note 1A) (including securities on loan valued at $33,191,879 (Note 7))
Unaffiliated issuers, at value (cost $534,285,803) $538,966,208
Affiliated issuers, at value (cost $45,215,204) (Note 1G) 45,215,204
Unrealized appreciation for open swap contracts (Note 5) 55,480
Receivable for investments sold 28,429,631
Interest and dividends receivable 5,370,038
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 63,445
Prepaid expenses 11,803
------------
Total assets 618,111,809
LIABILITIES
Payable for investments purchased $112,878,512
Liability for securities on loan (Note 7) 33,992,101
Payable for variation margin on open futures contracts (Note 5) 270,288
Options written, at value (premiums received $551,644) (Note 5) 242,382
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 316,080
Unrealized depreciation on open swap contracts (Note 5) 18,380
Accrued custody, accounting and administration fees (Note 2) 26,371
Accrued trustee fees and expenses (Note 2) 27,507
Accrued expenses and other liabilities 69,503
------------
Total liabilities 147,841,124
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $470,270,685
============
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENT OF OPERATION
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $30,662 (Note 7)) $ 11,908,893
Dividend income 85,552
------------
Total investment Income 11,994,445
EXPENSES
Investment advisory fee (Note 2) $ 1,046,601
Custody, accounting and administration fees (Note 2) 83,519
Legal and audit fees 40,391
Trustees' fees and expenses (Note 2) 44,516
Insurance expense 10,666
Miscellaneous 2,331
------------
Total expenses 1,228,024
------------
Net investment income 10,766,421
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 5,222,062
Financial futures contracts 1,182,671
Option transactions (241,019)
Foreign currency transactions and forward foreign currency exchange contracts 3,451,780
------------
Net realized gain 9,615,494
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (16,490,825)
------------
Change in net unrealized appreciation (depreciation) (16,490,825)
------------
Net realized and unrealized gain (loss) (6,875,331)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,891,090
============
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS FOR THE PERIOD ENDED JUNE 30, 2004
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income (loss) $ 10,766,421 $ 30,021,028
Net realized gains (losses) 9,615,494 15,573,886
Change in net unrealized appreciation (depreciation) (16,490,825) (4,658,156)
------------- -------------
Net increase in net assets from investment operations 3,891,090 40,936,758
------------- -------------
CAPITAL TRANSACTIONS
Contributions 34,100,503 24,345,488
Withdrawals (178,729,348) (398,371,613)
------------ ------------
Net increase (decrease) in net assets from capital transactions (144,628,845) (374,026,125)
------------- ------------
TOTAL INCREASE IN NET ASSETS (140,737,755) (333,089,367)
NET ASSETS
At beginning of period 611,008,440 944,097,807
------------- -------------
At end of period $ 470,270,685 $ 611,008,440
============= =============
The accompanying notes are an integral part of the financial statements.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
FINACIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001(A) 2000 1999
---------- -------- -------- ---------- ---------- ----------
TOTAL RETURN+(b) 0.63%(b) 5.25% 8.89% 7.18% 10.23% (0.69%)
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.43%++ 0.41% 0.38% 0.36% 0.35% 0.35%
Net Investment Income
(to average daily net assets)* 3.77%++ 3.78% 4.86% 6.37% 7.24% 6.86%
Portfolio Turnover 47%(b) 398% 384% 329% 233% 159%
Net Assets, End of Year (000's omitted) $470,271 $611,008 $944,098 $1,495,389 $2,226,002 $2,911,705
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A 0.42% 0.39% N/A N/A N/A
Net investment income N/A 3.77% 4.85% N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease the ratio of the net investment income to
average net assets from 9.20% to 8.87%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
(b) Not annualized.
+ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
++ Computed on an annualized basis based upon a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York on
January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Fixed Income Portfolio (the "Portfolio") is a separate diversified
investment series of the Portfolio Trust.
At June 30, 2004, there was one fund, Standish Mellon Fixed Income Fund
(the "Fund"), invested in the Portfolio. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. The Fund's proportionate interest at June 30, 2004
was approximately 100%.
The objective of the Portfolio is to achieve a high level of current
income, consistent with conserving principal and liquidity, and secondarily
to seek capital appreciation when changes in interest rates and economic
conditions indicate that capital appreciation may be available without
significant risk to principal by investing, under normal circumstances, at
least 80% of net assets in fixed income securities issued by U.S. and
foreign governments and companies.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity and
will then be valued at amortized value based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized
value does not represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
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.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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. COMMITMENT AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
G. AFFILIATED ISSUERS
Issuers in which the Portfolio held investments in other investment
companies advised by Standish Mellon Asset Management Company LLC
("Standish Mellon") or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon for overall investment
advisory and administrative services is paid monthly at the annual rate of
0.40% of the Portfolio's first $250,000,000 of average daily net assets,
0.35% of the next $250,000,000 of average daily net assets, and 0.30% of
the average daily net assets in excess of $500,000,000.
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 $88,461 during the period ended
June 30, 2004 and owed $29,000.
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 June 30, 2004 were as follows:
PURCHASES SALES
------------- ------------
U.S. Government Securities $168,996,342 $166,280,332
============ ============
Investments
(non-U.S.Government
Securities) $137,413,912 $203,336,849
============ ============
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) FEDERAL TAXES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal tax
basis, were as follows:
Aggregate Cost $579,669,186
============
Gross unrealized appreciation 11,244,994
Gross unrealized depreciation (6,677,287)
------------
Net unrealized appreciation $ 4,567,707
============
(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.
A summary of the written put options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN PUT OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 4 $ 287,972
Options written 10 860,189
Options expired (7) (480,060)
Options closed (3) (211,093)
--------- ---------
Outstanding, end of period 4 $ 457,008
========= =========
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004, the Portfolio held the following written put option
contracts:
SECURITY CONTRACTS VALUE
---------------------------------------------------------------------------
UST 2.50% Put, Strike Price 99.38, 7/02/04 1 $ 18,480
UST 3.25% Put, Strike Price 97.40, 7/26/04 1 28,263
UST 4.00% Put, Strike Price 98.39, 8/05/04 1 73,515
UST 3.125% Put, Strike Price 94.82, 11/01/04 1 45,410
--------
Total (premiums received $457,008) $165,668
========
A summary of the written call options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN PUT OPTIONS TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 4 $ 220,133
Options written 9 448,929
Options expired (3) (163,123)
Options closed (7) (411,303)
--------- ---------
Outstanding, end of period 3 $ 94,636
========= =========
At June 30, 2004, the Portfolio held the following written call option
contracts:
SECURITY CONTRACTS VALUE
---------------------------------------------------------------------------
UST 2.50% Call, Strike Price 99.38, 7/02/04 1 $68,086
UST 3.25% Call, Strike Price 103.78, 7/26/04 1 --
UST 3.125% Call, Strike Price 100.82, 11/01/04 1 8,628
-------
Total (premiums received $94,636) $76,714
=======
INTEREST RATE FLOORS
Interest rate floors purchased by the Portfolio entitle the Portfolio to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined
interest rate amount. Credit and market risk exist with respect to these
instruments. If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or counterparty to a transaction may
not perform. The Portfolio expects to enter these transactions primarily
for hedging purposes including, but not limited to, preserving a return or
spread on a particular investment or portion of its portfolio, protecting
against currency fluctuations, as a duration management technique or
protecting against an increase in the price of securities the Portfolio
anticipates purchasing at a later date. Interest rate floors are
"marked-to-market" daily based on quotations from market makers and the
change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations. Periodic payments of interest, if any, are
reported as additions to interest income in the Statement of Operations.
Realized gains or losses from these agreements are disclosed in the
Statement of Operations.
At June 30, 2004, the Portfolio did not hold any open interest rate floor
agreements.
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME 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 June 30, 2004, the Portfolio held the following forward foreign currency
exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
----------------------------------------------------------------------------------------------------------------------------
Euro 4,780,000 9/15/2004 $5,817,035 $5,753,590 $63,445
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Euro 34,040,000 9/15/2004 $41,425,079 $41,108,999 $(316,080)
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the
underlying instrument or hedge other investments. In addition, there is the
risk that the Portfolio may not be able to enter into a closing transaction
because of an illiquid secondary market. Losses may arise if there is an
illiquid secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2004, the Portfolio held the following financials futures
contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE (LOSS)
----------------------------------------------------------------------------------------------------------------------------
U.S. 5 Year Note (345 Contracts) Short 9/21/2004 $37,497,188 $(162,506)
U.S. 10 Year Note (190 Contracts) Short 9/21/2004 20,772,344 (149,388)
----------- ---------
$58,269,532 $(311,894)
=========== =========
25
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
SWAP AGREEMENTS
The Portfolio may enter into swap agreements. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The Portfolio may enter into interest rate and credit
default swap agreements to manage its exposure to interest rates and credit
risk. Interest rate swap agreements involve the exchange by the Portfolio
with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. In a credit
default swap, one party makes a stream of payments to another party in
exchange for the right to receive a specified return in the event of a
default by a third party on its obligation. The Portfolio may use credit
default swaps to provide a measure of protection against defaults of
issuers (i.e., to reduce risk where the Portfolio owns or has exposure to
the corporate or sovereign issuer) or to take an active long or short
position with respect to the likelihood of a particular corporate or
sovereign issuer's default. In connection with these agreements, cash or
securities may be set aside as collateral in accordance with the terms of
the swap agreement. The Portfolio earns interest on cash set aside as
collateral. Swaps are marked to market daily based upon quotations from
market makers and change in value, if any, is recorded as unrealized gain
or loss in the Statement of Operations. These financial instruments are not
actively traded on financial markets. The values assigned to these
instruments are based upon the best available information and because of
the uncertainty of the valuation, these values may differ significantly
from the values that would have been realized had a ready market for these
instruments existed, and differences could be material. Payments received
or made from credit default swaps at the end of the measurement period are
recorded as realized gain or loss in the Statement of Operations. Net
payments of interest on interest rate swap agreements, if any, are included
as part of realized gain or loss. Entering into these agreements involves,
to varying degrees, elements of credit, market, and documentation risk in
excess of the amounts recognized on the Statement of Assets and
Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements
may default on its obligation to perform or disagree as to the meaning of
contractual terms in the agreements, and that there may be unfavorable
changes in interest rates.
At June 30, 2004, the Portfolio held the following open swap contracts:
NET UNREALIZED
NOTIONAL AMOUNT EXPIRATION APPRECIATION
PORTFOLIO/COUNTERPARTY DATE DESCRIPTION (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------------------
11,415,000 USD 7/31/04 Agreement with Bear Stearns, dated 1/30/04
to pay the notional amount multiplied by the
1 month LIBOR adjusted by a specified spread
and receive the notional amount multiplied by
the total return of The Lehman Brothers, Inc.
CMBS Investment Grade ERISA-eligible Index. $25,341
11,585,000 USD 10/31/2004 Agreement with Goldman Sachs, dated 4/28/04
to pay the notional amount multiplied by the
1 month LIBOR adjusted by a specified spread
and receive the notional amount multiplied by
the total return of The Lehman Brothers, Inc.
CMBS Investment Grade ERISA-eligible Index. $26,182
1,035,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 6/18/04
to pay 0.77% per year times the notional amount.
The Portfolio receives payment only upon a default
event by Clear Channel Communications, Inc., the
notional amount times the difference between the
par value and the then-market of Clear Channel
Communications, Inc., 7.65% due 9/15/10. $(1,620)
26
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NET UNREALIZED
NOTIONAL AMOUNT EXPIRATION APPRECIATION
PORTFOLIO/COUNTERPARTY DATE DESCRIPTION (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------------------
2,330,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 5/19/04
to pay 0.77% per year times the notional amount.
The Portfolio receives payment only upon a default
event by Inco, Ltd., the notional amount times the
difference between the par value and the
then-market of Inco Ltd., 5.625% due 5/15/12. $(5,815)
2,330,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 5/19/04
to pay 0.44% per year times the notional amount.
The Portfolio receives payment only upon a default
event by Commercial Metals Co., the notional
amount times the difference between the par value
and the then-market of Commercial Metals Co.,
5.625% due 11/15/13. $2,398
1,415,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 4/23/04
to pay 1.56% per year times the notional amount.
The Portfolio receives payment only upon a default
event by Georgia Pacific Corp., the notional amount
times the difference between the par value and
the then-market of Georgia Pacific Corp.,
8.125% due 5/15/11. $(10,945)
1,415,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 4/23/04 to
pay 0.76% per year times the notional amount.
The Portfolio receives payment only upon a default
event by Mead Westvaco Corp., the notional amount
times the difference between the par value and
the then-market of Mead Westvaco Corp.,
6.85% due 4/01/12. $ 1,559
--------
Total Net Unrealized Appreciation $ 37,100
========
(6) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income on
the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least equal
to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the forward
sale of other securities it owns. Income on the securities will not be
earned until settlement date. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Portfolio's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, according to the procedures described
under "Investment security valuations" above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
27
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
"marked-to-market" daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the sale
of the securities based upon the unit price established at the date the
commitment was entered into.
See the Schedule of Investments for outstanding delayed delivery
transactions.
(7) SECURITIES LENDING:
The Portfolio may lend its securities 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 June 30, 2004
resulting in $30,662 of security lending income. At June 30, 2004, the
Portfolio had $33,191,879 worth of securities on loan.
See the Schedule of Investments for securities on loan.
(8) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1-2 of
1%. In addition, a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $2,117 for the Portfolio.
During the period ended June 30, 2004, the Portfolio had not borrowed under
the credit facility.
28
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
29
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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
30
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0923SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
GLOBAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon Global Fixed Income Portfolio ("Portfolio"), at value (Note 1A) $ 90,746,825
Receivable for Fund shares sold 341
Prepaid expenses 13,308
------------
Total assets 90,760,474
LIABILITIES
Accrued transfer agent fees (Note 2) $ 2,391
Accrued expenses and other liabilities 17,281
--------
Total liabilities 19,672
------------
NET ASSETS $ 90,740,802
============
NET ASSETS CONSIST OF:
Paid-in capital $104,757,770
Accumulated net realized loss (16,683,814)
Undistributed net investment loss (1,351,238)
Net unrealized appreciation 4,018,084
------------
TOTAL NET ASSETS $ 90,740,802
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 4,370,201
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 20.76
============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $ 2,599,355
Expenses allocated from Portfolio (327,048)
------------
Net investment income allocated from Portfolio 2,272,307
EXPENSES
Transfer agent fees (Note 2) $ 3,458
Registration fees 10,711
Legal and audit services 15,868
Trustees' fees and expenses (Note 2) 994
Insurance expense 760
Miscellaneous 5,114
--------
Total expenses 36,905
------------
Net investment income 2,235,402
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment transactions 8,790,515
Change in unrealized appreciation (depreciation) allocated from Portfolio (9,903,434)
------------
Net realized and unrealized loss on investments (1,112,919)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,122,483
============
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 30, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 2,235,402 $ 5,973,675
Net realized gains 8,790,515 (1,376)
Change in net unrealized appreciation (9,903,434) 3,796,089
------------ ------------
Net increase in net assets from investment operations 1,122,483 9,768,388
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income -- --
Return of capital -- --
------------ ------------
Total distributions to shareholders -- --
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 1,941,448 10,566,938
Value of shares issued to shareholders in payment of distributions declared -- --
Cost of shares redeemed (58,509,047) (38,731,401)
------------ ------------
Net decrease in net assets from Fund share transactions (56,567,599) (28,164,463)
------------ ------------
TOTAL DECREASE IN NET ASSETS (55,445,116) (18,396,075)
NET ASSETS
At beginning of period 146,185,918 164,581,993
------------ ------------
At end of period (including distributions in excess
of net investment income of $1,351,238 and $3,586,640) $ 90,740,802 $146,185,918
============ ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 --------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
---------------- -------- -------- -------- -------- --------
NET ASSET VALUE, BEGINNING OF THE PERIOD $ 20.67 $ 19.43 $ 18.45 $ 18.53 $ 18.76 $ 20.28
------- -------- -------- -------- -------- --------
FROM INVESTMENT OPERATIONS:
Net investment income(*) (1) 0.42 0.75 0.82 0.84 1.06 1.26
Net realized and unrealized gain
(loss) on investments (0.33) 0.49 0.44 (0.01)(2) 0.71 (1.38)
------- -------- -------- -------- -------- --------
Total from investment operations 0.09 1.24 1.26 0.83 1.77 (0.12)
------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (0.27) (0.91) (2.00) (1.40)
From tax return of capital -- -- (0.01) -- -- --
------- -------- -------- -------- -------- --------
Total distributions to shareholders -- -- (0.28) (0.91) (2.00) (1.40)
------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $ 20.76 $ 20.67 $ 19.43 $ 18.45 $ 18.53 $ 18.76
------- -------- -------- -------- -------- --------
TOTAL RETURN 0.44%(3) 6.38%((+)) 6.94% 4.51% 9.79% (0.64)%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)(*) 0.63%((+)(+) 0.65% 0.60% 0.56% 0.56% 0.54%
Net Investment Income
(to average daily net assets)(*) 3.89%((+)(+)) 3.74% 4.43% 4.46% 5.59% 6.31%
Net Assets, End of Year (000's omitted) $90,741 $146,186 $164,582 $359,358 $373,739 $379,246
- -----------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose a portion of its investment advisory fee payable to the Portfolio
and/ or reimbursed the Fund for a portion of its operating expenses. If
this voluntary action had not been taken, the investment income per share
and the ratios would have been:
Net investment income per share (1) N/A $ 0.74 N/A N/A N/A N/A
Ratios (to average daily net assets):
Expenses N/A 0.70% N/A N/A N/A N/A
Net investment income N/A 3.69% N/A N/A N/A N/A
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to decrease net
investment income per share by $0.007, increase net realized and unrealized
gains and losses per share by $0.007 and decrease the ratio of net
investment income to average net assets from 4.50% to 4.46%. Per share data
and ratios/supplemental data for the periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding,
(2) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemptions of Fund shares in relation to the
fluctuating market values for the Fund.
(3) Not annualized.
(+) Total return would have been lower in the absence of expense waivers.
(+)(+) Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Global Fixed Income Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity.
The Fund seeks to achieve its objective by investing all of its investable
assets in an interest of Standish Mellon Global Fixed Income Portfolio (the
"Portfolio"), a subtrust of the Mellon Institutional Funds Master Portfolio
(the "Portfolio Trust"), which is organized as a New York trust and which
has the same investment objective as the Fund. The Portfolio seeks to
achieve its investment objective by investing, under normal circumstances,
at least 80% of its net assets in U.S. and non-U.S. dollar denominated
fixed income securities of U.S. and foreign governments and companies
located in the U.S. and various countries, including emerging markets. The
value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (approximately
100% at June 30, 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. The Fund does not isolate that portion of
the results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market prices
of securities held. Such fluctuations are included with the net realized
and unrealized gain or loss from investments.
C. DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. In determining the amounts of its dividends,
the Fund will take into account its share of the income, gains or losses,
expenses, and any other tax items of the Portfolio. Distributions to
shareholders are recorded on ex-dividend date. Dividends from net
investment income and distributions from capital gains, if any, are
reinvested in additional shares of the Fund unless a shareholder elects to
receive them in cash. Income and capital gain distributions are determined
in accordance with income tax regulations which may differ from accounting
principles generally accepted in the United States of America. These
differences, which may result in distribution reclassifications, are
primarily due to differing treatments for foreign currency transactions,
options, futures, amortization and/or accretion of premiums and discounts
on certain securities, capital loss carryforwards and losses deferred due
to wash sales.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON GLOBAL FIXED INCOME 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
Standish Mellon Asset Management Company LLC ("Standish Mellon"), a
wholly-owned subsidiary of Mellon Financial Corporation, for such services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
On February 23, 2004, the Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly owned subsidiary of Dreyfus, which is an affiliate
of Standish Mellon, to provide transfer agent services to the Fund.
Pursuant to this agreement the Fund was charged $2,391 during the period
ended June 30, 2004 and $2,391 was owed at June 30, 2004.
The Portfolio compensates Mellon Bank, N.A. under a administration and
accounting services agreement for providing fund administration and fund
accounting services for the Portfolio.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended June 30, 2004, aggregated $1,941,448 and $65,926,424,
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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
Shares sold 91,853 523,070
Shares issued to shareholders in payment
of distributions declared -- --
Shares redeemed (2,794,028) (1,921,020)
---------- ----------
Net decrease (2,702,175) (1,397,950)
========== ==========
At June 30, 2004, three shareholders of record held approximately 31%, 21%
and 19% of the total outstanding shares of the Fund, respectively.
Investment activity of these shareholders could have a material impact on
the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--96.1%
ASSET BACKED--2.4%
Household Automotive Trust 2003-1 A2 1.300% 9/18/2006 USD 517,107 $ 516,858
MBNA Master Credit Card Trust USA 1999-G A 6.350 12/15/2006 1,595,000 1,598,278
Whole Auto Loan Trust 2002-1 A2 1.880 6/15/2005 70,814 70,831
----------
Total Asset Backed (Cost $2,244,667) 2,185,967
----------
CORPORATE--17.8%
BASIC MATERIALS--0.7%
Alcoa Inc.(*) 4.250 8/15/2007 85,000 86,240
Freeport-McMoRan Copper & Gold, Inc.(*) 10.125 2/1/2010 130,000 143,650
Georgia-Pacific Corp. 8.875 2/1/2010 115,000 130,238
ICI Wilmington, Inc. 4.375 12/1/2008 250,000 245,236
----------
605,364
----------
COMMUNICATIONS--2.8%
COX Communications, Inc.(*) 7.125 10/1/2012 295,000 323,306
CSC Holdings, Inc. 7.875 12/15/2007 155,000 161,200
Dex Media West LLC/Dex Media Finance Co. 8.500 8/15/2010 70,000 76,300
Dex Media West LLC/Dex Media Finance Co. 9.875 8/15/2013 70,000 76,825
Liberty Media Corp. 3.500 9/25/2006 300,000 299,456
News America Holdings(*) 9.250 2/1/2013 180,000 225,857
RH Donnelley Finance Corp. I 144A 8.875 12/15/2010 50,000 54,875
RH Donnelley Finance Corp. I 144A 10.875 12/15/2012 90,000 104,400
Salem Communications Corp. 7.750 12/15/2010 90,000 91,913
Sprint Capital Corp. 6.900 5/1/2019 435,000 437,591
Sprint Capital Corp.(*) 8.375 3/15/2012 420,000 482,718
Univision Communications, Inc. 7.850 7/15/2011 200,000 230,641
----------
2,565,082
----------
CONSUMER CYCLICAL--1.2%
Coast Hotels & Casinos, Inc. 9.500 4/1/2009 145,000 152,250
Lear Corp. 8.110 5/15/2009 150,000 170,857
Mohegan Tribal Gaming Authority 6.375 7/15/2009 100,000 100,250
Mohegan Tribal Gaming Authority 8.375 7/1/2011 155,000 167,400
Office Depot, Inc. 6.250 8/15/2013 145,000 149,349
Yum! Brands Inc. 8.875 4/15/2011 310,000 374,085
----------
1,114,191
----------
CONSUMER NONCYCLICAL--0.7%
Kroger Co. 8.000 9/15/2029 185,000 215,048
Wyeth 5.500 2/1/2014 455,000 434,759
----------
649,807
----------
ENERGY--1.4%
Chesapeake Energy Corp. 8.125 4/1/2011 100,000 108,000
Halliburton Co. 5.500 10/15/2010 325,000 328,799
Pemex Project Funding Master Trust(a) 2.820 6/15/2010 155,000 155,698
Salomon Brothers AF for OAO Siberian Oil Co. 10.750 1/15/2009 200,000 206,000
Southern Natural Gas Co.(*) 8.875 3/15/2010 100,000 109,250
Transcontinental Gas Pipe Line 6.125 1/15/2005 325,000 329,875
----------
1,237,622
----------
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL--5.1%
Banco Nacional de Desenvolvimento Economic(a) 9.622% 6/16/2008 USD 85,000 $ 86,27
Boston Properties Inc. 5.000 1/15/2013 370,000 388,049
Chevy Chase Bank FSB 6.875 12/1/2013 295,000 295,000
EOP Operating LP(*) 6.800 1/15/2009 255,000 275,990
EOP Operating LP.(*) 7.875 7/15/2031 155,000 172,984
FleetBoston Financial Corp. 7.375 12/1/2009 210,000 236,797
Ford Motor Credit Co. 6.875 2/1/2006 395,000 414,314
General Motors Acceptance Corp. 6.875 9/15/2011 410,000 420,372
Glencore Funding LLC 144A 6.000 4/15/2014 455,000 422,031
Jefferies Group, Inc. 5.500 3/15/2016 110,000 105,236
Morgan Stanley(*) 4.750 4/1/2014 200,000 184,524
National City Corp. 6.875 5/15/2019 455,000 499,413
Nordea Bank Finland PLC/New York, NY 7.500 1/30/2007 445,000 481,702
Union Planters Bank NA 5.125 6/15/2007 455,000 477,057
Wells Fargo & Co.(*) 5.000 11/15/2014 175,000 169,133
----------
4,628,877
----------
INDUSTRIAL--2.0%
Allied Waste North America 8.875 4/1/2008 225,000 246,375
American Standard, Inc. 7.375 2/1/2008 145,000 156,600
Jefferson Smurfit Corp. US 8.250 10/1/2012 15,000 15,600
Oakmont Asset Trust 144A 4.514 12/22/2008 400,000 391,832
Raytheon Co. 5.500 11/15/2012 520,000 524,738
Republic Services, Inc. 6.750 8/15/2011 150,000 164,094
Waste Managemnt, Inc.(*) 6.875 5/15/2009 245,000 269,002
----------
1,768,241
----------
UTILITIES--3.9%
AES Corp. 144A 8.750 5/15/2013 100,000 107,125
AES Corp. 144A 10.000 7/15/2005 53,270 54,469
First Energy Corp. 5.500 11/15/2006 445,000 460,363
FirstEnergy Corp. 6.450 11/15/2011 560,000 580,585
Niagara Mohawk Power Corp. 7.750 10/1/2008 175,000 196,991
Nisource Finance Corporation(*) 6.150 3/1/2013 150,000 155,409
Northern States Power Co. 8.000 8/28/2012 195,000 231,777
Pepco Holdings, Inc. 6.450 8/15/2012 485,000 502,368
PPL Capital Funding Trust I 7.290 5/18/2006 315,000 330,715
Progress Energy Inc. 7.000 10/30/2031 230,000 236,690
Public Service Co. of Colorado 5.000 10/1/2012 355,000 419,044
TXU Energy Co.(*) 7.000 3/15/2013 270,000 294,017
----------
3,569,553
----------
Total Corporate (Cost $15,947,244) 16,138,737
----------
SOVEREIGN BONDS--2.8%
Republic of Brazil(a) 2.063 4/15/2006 152,000 149,340
Republic of Brazil 7.309 6/29/2009 115,000 115,000
Republic of Brazil(a) 2.125 4/15/2012 188,235 158,588
Republic of Bulgaria 7.500 1/15/2013 15,000 21,037
Republic of Bulgaria(a) 2.000 7/28/2024 75,000 74,906
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN BONDS--(CONTINUED)
Republic of Bulgaria 144A 8.250% 1/15/2015 USD 120,000 $ 139,650
Republic of Colombia(*) 10.000 1/23/2012 145,000 150,075
Republic of El Salvador 8.500 7/25/2011 160,000 172,800
Republic of El Salvador 8.250 4/10/2032 145,000 134,488
Republic of Panama 8.875 9/30/2027 170,000 164,900
Republic of Peru 4.500 3/7/2017 85,000 68,850
Republic of South Africa 6.500 6/2/2014 160,000 160,800
Republic of Turkey 9.000 6/30/2011 70,000 70,175
Republic of Turkey 11.500 1/23/2012 150,000 168,000
Russian Federation 12.750 6/24/2028 60,000 87,150
Russian Federation 5.000 3/31/2030 200,000 182,750
Ukraine Government Senior Notes 11.000 3/15/2007 190,403 204,684
United Mexican States 9.875 2/1/2010 270,000 324,135
----------
Total Sovereign Bonds (Cost $2,639,680) 2,547,328
----------
YANKEE BONDS--6.7%
Amvescap Plc 5.900 1/15/2007 265,000 279,862
Banque Centrale de Tunisie 7.375 4/25/2012 210,000 227,850
British Sky Broadcasting PLC 7.300 10/15/2006 410,000 442,652
British Sky Broadcasting PLC 6.875 2/23/2009 480,000 524,228
Carnival Corp. 3.750 11/15/2007 265,000 262,003
Deutsche Telekom International Finance BV 8.000 6/15/2010 375,000 438,209
Deutsche Telekom International Finance BV 5.250 7/22/2013 90,000 87,618
Domtar Inc.(*) 5.375 12/1/2013 545,000 518,241
French Telecom 9.000 3/1/2011 205,000 237,558
HBOS PLC 144A 5.375 11/1/2013 325,000 313,206
Hutchison Whampoa Ltd. 144A 5.450 11/24/2010 585,000 574,195
Inco Ltd. 7.750 5/15/2012 205,000 233,167
Industrial Bank of Korea 144A 4.000 5/19/2014 175,000 162,885
Petronas Capital Ltd.(*) 144A 7.875 5/22/2022 160,000 176,881
Potash Corp. of Saskatchewan 4.875 3/1/2013 170,000 162,897
Rogers Cable, Inc. 6.250 6/15/2013 60,000 56,485
Royal Caribbean Cruises Ltd. 8.250 4/1/2005 100,000 103,500
Teck Cominco Ltd. 7.000 9/15/2012 340,000 363,593
Telecom Italia Capital SA(*) 144A 4.000 11/15/2008 560,000 550,113
Telus Corp. 8.000 6/1/2011 335,000 380,748
----------
Total Yankee Bonds (Cost $6,093,675) 6,095,891
----------
U.S. GOVERNMENT AGENCY--1.5%
PASS THRU SECURITIES--1.5%
FNMA 5.500 1/1/2034 590,732 589,612
FNMA (TBA)(#) 6.500 7/1/2019 760,000 791,113
----------
Total U.S. Government Agency (Cost $1,385,913) 1,380,725
----------
U.S. TREASURY OBLIGATIONS--10.3%
TREASURY BONDS--7.5%
United States Treasury Bond 3.250 8/15/2008 6,365,000 $6,286,182
United States Treasury Bond 6.250 5/15/2030 480,000 537,431
----------
6,823,613
----------
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
TREASURY NOTES--2.8%
United States Treasury Note(*) 5.000% 2/15/2011 USD 2,385,000 $2,496,425
----------
Total U.S. Treasury Obligations (Cost $9,391,651) 9,320,038
----------
FOREIGN DENOMINATED--54.6%
AUSTRALIA--5.3%
Australian Government Bond 7.500 9/15/2009 AUD 4,630,000 3,481,050
Australian Government Bond 6.500 5/15/2013 1,775,000 1,287,818
----------
4,768,868
----------
CANADA--0.5%
Canadian Pacific Railway Ltd. 144A 4.900 6/15/2010 CAD 620,000 459,545
----------
DENMARK--0.9%
Realkredit Danmark A/S 4.000 1/1/2006 DKK 5,140,000 858,184
----------
EURO--41.0%
Allied Domecq Financial Services PLC 5.875 6/12/2009 EUR 145,000 188,847
Autostrade SpA(a) 2.552 6/9/2011 300,000 364,844
Bank of America Corp. 4.625 2/18/2014 210,000 253,253
Barclays Bank PLC 7.500 12/15/2010 65,000 92,264
Bertelsmann US Finance, Inc. 4.625 6/3/2010 195,000 239,835
Bundesobligation 5.000 5/20/2005 1,105,000 1,377,112
Bundesobligation 5.000 8/19/2005 610,000 764,366
Bundesobligation 3.500 10/10/2008 1,735,000 2,116,668
Buoni del Tesoro Poliennali 2.150 9/15/2014 495,000 601,613
Citigroup, Inc.(a) 2.237 6/3/2011 370,000 449,098
Deutsche Bundesrepublik 5.250 1/4/2011 125,000 163,910
Deutsche Bundesrepublik 5.000 7/4/2011 1,365,000 1,764,985
Deutsche Bundesrepublik 4.500 1/4/2013 1,195,000 1,487,822
Deutsche Bundesrepublik 4.000 1/4/2028 950,000 1,177,260
Deutsche Bundesrepublik 5.625 1/4/2028 100,000 133,888
Deutsche Telekom International Finance BV 8.125 5/29/2012 225,000 333,225
FBG Treasury Europe 5.750 3/17/2005 295,000 366,969
FCE Bank PLC(a) 2.522 6/28/2006 260,000 314,740
France Government 3.150 7/25/2032 1,666,212 2,342,739
France Telecom 7.250 1/28/2013 300,000 422,237
French Treasury Note 5.000 1/12/2006 2,720,000 3,434,109
GE Capital European Funding(a) 2.198 5/4/2011 370,000 449,264
General Motors Acceptance Corp.(a) 3.710 7/5/2005 255,000 315,009
HBOS PLC (a) 6.050 11/23/2049 290,000 381,606
Hellenic Republic 4.500 5/20/2014 1,175,000 1,430,793
Hilton Group Finance PLC 6.500 7/17/2009 225,000 299,737
HJ Heinz BV 5.125 4/10/2006 100,000 126,209
Honeywell Holding BV 5.250 12/20/2006 135,000 170,400
Household Finance Corp. 6.500 5/5/2009 300,000 405,130
International Paper Co. 5.375 8/11/2006 135,000 171,059
Italy Buoni Poliennali Del Tesoro 4.500 3/1/2007 2,155,000 2,724,760
Kappa Beheer BV 10.625 7/15/2009 135,000 173,545
KFW Group 3.500 4/17/2009 435,000 527,123
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
EURO--(CONTINUED)
Lear Corp. 8.125% 4/1/2008 EUR 205,000 $ 284,93
Linde Finance BV 6.000 7/29/2049 215,000 272,430
MBNA Master Credit Card Trust USA 144A 4.375 8/19/2004 1,100,000 1,343,567
Nalco Co. 144A 7.750 11/15/2011 100,000 125,506
National Westminster Bank PLC 6.625 10/5/2009 70,000 94,436
Netherlands Government Bond 5.500 7/15/2010 2,370,000 3,140,378
NGG Finance PLC 5.250 8/23/2006 190,000 241,056
Nordea Bank Sweden AB 144A 6.000 12/13/2010 140,000 177,933
Parker Hannifin Corp. 6.250 11/21/2005 75,000 95,492
Pemex Project Funding Master Trust 144A 6.625 4/4/2010 180,000 230,626
Sara Lee Corp. 6.125 7/27/2007 125,000 163,746
Spain Government Bond 4.250 10/31/2007 1,760,000 2,213,456
Svenska Handelsbanken 5.500 3/7/2011 100,000 126,835
Teksid Aluminum SpA 11.375 7/15/2011 70,000 73,004
Telefonica Europe BV 5.125 2/14/2013 195,000 243,820
Telenet Communications NV 144A 9.000 12/15/2013 275,000 333,412
ThyssenKrupp Finance Nederland BV 7.000 3/19/2009 160,000 213,852
Transco PLC 5.250 5/23/2006 245,000 310,304
Tyco International Group SA 5.500 11/19/2008 695,000 890,259
Valentia Telecommunications Ltd 7.250 8/15/2013 230,000 290,064
Veolia Environnement 5.875 6/27/2008 185,000 241,644
West LB Covered Bank PLC 144A 4.000 3/25/2014 450,000 526,842
----------
37,198,019
----------
TURKEY--0.3%
Turkey Government Bond(b) 0.000 8/24/2005 TRL 300,000 268,182
----------
SINGAPORE--2.7%
Singapore Government 5.625 7/1/2008 SGD 3,780,000 2,482,892
----------
SOUTH AFRICA--0.1%
Repubic of South Africa 5.250 5/16/2013 ZAR 110,000 130,349
----------
UNITED KINGDOM--2.4%
Inco 15.750 7/15/2006 GBP 200,000 406,363
United Kingdom Gilt 4.000 3/7/2009 1,025,000 1,782,240
----------
2,188,603
----------
UNITED STATES--1.4%
Philip Morris Capital Corp. 4.000 5/31/2006 CHF 1,530,000 1,229,819
----------
Total Foreign Denominated (Cost $45,101,522) 49,584,461
----------
TOTAL BONDS AND NOTES (Cost $82,804,352) 87,253,147
----------
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY RATE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
PURCHASED OPTIONS--0.2% CONTRACT SIZE
-------------
USD Put/JPY Call, Strike Price 105, 7/6/04 (USD) 2,930,000 $ --
USD Put/EUR Call, Strike Price 1.30, 7/9/04 (USD) 2,780,000 278
USD Put/CAD Call, Strike Price 1.26, 7/13/04 (USD) 3,250,000 --
USD Put/AUD Call, Strike Price .7825, 7/23/04 (USD) 250,000 --
USD Put/JPY Call, Strike Price 105, 9/28/04 (USD) 2,180,000 27,470
USD Put/ Eur Call, Strike Price 1.25, 11/18/04 (USD) 4,390,000 63,655
USD Put/CAD Call, Strike Price 1.34, 11/29/04 (USD) 1,760,000 38,720
USD Put/ Eur Call, Strike Price 1.27, 11/29/04 (USD) 1,760,000 19,360
-----------
TOTAL PURCHASED OPTIONS (Cost $397,377) 149,483
-----------
SHORT TERM INVESTMENTS--0.5%
INVESTMENT COMPANIES--0.5% PAR VALUE
---------
Dreyfus Institutional Preferred Plus ((+)(+)) 1.000% USD 432,077 432,077
-----------
TOTAL SHORT TERM INVESTMENTS--(Cost $432,077) 432,077
-----------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--14.4%
INVESTMENT COMPANIES--14.4%
Dreyfus Cash Management Plus Fund((+)(+)) (Cost $13,063,753) 1.000% 13,063,753 13,063,753
-----------
TOTAL INVESTMENTS--111.2% (COST $96,697,559) 100,898,460
LIABILITIES IN EXCESS OF OTHER ASSETS--(11.2)% (10,151,635)
-----------
NET ASSETS--100.0% $90,746,825
-----------
- ----------
NOTES TO SCHEDULE OF INVESTMENTS:
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
AUD--Australian Dollar
CAD--Canadian Dollar
CHF--Swiss Francs
DKK--Danish Krone
EUR--Euro
FLIRB--Front Loaded Interest Reduction Bond
GBP--British Pound
SGD--Singapore Dollar
TRL--Turkish Lira
ZAR--South African Rond
(a) Variable Rate Security; rate indicated is as if 6/30/2004.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date. The rate shown is the
rate at period end. The maturity date shown is the ultimate maturity.
* Security, or a portion of thereof, was on loan at June 30, 2004.
(+) Denotes all or part of security segregated as collateral.
(+)(+) Affiliated institutional money market fund. The effective yield is
1.00%. 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.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- --------------------------------------------------------------------------------
Foreign Government 40.7%
Short Term Investments 14.9%
Financial 12.7%
U.S. Government 10.3%
Communications 7.6%
Asset Backed 5.4%
Utilities 4.7%
Industrial 4.2%
Consumer Noncyclical 3.4%
Basic Materials 3.2%
Consumer Cyclical 2.3%
Energy 1.8%
-----
111.2%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- --------------------------------------------------------------------------------
United States 52.5%
Germany 10.7%
France 7.4%
Netherlands 6.1%
United Kingdom 5.9%
Australia 5.4%
Italy 4.1%
Singapore 2.7%
Spain 2.4%
Canada 2.4%
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (Note 1A) (including securities on loan, valued at $12,382,704 (Note 6))
Unaffiliated issuers, at value (cost $83,201,729) $ 87,402,630
Affiliated issuers, at value (cost $13,495,830) (Note 1H) 13,495,830
Cash 49,183
Foreign currency (identified cost $748,517) 753,208
Receivable for investments sold 3,570,880
Interest and dividends receivable 1,696,748
Unrealized appreciation on forward currency exchange contracts 51,941
Prepaid expenses 8,489
-----------
Total assets 107,028,909
LIABILITIES
Liability for securities on loan (Note 6) $13,063,753
Payable for securities purchased 2,771,221
Options written, at value (Note 5) (premiums received $99,031) 38,336
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 335,080
Accrued custody, accounting and administration fees (Note 2) 14,221
Accrued trustee fees and expenses (Note 2) 6,777
Accrued expenses and other liabilities 52,696
___________
Total liabilities 16,282,084
------------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $ 90,746,825
============
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including foreign withholding tax of $13,051) (including
securities lending income of $5,182 (Note 6)) $ 2,599,355
EXPENSES
Investment advisory fee (Note 2) $ 231,869
Accounting and custody fees (Note 2) 51,950
Legal and audit fees 23,354
Trustees' fees and expenses (Note 2) 12,520
Insurance expense 6,822
Miscellaneous 533
-----------
Total expenses 327,048
------------
Net investment income 2,272,307
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 1,524,970
Foreign currency and forward foreign currency exchange contracts 6,992,114
Option transactions 273,431
-----------
Net realized gain 8,790,515
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (9,903,434)
-----------
Change in net unrealized appreciation (depreciation) (9,903,434)
------------
Net realized and unrealized loss (1,112,919)
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 1,159,388
============
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 30, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS
FROM INVESTMENT OPERATIONS
Net investment income $ 2,272,307 $ 5,997,419
Net realized gains (loss) 8,790,515 (1,377)
Change in net unrealized appreciation (depreciation) (9,903,434) 3,796,094
------------ -------------
Net increase in net assets from investment operations 1,159,388 9,792,136
------------ -------------
CAPITAL TRANSACTIONS
Contributions 1,941,448 10,566,938
Withdrawals (65,926,424) (31,376,618)
------------ -------------
Net decrease in net assets from capital transactions (63,984,976) (20,809,680)
------------ -------------
TOTAL DECREASE IN NET ASSETS (62,825,588) (11,017,544)
NET ASSETS
At beginning of period 153,572,413 164,589,957
------------ -------------
At end of period $ 90,746,825 $153,572,413
============ ============
The accompanying notes are an integral part of the financial statements.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 -----------------------------------------------------------
(UNAUDITED) 2003 2002 2001(a) 2000 1999
---------------- -------- -------- -------- -------- -------
TOTAL RETURN((+)) 0.44%(b) 6.40% 6.98% 4.54% 9.82% (0.62)%
RATIOS:
Expenses (to average daily net assets) 0.57%((+)(+)) 0.63% 0.56% 0.53% 0.53% 0.52%
Net Investment Income
(to average daily net assets) 3.94%((+)(+)) 3.75% 4.47% 4.49% 5.61% 6.33%
Portfolio Turnover 81%(b) 222% 205% 251% 236% 172%
Net Assets, End of Year (000's omitted) $90,747 $153,572 $164,590 $364,068 $375,348 $379,604
- ------------
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to decrease the ratio of the net investment income
to average net assets from 4.53% to 4.49%. Ratios for the periods prior
to January 1, 2001 have not been restated to reflect this change in
presentation.
(b) Not annualized.
(+) Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to
the financial statements.
(+)(+) Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York on
January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Global Fixed Income Portfolio (the "Portfolio") is a separate
non-diversified investment series of the Portfolio Trust.
The objective of the Portfolio is to maximize total return while realizing
a market level of income consistent with preserving principal and
liquidity. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of its net assets in U.S. and non-U.S.
dollar denominated fixed income securities of U.S. and foreign governments
and companies located in the U.S. and various countries, including emerging
markets.
At June 30, 2004 there was one fund, Standish Mellon Global Fixed Income
Fund (the "Fund"), invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at June
30, 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 in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity and
will then be valued at amortized value based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized
value does not represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield - to - maturity method
on long-term debt securities. Realized gains and losses from securities
sold are recorded on the identified cost basis. The Portfolio does not
isolate that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising from
changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments. Net
realized gains and losses on foreign currency transactions represent gains
and losses on disposition of foreign currencies and forward foreign
currency exchange contracts, currency gains and losses realized between the
trade and settlement dates on securities transactions, and the difference
between the amount of investment income and foreign withholding taxes
recorded on the Fund's books and the U.S. dollar equivalent amounts usually
required or paid.
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.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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. 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. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Portfolio may enter into contracts
and agreements that contain a variety of representations and warranties,
which provide general indemnifications. The maximum exposure to the
Portfolio under these arrangements is unknown, as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
However, based on experience, the Portfolio expects the risks of loss to be
remote.
H. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon for overall investment
advisory and administrative services, and general office facilities, is
paid monthly at the annual rate of 0.40% of the Portfolio's average daily
net assets.
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 $51,950 during the period ended
June 30, 2004 and was owed $14,221 as of June 30, 2004.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
----------- -------------
U.S. Government Securities $21,830,765 $ 14,712,429
=========== =============
Investments (non-U.S.Government Securities) $70,752,507 $ 125,277,067
=========== =============
(4) FEDERAL TAXES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal tax
basis, were as follows:
Aggregate Cost $ 82,839,051
=============
Gross unrealized appreciation 5,397,118
Gross unrealized depreciation (1,192,216)
-------------
Net unrealized appreciation $ 4,204,902
=============
(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
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
A summary of the written currency options for the period ended June 30,
2004 is as follows:
NUMBER OF
WRITTEN CURRENCY OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 3 $ 69,112
Options written 10 178,589
Options expired (3) (52,541)
Options closed (4) (96,129)
--- --------
Outstanding, end of period 6 $ 99,031
=== ========
At June 30, 2004, the Portfolio held the following written currency option
contracts:
NUMBER OF
SECURITY CONTRACTS VALUE
---------------------------------------------------------------------------
USD PUT EUR CALL, Strike Price 1.37, 7/09/04 1 --
USD PUT AUD CALL, Strike Price 0.82, 7/23/04 1 --
USD PUT JPY CALL, Strike Price 100, 9/28/04 1 $ 9,152
USD PUT EUR CALL, Strike Price 1.32, 11/18/04 1 14,048
USD PUT EUR CALL, Strike Price 1.27, 11/29/04 1 9,856
USD PUT EUR CALL, Strike Price 1.34, 11/29/04 1 5,280
-------
Total (premiums received $99,031) $38,336
=======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
At June 30, 2004, the Portfolio held the following forward foreign currency
exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
---------------------------------------------------------------------------------------------------------------
Euro 120,000 9/15/2004 $ 146,034 $ 144,911 $ 1,123
British Pound Sterling 991,491 7/1/2004 1,802,268 1,803,523 (1,255)
Swedish Krona 22,500,000 9/15/2004 2,989,276 2,993,613 (4,337)
---------- ----------- ----------
TOTAL $4,937,578 $4,942,047 $ (4,469)
========== ========== ==========
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO STANDISH MELLON GLOBAL FIXED INCOME
PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
----------------------------------------------------------------------------------------------------------------------------
Australian Dollar 6,960,000 9/15/2004 4,806,334 4,844,820 $ 38,486
Canadian Dollar 620,000 9/15/2004 464,073 457,227 (6,846)
Swiss Franc 1,610,000 9/15/2004 1,290,755 1,288,000 (2,755)
Danish Krone 9,820,000 9/15/2004 1,608,309 1,593,638 (14,671)
Euro 31,258,000 9/15/2004 38,039,516 37,764,798 (274,718)
British Pound Sterling 1,000,000 9/15/2004 1,805,121 1,806,950 1,829
Swedish Krona 24,818,500 7/1/2004 3,301,359 3,306,047 4,688
Swedish Krona 22,500,000 9/15/2004 2,989,276 2,967,359 (21,917)
Singapore Dollar 4,320,000 9/15/2004 2,519,024 2,524,839 5,815
----------- ----------- ---------
Total $56,823,767 $56,553,678 $(270,089)
=========== =========== =========
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
IN CONTRACT UNREALIZED
CONTRACTS TO DELIVER MARKET VALUE EXHANCGE FOR VALUE VALUE DATE (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Euro $ 1,655,264 Swedish Krona $ 1,646,683 9/2/2004 $ (8,581)
----------- ----------- ---------
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the
underlying instrument or hedge other investments. In addition, there is the
risk that the Portfolio may not be able to enter into a closing transaction
because of an illiquid secondary market. Losses may arise if there is an
illiquid secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2004, the Portfolio held no financial futures contracts.
SWAP AGREEMENTS
The Portfolio may enter into swap agreements. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The Portfolio may enter into interest rate and credit
default swap agreements to manage its exposure to interest rates and credit
risk. Interest rate swap agreements involve the exchange by the Portfolio
with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. In a credit
default swap, one party makes a stream of payments to another party in
exchange for the right to receive a specified return in the event of a
default by a third party on its obligation. The Portfolio may use credit
default swaps to provide a measure of protection against defaults of
issuers (i.e., to reduce risk where the Portfolio owns or has exposure to
the corporate
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
or sovereign issuer) or to take an active long or short position with
respect to the likelihood of a particular corporate or sovereign issuer's
default. In connection with these agreements, cash or securities may be set
aside as collateral in accordance with the terms of the swap agreement. The
Portfolio earns interest on cash set aside as collateral. Swaps are marked
to market daily based upon quotations from market makers and change in
value, if any, is recorded as unrealized gain or loss in the Statement of
Operations. These financial instruments are not actively traded on
financial markets. The values assigned to these instruments are based upon
the best available information and because of the uncertainty of the
valuation, these values may differ significantly from the values that would
have been realized had a ready market for these instruments existed, and
differences could be material. Payments received or made from credit
default swaps at the end of the measurement period are recorded as realized
gain or loss in the Statement of Operations. Net payments of interest on
interest rate swap agreements, if any, are included as part of realized
gain or loss. Entering into these agreements involves, to varying degrees,
elements of credit, market, and documentation risk in excess of the amounts
recognized on the Statement of Assets and Liabilities. Such risks involve
the possibility that there will be no liquid market for these agreements,
that the counterparty to the agreements may default on its obligation to
perform or disagree as to the meaning of contractual terms in the
agreements, and that there may be unfavorable changes in interest rates.
At June 30, 2004, the Portfolio held no open swap 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 June 30, 2004
resulting in $5,182 of security lending income. At June 30, 2004, the
Portfolio had $12,382,704 worth of securities on loan.
See the Schedule of Investments for securities out on loan.
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income on
the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least equal
to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the forward
sale of other securities it owns. Income on the securities will not be
earned until settlement date. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Portfolio's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, according to the procedures described
under "Investment security valuations" above.
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON GLOBAL FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
"marked-to-market" daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the sale
of the securities based upon the unit price established at the date the
commitment was entered into.
See the Schedule of Investments for outstanding delayed delivery
transactions.
8) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $428 for the Portfolio.
During the period ended June 30, 2004, the Portfolio had not borrowed under
the credit facility.
25
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
26
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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
27
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0934SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon High Yield Bond Portfolio ("Portfolio"), at value (Note 1A) $57,198,033
Receivable for Fund shares sold 73
Prepaid expenses 13,482
-----------
Total assets 57,211,588
LIABILITIES
Payable for Fund shares redeemed $392,016
Accrued transfer agent fees (Note 2) 1,609
Accrued expenses and other liabilities 3,157
--------
Total liabilities 396,782
-----------
NET ASSETS $56,814,806
===========
NET ASSETS CONSIST OF:
Paid-in capital $66,642,340
Accumulated net realized loss (10,660,244)
Undistributed net investment income 127,946
Net unrealized appreciation 704,764
-----------
TOTAL NET ASSETS $56,814,806
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,598,587
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 15.79
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $2,204,226
Dividend income allocated from Portfolio 8,530
Expenses allocated from Portfolio (139,331)
----------
Net investment income allocated from Portfolio 2,073,425
EXPENSES
Transfer agent fees (Note 2) $ 3,419
Registration fees 9,448
Legal and audit services 11,737
Trustees' fees and expenses (Note 2) 994
Insurance expense 480
Miscellaneous 6,213
-------
Total expenses 32,291
DEDUCT:
Reimbursement of Fund operating expenses (Note 2) (32,291)
-------
Net expenses --
----------
Net investment income 2,073,425
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment transactions 1,009,811
Change in unrealized appreciation
(depreciation) allocated from Portfolio (2,830,243)
----------
Net realized and unrealized loss on investments (1,820,432)
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 252,993
==========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 30, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 2,073,425 $ 4,069,056
Net realized gains 1,009,811 1,480,913
Change in net unrealized appreciation (2,830,243) 4,617,621
----------- -----------
Net increase in net assets from investment operations 252,993 10,167,590
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (1,775,827) (4,091,517)
----------- -----------
Total distributions to shareholders (1,775,827) (4,091,517)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 5,173,783 13,539,738
Value of shares issued to shareholders in payment of distributions declared 1,609,719 3,716,831
Cost of shares redeemed (5,481,936) (10,355,582)
----------- -----------
Net increase in net assets from Fund share transactions 1,301,566 6,900,987
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (221,268) 12,977,060
NET ASSETS
At beginning of period 57,036,074 44,059,014
----------- -----------
At end of period (including undistributed net investment income of
$127,946 and distributions in excess of net investment income of $169,652) $56,814,806 $57,036,074
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 -------------------------------------------------------
(UNAUDITED) 2003 2002 2001(a) 2000 1999
------------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 16.19 $ 14.34 $ 14.88 $ 15.88 $ 17.39 $ 19.02
------- ------- ------- ------- ------- -------
From Investment Operations:
Net investment income* (1) 0.59 1.21 1.26 1.40 1.64 1.84
Net realized and unrealized gains
(loss) on investments (0.49) 1.85 (0.59) (1.18) (1.19) (1.45)
------- ------- ------- ------- ------- -------
Total from investment operations 0.10 3.06 0.67 0.22 0.45 0.39
------- ------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.50) (1.21) (1.21) (1.21) (1.93) (2.00)
From net realized gains on investments -- -- -- (0.01) (0.03) (0.02)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.50) (1.21) (1.21) (1.22) (1.96) (2.02)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Year $ 15.79 $ 16.19 $ 14.34 $ 14.88 $ 15.88 $ 17.39
======= ======= ======= ======= ======= =======
Total Return+ 0.67%++ 21.76% 4.70% 1.52% 2.84% 2.20%
Ratios/Supplemental data:
Expenses (to average daily net assets)*(2) 0.49%+++ 0.50% 0.50% 0.50% 0.37% 0.00%
Net Investment Income
(to average daily net assets)* 7.34%+++ 7.79% 8.68% 8.86% 10.41% 9.87%
Net Assets, End of Period (000's omitted) $56,815 $57,036 $44,059 $46,302 $31,807 $31,138
- --------------
* 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) $ 0.56 $ 1.13 $ 1.21 $ 1.33 $ 1.64 $ 1.64
Ratios (to average daily net assets):
Expenses 0.82%+++ 1.00% 1.01% 0.97% 1.11% 1.08%
Net investment income 7.01%+++ 7.29% 8.17% 8.39% 9.67% 8.79%
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001
and began amortizing premium and discount on all debt securities on
an effective yield basis. The effect of this change for the year
ended December 31, 2001 was to decrease net investment income per
share by $0.05, increase net realized and unrealized gains and losses
per share by $0.05 and decrease the ratio of net investment income to
average net assets from 9.20% to 8.86%. Per share data and
ratios/supplemental data for the periods prior to January 1, 2001
have not been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Standish Mellon High Yield Bond
Portfolio's allocated expenses.
(+) Total return would have been lower in the absence of expense waivers.
(+)(+) Not annualized.
(+)(+)(+) Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the Trust) is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon High Yield Bond Fund (the Fund) is a separate diversified
investment series of the Trust.
The objective of the Fund is to maximize total return, consisting primarily
of a high level of income. The Fund seeks to achieve its objective by
investing all of its investable assets in an interest of the Standish
Mellon High Yield Bond Portfolio (the Portfolio), a subtrust of the Mellon
Institutional Funds Master Portfolio ( the Portfolio Trust), which is
organized as a New York trust and which has the same investment objective
as the Fund. The Portfolio seeks to achieve its objective by investing,
under normal circumstances, at least 80% of net assets in fixed income
securities issued by U.S. and foreign governments, companies and banks, as
well as tax-exempt securities, preferred stocks and warrants. The value of
the Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio (approximately 100% at June 30,
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 the ex-dividend date. The
Fund's dividends from short-term and long-term capital gains, if any, after
reduction of capital losses will be declared and distributed at least
annually, as will dividends from net investment income. In determining the
amounts of its dividends, the Fund will take into account its share of the
income, gains or losses, expenses, and any other tax items of the
Portfolio. Dividends from net investment income and distributions from
capital gains, if any, are reinvested in additional shares of the Fund
unless a shareholder elects to receive them in cash. Income and capital
gain distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
for foreign currency transactions, amortization and/or accretion of
premiums and discounts on certain securities, non-taxable dividends,
capital loss carryforwards, post-October losses, losses deferred due to
wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND 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.
F. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC (Standish Mellon),
or its affiliates.
(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
Standish Mellon, a wholly-owned subsidiary of Mellon Financial Corporation,
for such services. See Note 2 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report. Standish Mellon
voluntarily agreed to limit the total operating expenses of the Fund and
it's pro rata share of the Portfolio expenses (excluding commissions, taxes
and extraordinary expenses) to 0.50% of the Fund's average daily net
assets. This agreement is voluntary and temporary and may be discontinued
or revised by Standish Mellon at any time. Pursuant to this agreement, for
the period ended June 30, 2004, Standish Mellon voluntarily reimbursed the
Fund for $32,291 of its operating expenses.
On February 23, 2004, the Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly-owned subsidiary of Dreyfus which is an affiliate
of Standish Mellon, to perform transfer agency services for the Fund.
Pursuant to this agreement the Fund was charged $1,775 during the period
ended June 30, 2004 and $1,609 was owed at June 30, 2004.
The Portfolio compensates Mellon Bank, N.A. under a administration and
accounting services agreement for providing fund administration and fund
accounting services for the Portfolio.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, disclosed in the Fund's prospectus, 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 June 30, 2004,
the Fund did receive any redemption fees.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
year ended June 30, 2004 aggregated $6,780,854 and $6,914,377,
respectively.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON HIGH YIELD BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
Shares sold 324,006 883,066
Shares issued to shareholders in payment
of distributions declared 100,786 235,981
Shares redeemed (348,707) (668,446)
-------- --------
Net increase 76,085 450,601
======== ========
At June 30, 2004, two shareholders of record held approximately 60% and 13%
of the total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 91.4%
CONVERTIBLE CORPORATE BONDS -- 0.3%
Centerpoint Energy, Inc. 144A CVT 2.875% 1/15/24 USD 75,000 $ 79,313
Royal Caribbean Cruises Step Up Notes CVT (a) 0.000 5/18/21 50,000 35,000
Xcel Energy, Inc. 144A CVT 7.500 11/21/07 40,000 59,650
-----------
Total Convertible Corporate Bonds (Cost $138,845) 173,963
-----------
CORPORATE -- 77.4%
BASIC MATERIALS -- 7.3%
Airgas, Inc. 144A 6.250 7/15/14 35,000 33,513
Boise Cascade Corp. 6.500 11/1/10 110,000 111,925
Earle M Jorgenson Co. 9.750 6/1/12 100,000 109,500
Earle M Jorgenson Co. 10.125 9/1/08 140,000 153,300
Equistar Chemicals LP/Equistar Funding Corp.* 10.625 5/1/11 160,000 177,600
Freeport-McMoRan Copper & Gold, Inc.* 10.125 2/1/10 175,000 193,375
Freeport-McMoRan Copper & Gold, Inc. 6.875 2/1/14 115,000 105,225
Georgia Pacific Corp. 144A 8.000 1/15/24 230,000 230,000
Georgia-Pacific Corp. 7.375 7/15/08 440,000 468,600
Georgia-Pacific Corp. 8.875 2/1/10 460,000 520,950
International Steel Group, Inc. 144A 6.500 4/15/14 225,000 210,938
Kansas City Southern Railway 7.500 6/15/09 250,000 250,000
Lyondell Chemical Co.* 9.625 5/1/07 310,000 323,950
Nalco Co. 144A 8.875 11/15/13 500,000 523,750
Steel Dynamics, Inc.* 9.500 3/15/09 325,000 359,125
United States Steel Corp. 9.750 5/15/10 109,000 120,718
Westlake Chemical Corp. 8.750 7/15/11 235,000 254,975
-----------
4,147,444
-----------
COMMUNICATIONS--12.9%
ACC Escrow Corp. 10.000 8/1/11 70,000 60,375
American Media Operation, Inc. 10.250 5/1/09 135,000 140,063
American Tower Corp.* 9.375 2/1/09 160,000 170,800
Block Communications, Inc. 9.250 4/15/09 400,000 420,000
Cablevision Systems Corp. 144A (b) 5.670 4/1/09 325,000 333,125
CBD Media, Inc. 8.625 6/1/11 350,000 368,375
Crown Castle International Corp.* 7.500 12/1/13 140,000 139,300
CSC Holdings, Inc. 8.125 8/15/09 200,000 208,000
Dex Media West LLC/Dex Media Finance Co. 8.500 8/15/10 80,000 87,200
Dex Media West LLC/Dex Media Finance Co. 9.875 8/15/13 80,000 87,800
Dex Media, Inc. 144* 8.000 11/15/13 90,000 86,400
DirecTV Holdings LLC 8.375 3/15/13 275,000 304,219
Dobson Communications Corp.* 8.875 10/1/13 160,000 121,600
Echostar DBS Corp. 5.750 10/1/08 649,000 640,076
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS (CONTINUED)
Echostar DBS Corp. 9.125% 1/15/09 USD 146,000 $ 160,053
Entercom Radio LLC/Entercom Capital, Inc. 7.625 3/1/14 50,000 51,688
Entravision Communications Corp. 8.125 3/15/09 420,000 433,125
MCI, Inc. 5.908 5/1/07 183,000 177,510
MCI, Inc. 6.688 5/1/09 183,000 169,275
MCI, Inc.* 7.735 5/1/14 157,000 140,515
Nextel Communications, Inc.* 6.875 10/31/13 405,000 401,456
Qwest Capital Funding, Inc. 6.500 11/15/18 685,000 506,900
Qwest Communications International 144A (b) 4.750 2/15/09 200,000 187,000
Qwest Services Corp. 144A* 13.500 12/15/07 145,000 165,300
Radio One, Inc. 8.875 7/1/11 60,000 65,475
RH Donnelley Finance Corp. I 144A 8.875 12/15/10 220,000 241,450
RH Donnelley Finance Corp. I 144A 10.875 12/15/12 320,000 371,200
Rural Cellular Corp. 8.250 3/15/12 85,000 86,913
Salem Communications Corp. 7.750 12/15/10 390,000 398,288
Sinclair Broadcast Group, Inc. 4.875 7/15/18 80,000 73,800
Spanish Broadcasting System 9.625 11/1/09 190,000 200,450
UbiquiTel Operating Co.* 9.875 3/1/11 170,000 170,000
US Unwired, Inc. 144A (b)* 5.791 6/15/10 200,000 202,750
----------
7,370,481
----------
CONSUMER CYCLICAL -- 18.9%
Advanced Accessory Systems LLC 10.750 6/15/11 260,000 252,200
AMC Entertainment, Inc. 144A* 8.000 3/1/14 200,000 191,000
American Casino & Entertainment Properties LLC 144A 7.850 2/1/12 70,000 71,050
Amerigas Partners LP/Amerigas Eagle Finance Corp. 8.875 5/20/11 200,000 213,000
Ameristar Casinos, Inc. 10.750 2/15/09 500,000 570,000
Argosy Gaming Co.* 7.000 1/15/14 800,000 780,000
Carmike Cinemas, Inc. 144A* 7.500 2/15/14 265,000 253,075
Chumash Casino & Resort Enterprise 144A 9.000 7/15/10 515,000 558,775
Cinemark USA, Inc. 9.000 2/1/13 135,000 147,319
Coast Hotels & Casinos, Inc. 9.500 4/1/09 285,000 299,250
Domino's, Inc. 8.250 7/1/11 155,000 164,300
DR Horton, Inc. 8.500 4/15/12 50,000 55,250
Friendly Ice Cream Corp. 144A 8.375 6/15/12 35,000 33,950
INVISTA 144A 9.250 5/1/12 160,000 160,800
Isle of Capri Casinos, Inc. 144A 7.000 3/1/14 545,000 505,488
John Q Hammons Hotels Finance Corp. III 8.875 5/15/12 350,000 379,750
Keystone Automotive Operations, Inc. 144A 9.750 11/1/13 105,000 112,350
Mohegan Tribal Gaming Authority 8.125 1/1/06 200,000 211,000
Mohegan Tribal Gaming Authority 8.375 7/1/11 670,000 723,600
National Waterworks, Inc. 10.500 12/1/12 90,000 99,900
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER CYCLICAL (CONTINUED)
Norcraft Co LP/Norcraft Finance Corp. 144A 9.000% 11/1/11 USD 50,000 $ 52,750
Pinnacle Entertainment, Inc.* 8.750 10/1/13 170,000 168,725
Rite Aid Corp.* 12.500 9/15/06 570,000 645,525
Rite Aid Corp. 8.125 5/1/10 310,000 326,275
Rite Aid Corp. 9.500 2/15/11 135,000 148,838
Royal Caribbean Cruises Ltd. 8.000 5/15/10 150,000 161,625
Royal Caribbean Cruises Ltd.* 8.750 2/2/11 1,000,000 1,107,500
Royal Caribbean Cruises Ltd. 7.500 10/15/27 325,000 303,875
Russell Corp. 9.250 5/1/10 187,000 198,688
Six Flags, Inc.* 9.500 2/1/09 270,000 277,425
Speedway Motorsports, Inc. 6.750 6/1/13 395,000 398,950
Speedway Motorsports, Inc. 144A 6.750 6/1/13 225,000 225,000
Station Casinos, Inc. 6.500 2/1/14 325,000 312,813
True Temper Sports, Inc. 8.375 9/15/11 100,000 100,000
TRW Automotive, Inc. 9.375 2/15/13 277,000 312,318
Turning Stone Casino Resort Enterprise 9.125 12/15/10 250,000 261,250
----------
10,783,614
----------
CONSUMER NONCYCLICAL -- 6.9%
Altria Group, Inc. 7.000 11/4/13 135,000 137,474
Chattem, Inc. 7.000 3/1/14 215,000 206,400
Chattem, Inc. (b) 4.310 3/1/10 75,000 76,875
Constellation Brands, Inc. 8.000 2/15/08 130,000 139,750
Corn Products International, Inc. 8.250 7/15/07 145,000 157,869
Corrections Corp Of America 7.500 5/1/11 60,000 60,600
Del Monte Corp. 8.625 12/15/12 505,000 544,138
Elizabeth Arden, Inc. 144A* 7.750 1/15/14 55,000 55,963
Great Lakes Dredge & Dock 7.750 12/15/13 150,000 126,750
HCA, Inc. 8.850 1/1/07 175,000 191,586
Ingles Markets, Inc. 8.875 12/1/11 150,000 154,125
Kinetic Concepts, Inc. 7.375 5/15/13 94,000 98,230
Marsh Supermarkets, Inc. 8.875 8/1/07 95,000 95,000
Medex, Inc. 8.875 5/15/13 35,000 36,925
NeighborCare, Inc. 144A 6.875 11/15/13 40,000 42,400
Pathmark Stores, Inc.* 8.750 2/1/12 270,000 270,000
Pinnacle Foods Holding Corp. 144A 8.250 12/1/13 315,000 303,975
RJ Reynolds Tobacco Holdings, Inc.* 7.750 5/15/06 135,000 140,400
Scotts Co. 6.625 11/15/13 85,000 85,000
Smithfield Foods, Inc. 7.750 5/15/13 160,000 168,000
Standard Commercial Corp. 144A* 8.000 4/15/12 75,000 73,500
Stater Brothers Holdings 144A 4.969 6/15/10 200,000 203,250
Stater Brothers Holdings 144A 8.125 6/15/12 595,000 597,231
----------
3,965,441
----------
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
ENERGY -- 9.1%
ANR Pipeline Co. 7.375% 2/15/24 USD 225,000 $ 209,250
ANR Pipeline Co. 7.000 6/1/25 35,000 35,525
Chesapeake Energy Corp. 8.125 4/1/11 275,000 297,000
Citgo Petroleum Corp. 11.375 2/1/11 410,000 475,600
Dynegy Holdings, Inc. 144A 9.875 7/15/10 485,000 521,375
El Paso Natural Gas Co. 8.625 1/15/22 275,000 268,125
El Paso Natural Gas Co. 8.375 6/15/32 140,000 133,700
El Paso Production Holding Co. 7.750 6/1/13 160,000 146,800
Houston Exploration Co. 7.000 6/15/13 150,000 150,750
Newfield Exploration Co. 8.375 8/15/12 170,000 184,450
Northwest Pipeline Corp. 6.625 12/1/07 525,000 540,750
Peabody Energy Corp.* 6.875 3/15/13 125,000 126,563
Pogo Producing Co. 8.250 4/15/11 55,000 60,225
Premcor Refining Group, Inc. 9.500 2/1/13 195,000 224,738
Southern Natural Gas Co.* 8.875 3/15/10 50,000 54,625
Southern Natural Gas Co. 7.350 2/15/31 350,000 313,250
Tennessee Gas Pipeline Co. 8.375 6/15/32 175,000 170,625
Tesoro Petroleum Corp.* 8.000 4/15/08 65,000 69,550
Transcontinental Gas Pipe Line Corp. 8.875 7/15/12 325,000 367,250
Williams Cos, Inc. 8.625 6/1/10 75,000 82,500
Williams Cos, Inc.* 7.125 9/1/11 225,000 228,375
Williams Cos, Inc. 7.875 9/1/21 475,000 457,188
Williams Cos, Inc. 7.750 6/15/31 115,000 105,225
----------
5,223,439
----------
FINANCIAL -- 6.0%
Alamosa Delaware, Inc. 144A* 8.500 1/31/12 160,000 156,800
Arch Western Finance LLC 144a 6.750 7/1/13 80,000 80,000
Banco Nacional de Desenvolvimento Economic 9.622 6/16/08 45,000 45,675
BF Saul Reit 7.500 3/1/14 300,000 297,000
Chevy Chase Bank FSB 6.875 12/1/13 795,000 795,000
Couche-Tard 7.500 12/15/13 100,000 100,000
Felcor Lodging LP* 9.500 9/15/08 46,000 48,530
Felcor Lodging LP 144A (b) 5.784 6/1/11 160,000 160,800
Host Marriott LP 8.375 2/15/06 115,000 121,325
Host Marriott LP 144A 3.250 4/15/24 130,000 122,850
KRATON Polymers LLC/Capital Corp. 144A 8.125 1/15/14 20,000 20,200
Leucadia National Corp. 7.000 8/15/13 420,000 415,354
Leucadia National Corp. 3.750 4/15/14 125,000 123,750
Meristar Hospitality Corp. 9.500 4/1/10 175,000 217,219
Meristar Hospitality Corp.* 9.000 1/15/08 275,000 277,750
Meristar Hospitality Operating Partnership LP* 10.500 6/15/09 190,000 202,350
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
PX Escrow Corp. 9.625% 2/1/06 USD 400,000 $ 248,000
----------
3,432,603
----------
INDUSTRIAL -- 8.7%
Alliant Techsystems, Inc. 8.500 5/15/11 105,000 113,400
Alliant Techsystems, Inc. 144A 2.750 2/15/24 45,000 47,475
Allied Waste North America 8.875 4/1/08 275,000 301,125
Allied Waste North America 8.500 12/1/08 150,000 164,063
Allied Waste North America 7.875 4/15/13 215,000 224,675
Ball Corp. 6.875 12/15/12 30,000 30,450
Berry Plastics Corp. 10.750 7/15/12 70,000 77,700
Browning-Ferris Industries, Inc. 9.250 5/1/21 360,000 388,800
Communications & Power Industries, Inc. 8.000 2/1/12 35,000 35,000
Consolidated Communications Illinois 144A 9.750 4/1/12 245,000 248,675
Crown Cork & Seal Co, Inc. 8.000 4/15/23 270,000 234,900
Crown Cork & Seal Co, Inc. 7.375 12/15/26 720,000 597,600
Esterline Technologies Corp. 7.750 6/15/13 120,000 123,600
K&F Industries, Inc. 9.625 12/15/10 65,000 71,256
L-3 Communications Corp. 6.125 7/15/13 250,000 241,250
Owens-Brockway* 7.750 5/15/11 155,000 161,200
Owens-Illinois, Inc.* 7.500 5/15/10 290,000 284,200
Silgan Holdings, Inc. 6.750 11/15/13 110,000 106,700
Solo Cup Co.* 8.500 2/15/14 70,000 65,100
SPX Corp. 6.250 6/15/11 80,000 77,800
SPX Corp.* 7.500 1/1/13 175,000 179,375
Stone Container Corp. 8.375 7/1/12 360,000 376,200
Texas Industries, Inc. 10.250 6/15/11 235,000 262,025
Trinity Industries, Inc. 144A 6.500 3/15/14 595,000 544,425
----------
4,956,994
----------
UTILITIES -- 7.6%
AES Corp.* 8.500 11/1/07 135,000 138,375
AES Corp.* 8.875 2/15/11 100,000 103,750
AES Corp. 144A 10.000 7/15/05 313,703 320,762
AES Corp. 144A 8.750 5/15/13 635,000 680,244
CMS Energy Corp. 9.875 10/15/07 400,000 431,000
CMS Energy Corp. 144A 7.750 8/1/10 150,000 149,250
CMS Energy Corp.* 8.500 4/15/11 95,000 96,900
DPL, Inc.* 6.875 9/1/11 330,000 332,475
FirstEnergy Corp. 6.450 11/15/11 635,000 658,342
FPL Energy Wind Funding LLC 144A 6.876 6/27/17 132,440 129,791
Ipalco Enterprises, Inc. 7.375 11/14/08 310,000 336,350
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
Monongahela Power Co. 144A 6.700% 6/15/14 USD 110,000 $ 111,050
MSW Energy Holdings II LLC 144A 7.375 9/1/10 325,000 323,375
Nevada Power Co. 144A 6.500 4/15/12 135,000 128,250
NRG Energy, Inc. 144A 8.000 12/15/13 125,000 126,250
Reliant Energy, Inc.* 9.250 7/15/10 80,000 85,400
TECO Energy, Inc.* 7.500 6/15/10 70,000 70,700
Westar Energy, Inc. 7.875 5/1/07 125,000 137,594
-----------
4,359,858
-----------
Total Corporate Bonds (Cost $43,250,070) 44,239,874
-----------
MUNICIPAL OBLIGATIONS -- 0.1%
South Carolina Tobacco Settlement Authority (Cost $80,155) 6.000 5/15/22 90,000 80,447
-----------
SOVEREIGN BONDS -- 1.6%
Dominican Republic 144A 9.500 9/27/06 70,000 47,600
Republic of Argentina 12.250 6/19/18 53,063 14,194
Republic of Argentina 6.000 3/31/23 65,000 32,988
Republic of Brazil 2.063 4/15/06 17,600 17,292
Republic of Brazil (b) 7.309 6/29/09 70,000 70,000
Republic of Brazil 2.125 4/15/12 32,941 27,753
Republic of Brazil 11.000 8/17/40 45,000 42,120
Republic of Ecuador 7.000 8/15/30 40,000 27,400
Republic of El Salvador 8.250 4/10/32 65,000 60,288
Republic of Panama 8.875 9/30/27 35,000 33,950
Republic of Peru FLIRB (b) 4.500 3/7/17 25,000 20,250
Republic of Peru PDI (b) 5.000 3/7/17 59,150 50,425
Republic of Philippines 8.375 2/15/11 27,000 26,764
Republic of Philippines 10.625 3/16/25 5,000 5,175
Republic of Turkey 11.750 6/15/10 15,000 16,838
Republic of Turkey 9.000 6/30/11 35,000 35,088
Republic of Turkey 11.500 1/23/12 35,000 39,200
Republic of Uruguay 7.500 3/15/15 88,000 64,680
Republic of Venezuela* 5.375 8/7/10 75,000 59,438
Republic of Venezuela 2.150 4/20/11 40,000 30,900
Russian Federation 5.000 3/31/30 95,000 86,806
-----------
Total Sovereign Bonds (Cost $845,547) 809,149
-----------
YANKEE BONDS -- 6.1%
Abitibi-Consolidated, Inc. 8.550 8/1/10 225,000 237,247
AES Gener SA 7.500 3/25/14 325,000 307,125
BCP Caylux Holdings Luxembourg SCA* 9.625 6/15/14 260,000 269,425
The accompanying notes are an integral part of the financial statements.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
YANKEE BONDS (CONTINUED)
Crown European Holdings SA 9.500% 3/1/11 USD 400,000 $ 436,000
GT Group Telecom, Inc. Senior Step Up Notes* (a) 0.000 2/1/10 925,000 93
JSG Funding PLC 9.625 10/1/12 150,000 164,250
Norampac, Inc.* 6.750 6/1/13 80,000 78,400
Petroleum Geo-Services ASA* 10.000 11/5/10 260,000 269,100
Quebecor Media, Inc. 11.125 7/15/11 150,000 171,188
Rogers Cable, Inc. 6.250 6/15/13 315,000 296,548
Russel Metals, Inc. 6.375 3/1/14 70,000 65,625
Salomon Brothers AF for OAO Siberian Oil Co. 10.750 1/15/09 40,000 41,200
Stena AB 9.625 12/1/12 70,000 77,700
Stena AB 7.500 11/1/13 70,000 69,213
Tyco International Group SA* 6.125 1/15/09 500,000 530,823
Tyco International Group SA 6.375 10/15/11 275,000 292,540
Tyco International Group SA 144A 3.125 1/15/23 120,000 194,250
----------
Total Yankee Bonds (Cost $3,934,916) 3,500,727
----------
NON-AGENCY -- 1.0%
PASS THRU SECURITIES -- 1.0%
Continental Airlines, Inc. 2000-2 8.307 4/2/18 359,769 295,769
Continental Airlines, Inc. 1999-1 B 6.795 8/2/18 85,195 66,620
Continental Airlines, Inc. 1999 2 7.566 3/15/20 98,759 77,366
Northwest Airlines, Inc. 1999-2C 8.304 9/1/10 202,975 159,491
----------
Total Non-Agency (Cost $563,096) 599,246
----------
FOREIGN DENOMINATED -- 4.9%
EURO -- 4.9%
Eircom Funding 8.250 8/15/13 EUR 255,000 327,807
MTU Aero Engines Investment GmbH & Co. KG 144A 8.250 4/1/14 85,000 102,019
Nova Chemicals Corp.* 6.500 1/15/12 70,000 68,950
NTL Cable PLC 144A 8.750 4/15/14 350,000 430,740
Remy Cointreau S.A. 144A 6.500 7/1/10 60,000 73,841
Teksid Aluminum SpA 11.375 7/15/11 175,000 182,510
Telenet Communications NV 144A 9.000 12/15/13 495,000 600,142
Telenet Group Holding NV 144A Senior Step Up Notes (a)* 0.000 6/15/14 210,000 133,350
Valentia Telecommunications Ltd 7.250 8/15/13 430,000 542,293
Vivendi Universal SA 9.250 4/15/10 265,000 313,217
----------
2,774,869
----------
FRANCE -- 0.0%
Ivory Coast FLIRB* (b) 2.000 3/29/18 FRF 1,000,000 26,935
----------
The accompanying notes are an integral part of the financial statements.
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- -----------------------------------------------------------------------------------------------------------------------------------
TURKEY -- 0.0%
Republic of Turkey (a) 0.000% 8/24/05 TRL 100,000 $ 89,39
-----------
Total Foreign Denominated (Cost $2,814,251) 2,891,198
-----------
TOTAL BONDS AND NOTES (Cost $51,626,880) 52,294,604
-----------
SHARES
------
COMMON STOCK -- 0.1%
MCI, Inc.* 2,811 39,635
-----------
TOTAL COMMON STOCK (Cost $0) 39,635
-----------
CONVERTIBLE PREFERRED STOCKS -- 2.1%
Ford Motor Co. Capital Trust II 6.50% CVT Pfd 2,000 109,520
General Motors Corp. Series C 6.25% CVT Pfd 2,300 66,792
Kansas City Southern 4.25% 144A CVT Pfd 290 175,414
Omnicare, Inc. 4.00% CVT Pfd 1,000 61,250
Sovereign Capital Trust II 4.375% CVT Pfd 16,500 779,610
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS (Cost $1,162,779) 1,192,586
-----------
WARRANTS -- 0.0%
COMMUNICATIONS -- 0.0%
GT Group Telecom, Inc., 02/01/2010** 925 9
McLeod USA, Inc., 04/16/2007** 3,379 473
-----------
TOTAL WARRANTS (Cost $60,043) 482
-----------
SHORT-TERM INVESTMENTS -- 3.4%
INVESTMENT COMPANIES -- 3.4% PAR VALUE
---------
Dreyfus Institutional Preferred Plus+ 1.000% USD 1,955,986 1,955,986
TOTAL SHORT TERM INVESTMENTS (Cost $1,955,986)
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED -- 18.9%
INVESTMENT COMPANIES -- 18.9%
Dreyfus Cash Management Plus Fund+ (Cost $10,803,411) 1.000% 10,803,411 10,803,411
-----------
TOTAL INVESTMENTS -- 115.9% (COST $65,609,099) 66,286,704
LIABILITIES IN EXCESS OF OTHER ASSETS -- (15.9)% (9,088,671)
-----------
NET ASSETS -- 100.0% $57,198,033
===========
The accompanying notes are an integral part of the financial statements.
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS:
144A - Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
CVT - Convertible
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
(b) Variable Rate Security; rate indicated is as if 6/30/2004.
* Security, or a portion of thereof, was on loan at June 30, 2004.
FLIRB - Front Loaded Interest Reduction Bond
~ Defaulted security.
PDI - Past Due Interest Bonds
REIT - Real Estate Investment Trust
Step Up - Coupon rate increases in increments to maturity. Rate disclosed is as
of June 30, 2004. Maturity date disclosed is the ultimate maturity.
USD - United States Dollar
EUR - Euro
FRF - French Franc
TRL - Turkish Lira
** Non-income producing security.
+ Affiliated institutional money market fund. The effective yield is 1.00% 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.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
SCHEDULE OF INVESTMENTS - JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- -------------------------------------------------------------------------------
Short Term Investments 22.3%
Consumer Cyclical 20.4%
Communcations 16.4%
Industrial 11.4%
Financial 10.1%
Energy 9.7%
Utilites 8.4%
Basic Materials 8.2%
Consumer Noncyclical 7.2%
Foreign Government 1.8%
------
115.9%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- -------------------------------------------------------------------------------
United States 94.8%
Liberia 2.8%
Canada 1.6%
France 1.4%
Belgium 1.3%
Ireland 0.9%
United Kingdom 0.8%
Chile 0.5%
Norway 0.5%
Brazil 0.4%
The accompanying notes are an integral part of the financial statements.
18
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (including securities on loan, valued at $10,587,579) (Note 6)
Unaffiliated issuers, at value (Note 1A) (cost $52,850,032) $53,527,307
Affiliated issuers, at value (Note 1A) (cost $12,759,397) (Note 1G) 12,759,397
Cash 318,323
Foreign currency, at value (identified cost, $660,997) 662,371
Receivable for investments sold 91,398
Interest and dividends receivable 1,104,631
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 998
Prepaid expenses 5,573
-----------
Total assets 68,469,998
LIABILITIES
Liability for securites on loan (Note 6) $10,803,411
Payable for investments purchased 393,920
Unrealized depreciation on forward foreign currency exchange contracts (Note 5) 22,628
Accrued accounting and custody fees (Note 2) 10,420
Accrued trustee fees and expenses (Note 2) 2,909
Accrued expenses and other liabilities 38,677
Total liabilities 11,271,965
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $57,198,033
===========
The accompanying notes are an integral part of the financial statements.
19
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1C)
Interest income (including securities lending income of $8,737) $ 2,204,226
Dividend income (net of foreign withholding taxes of $6) 8,530
-----------
Total investment Income 2,212,756
EXPENSES
Investment advisory fee (Note 2) $ 141,978
Accounting and custody fees (Note 2) 32,918
Legal and audit services 12,613
Trustees' fees and expenses (Note 2) 5,103
Insurance expense 4,419
Miscellaneous 1,266
-----------
Total expenses 198,297
DEDUCT:
Waiver of investment advisory fee (Note 2) (58,966)
-----------
Net expenses 139,331
-----------
Net investment income 2,073,425
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 789,078
Option transactions 3,093
Foreign currency transactions and forward foreign currency exchange contracts 217,640
-----------
Net realized gain 1,009,811
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (2,830,243)
-----------
Change in net unrealized appreciation (depreciation) (2,830,243)
-----------
Net realized and unrealized gain (loss) (1,820,432)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 252,993
===========
The accompanying notes are an integral part of the financial statements.
20
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 30, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income (loss) $ 2,073,425 $ 4,069,056
Net realized gains (losses) 1,009,811 1,480,920
Change in net unrealized appreciation (depreciation) (2,830,243) 4,617,633
----------- -----------
Net increase in net assets from investment operations 252,993 10,167,653
----------- -----------
CAPITAL TRANSACTIONS
Contributions 6,780,854 13,400,767
Withdrawals (6,914,377) (10,633,906)
----------- -----------
Net increase (decrease) in net assets from capital transactions (133,523) 2,766,861
----------- -----------
TOTAL INCREASE IN NET ASSETS 119,470 12,934,514
NET ASSETS
At beginning of period 57,078,563 44,144,049
----------- -----------
At end of period $57,198,033 $57,078,563
=========== ===========
The accompanying notes are an integral part of the financial statements.
21
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 -----------------------------------------------------------------
(UNAUDITED) 2003 2002 2001(a) 2000 1999
------------- ------- ------- ------- ------- -------
Total Return(+) 0.67%++ 21.76% 4.71% 1.54% 2.84% 2.20%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.49%+++ 0.50% 0.50% 0.50% 0.37% 0.00%
Net Investment Income
(to average daily net assets)* 7.32%+++ 7.79% 8.66% 8.87% 10.37% 9.83%
Portfolio Turnover 30%++ 80% 130% 117% 148% 137%
Net Assets, End of Year (000's omitted) $57,198 $57,079 $44,144 $47,048 $31,818 $31,144
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed the
Fund for a portion of its operating expenses. If this voluntary action had
not been taken, the investment income per share and the ratios would have
been:
Ratios (to average daily net assets):
Expenses 0.70%+++ 0.85% 0.82% 0.81% 0.89% 0.86%
Net investment income 7.11%+++ 7.44% 8.34% 8.56% 9.85% 8.97%
(a) The Portfolio has adopted the provisions of the revised AICPA Audit
and Accounting Guide for Investment Companies effective January 1,
2001 and began amortizing premium and discount on all debt securities
on an effective yield basis. The effect of this change for the year
ended December 31, 2001 was to decrease the ratio of the net
investment income to average net assets from 9.20% to 8.87%. Ratios
for the periods prior to January 1, 2001 have not been restated to
reflect this change in presentation.
+ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were
reinvested, and adjusted for the difference in expenses as set out in
the notes to the financial statements. Total return would have been
lower in the absence of expense waivers.
++ Not annualized.
+++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
22
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the Portfolio Trust) was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon High Yield Bond Portfolio (the Portfolio) is a separate diversified
investment series of the Portfolio Trust.
The objective of the Portfolio is to maximize total return, consisting
primarily of a high level of income. The Portfolio seeks to achieve its
objective by investing, under normal circumstances, at least 80% of net
assets in fixed income securities issued by U.S. and foreign governments,
companies and banks, as well as tax-exempt securities, preferred stocks and
warrants.
At June 30, 2004 there was one fund, Standish Mellon High Yield Bond Fund
(the Fund), invested in the Portfolio. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. The Fund's proportionate interest at June 30, 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 in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity and
will then be valued at amortized value based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized
value does not represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for discount or
amortization of premium using the yield--to--maturity method on long-term
debt securities. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities sold are recorded on the
identified cost basis. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
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.
23
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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. 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 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 Standish Mellon Asset Management Company LLC (Standish Mellon)
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon 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. Standish Mellon
voluntarily agreed to limit the Portfolio's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.50% of the Portfolio's average daily net assets for the period ended June
30, 2004. Pursuant to this agreement, for the period ended June 30, 2004,
Standish Mellon voluntarily did not impose $58,966 of its investment
advisory fees. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon 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 $32,918 during the period ended
June 30, 2004 and was owed $10,420 at June 30, 2004.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended June 30, 2004 were $16,206,032 and
$16,553,548, respectively. For the period ended June 30, 2004, the
Portfolio did not purchase or sell any long-term U.S. government
securities.
24
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(4) FEDERAL TAXES:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $ 54,805,688
============
Gross unrealized appreciation 2,367,596
Gross unrealized depreciation (1,689,991)
------------
Net unrealized appreciation $677,605
============
(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 Fund had no option activity for the period ended June 30, 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 June 30, 2004, the Portfolio held the following forward foreign currency
exchange contracts:
25
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL
PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
- ------------------------------------------------------------------------------------------------------------------------------------
EURO 100,000 9/15/2004 $121,695 $120,697 $998
LOCAL
PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
EURO 2,689,000 9/15/2004 $3,272,386 $3,249,758 $(22,628)
SWAP AGREEMENTS
The Portfolio may invest in swap agreements. A swap is an agreement to
exchange the return generated by one instrument for the return generated by
another instrument. The Portfolio may enter into interest rate and credit
default swap agreements to manage its exposure to interest rates and credit
risk. Interest rate swap agreements involve the exchange by the Portfolio
with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate
payments with respect to a notional amount of principal. In a credit
default swap, one party makes a stream of payments to another party in
exchange for the right to receive a specified return in the event of a
default by a third party on its obligation. The Portfolio may use credit
default swaps to provide a measure of protection against defaults of
issuers (i.e., to reduce risk where the Portfolio owns or has exposure to
the corporate or sovereign issuer) or to take an active long or short
position with respect to the likelihood of a particular corporate or
sovereign issuer's default. In connection with these agreements, cash or
securities may be set aside as collateral in accordance with the terms of
the swap agreement. The Portfolio earns interest on cash set aside as
collateral. Swaps are marked to market daily based upon quotations from
market makers and change in value, if any, is recorded as unrealized gain
or loss in the Statement of Operations. These financial instruments are not
actively traded on financial markets. The values assigned to these
instruments are based upon the best available information and because of
the uncertainty of the valuation, these values may differ significantly
from the values that would have been realized had a ready market for these
instruments existed, and differences could be material. Payments received
or made from credit default swaps at the end of the measurement period are
recorded as realized gain or loss in the Statement of Operations. Net
payments of interest on interest rate swap agreements, if any, are included
as part of realized gain/loss. Entering into these agreements involves, to
varying degrees, elements of credit, market, and documentation risk in
excess of the amounts recognized on the Statement of Assets and
Liabilities. Such risks involve the possibility that there will be no
liquid market for these agreements, that the counterparty to the agreements
may default on its obligation to perform or disagree as to the meaning of
contractual terms in the agreements, and that there may be unfavorable
changes in interest rates.
At June 30, 2004 the Portfolio held no open swap 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 June 30, 2004
resulting in $8,737 of security lending income. At June 30, 2004 the
Portfolio had $10,025,880 worth of securities on loan.
See the Schedule of Investments for the securities that are on loan.
26
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON HIGH YIELD BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase or sell securities on a when-issued, delayed
delivery or forward commitment basis. Payment and delivery may take place a
month or more after the date of the transactions. The price of the
underlying securities and the date when the securities will be delivered
and paid for are fixed at the time the transaction is negotiated. Income on
the securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least equal
to the amount of the purchase commitment.
The Portfolio may enter into to be announced (TBA) purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the forward
sale of other securities it owns. Income on the securities will not be
earned until settlement date. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Portfolio's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, according to the procedures described
under Investment security valuations above.
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
cover for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under Investment security valuations above. The contract is
marked-to-market daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss. If the Portfolio delivers securities
under the commitment, the Portfolio realizes a gain or a loss from the sale
of the securities based upon the unit price established at the date the
commitment was entered into.
At June 30, 2004, the Portfolio held no delayed delivery transactions.
(8) CONCENTRATION OF RISK:
The Portfolio invests in low rated (non-investment grade) and comparable
quality unrated high yield securities. Investments in high yield securities
are accompanied by a greater degree of credit risk and the value of high
yield securities tends to be more sensitive to economic conditions than
higher rated securities. The risk of loss due to default of an issuer may
be significantly greater for holders of high yield securities, because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer.
There are certain additional considerations and risks associated with
investing in foreign securities and currency transactions that are not
inherent with investments of domestic origin. The Portfolio's investment in
emerging market countries may involve greater risks than investments in
more developed markets and the price of such investments may be volatile.
These risks of investing in foreign and emerging markets may include
foreign currency exchange rate fluctuations, perceived credit risk, adverse
political and economic developments and possible adverse foreign government
intervention.
(9) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1/2 of
1%. In addition, a commitment fee, computed at an annual rate of .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 June 30, 2004, the expense related to the commitment
fee was $1,153 for the Portfolio.
During the period ended June 30, 2004, the Portfolio had borrowed under the
credit facility resulting in $7 of interest expense.
27
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
28
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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
29
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0943SA0604
[Logo] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
INTERNATIONAL FIXED INCOME FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (Note 1A) (including securities on loan, valued at $1,952,464) (Note 7)
Unaffiliated issuers, at value (cost $282,224,379) $298,101,140
Affiliated issuers, at value (cost $29,609,687) (Note 1H) 29,609,687
Foreign currency, at value (identified cost $4,114,042) 4,116,941
Receivable for investments sold 7,845,233
Receivable for Fund shares sold 78,873
Interest receivable 7,597,103
Unrealized appreciation on forward currency exchange contracts (Note 6) 255,780
Prepaid expenses 11,544
------------
Total assets 347,616,301
LIABILITIES
Payable to custodian for cash overdraft (Note 2) $ 2,274,749
Liability for securities on loan (Note 7) 2,059,850
Payable for Fund shares redeemed 17,675
Payable for investments purchased 16,385,616
Options written, at value (premiums received $327,403) (Note 6) 130,377
Unrealized depreciation on forward currency exchange contracts (Note 6) 1,717,192
Payable for variation margin on open futures contracts (Note 6) 137,844
Accrued accounting, custody and transfer agent fees (Note 2) 36,651
Accrued trustees' fees and expenses (Note 2) 19,148
Accrued expenses and other liabilities 56,801
----------
Total liabilities 22,835,903
------------
NET ASSETS $324,780,398
============
NET ASSETS CONSIST OF:
Paid-in capital $354,837,148
Accumulated net realized loss (39,671,963)
Undistributed net investment loss (4,858,183)
Net unrealized appreciation 14,473,396
------------
TOTAL NET ASSETS $324,780,398
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 15,354,876
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 21.15
------------
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including $122,205 of foreign tax expense) ((including
securities lending income of $9,913 (Note 7)) $ 7,128,577
EXPENSES
Investment advisory fee (Note 2) $ 715,369
Accounting and custody fees (Note 2) 108,670
Legal and audit services 63,123
Registration fees 34,424
Trustees' fees and expenses (Note 2) 26,905
Transfer agent fees--Institutional Class (Note 2) 3,357
Transfer agent fees--Service Class (Note 2) 2,032
Service Fees--Service Class (Note 2) 199
Insurance expense 9,478
Miscellaneous 14,776
------------
Total expenses 978,333
DEDUCT:
Reimbursement of Fund operating expenses--Service Class (Note 2) (2,032)
------------
Net expenses 976,301
-----------
Net investment income 6,152,276
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 2,484,286
Financial futures contracts 670,990
Written options transactions (402,021)
Foreign currency and forward foreign currency exchange contracts 18,449,962
------------
Net realized gain 21,203,217
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments $(23,484,866)
------------
Change in net unrealized appreciation (depreciation) (23,484,866)
-----------
Net realized and unrealized loss on investments (2,281,649)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 3,870,627
===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 6,152,276 $ 14,790,796
Net realized gains 21,203,217 (7,210,791)
Change in net unrealized appreciation (depreciation) (23,484,866) 12,057,374
------------ ------------
Net increase in net assets from investment operations 3,870,627 19,637,379
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income -- --
From net realized gains on investments -- --
------------ ------------
Total distributions to shareholders -- --
------------ ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares
Institutional Class 49,965,089 244,264,085
Service Class 25,910 1,066,887
Redemption fees credited to capital
Institutional Class 504 --
Cost of shares redeemed
Institutional Class (98,761,286) (258,534,627)
Service Class (96,133) (3,750,467)
------------ ------------
Net decrease in net assets from Fund share transactions (48,865,916) (16,954,122)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (44,995,289) 2,683,257
NET ASSETS
At beginning of period 369,775,687 367,092,430
------------ ------------
At end of period (including distributions in excess of
net investment income of $4,858,183 and $11,010,459) $324,780,398 $369,775,687
============ ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 -----------------------------------------------------------
(UNAUDITED) 2003 2002 2001(A) 2000 1999
---------- -------- -------- -------- -------- ----------
NET ASSET VALUE, BEGINNING OF THE PERIOD $ 21.02 $ 20.04 $ 19.43 $ 18.97 $ 21.32 $ 23.22
-------- -------- -------- -------- -------- ----------
FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.37 0.66 0.75 0.76 1.12 1.34
Net realized and unrealized gain
(loss) on investments (0.24) 0.32 0.46 0.01 0.84 (1.15)
-------- -------- -------- -------- -------- ----------
Total from investment operations 0.13 0.98 1.21 0.77 1.96 0.19
-------- -------- -------- -------- -------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (0.47) (0.31) (4.31) (2.08)
From net realized gain on investments -- -- -- -- -- (0.01)
From tax return of capital -- -- (0.13) -- -- --
-------- -------- -------- -------- -------- ----------
Total distributions to shareholders -- -- (0.60) (0.31) (4.31) (2.09)
-------- -------- -------- -------- -------- ----------
NET ASSET VALUE, END OF YEAR $ 21.15 $ 21.02 $ 20.04 $ 19.43 $ 18.97 $ 21.32
======== ======== ======== ======== ======== ==========
TOTAL RETURN 0.62%+ 4.89% 6.44% 4.07% 9.68% 0.79%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.55%++ 0.59% 0.59% 0.56% 0.53% 0.52%
Net Investment Income
(to average daily net assets) 3.45%++ 3.20% 3.89% 3.94% 5.21% 5.82%
Portfolio Turnover 68%+ 185% 159% 211% 240% 162%
Net Assets, End of Year (000's omitted) $324,780 $369,706 $364,460 $422,626 $454,333 $1,051,443
- --------------
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and began
amortizing premium and discount on all debt securities on an effective yield
basis. The effect of this change for the year ended December 31,2001 was to
decrease net investment income per share by $0.007, increase net realized and
unrealized gains and losses per share by $0.007 and decrease the ratio of net
investment income to average net assets from 3.98% to 3.94%. Per share data and
ratios/supplemental data for the periods prior to January 1, 2001 have not been
restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding.
+ Not annualized.
++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--91.5%
ASSET BACKED--0.5%
Household Automotive Trust 2003-1 A2 1.300% 9/18/2006 USD 572,945 $ 572,66
MBNA Master Credit Card Trust USA 1999-G A 6.350 12/15/2006 815,000 816,675
Whole Auto Loan Trust 2002-1 A2 1.880 6/15/2005 174,365 174,408
-----------
Total Asset Backed (Cost $ 1,594,046) 1,563,752
-----------
CORPORATE--4.4%
BASIC MATERIALS--0.2%
International Steel Group, Inc. * 6.500 4/15/2014 835,000 782,813
-----------
COMMUNICATIONS--0.9%
CSC Holdings, Inc. 7.875 12/15/2007 420,000 436,800
RH Donnelley Finance Corp. I 8.875 12/15/2010 125,000 137,188
RH Donnelley Finance Corp. I 10.875 12/15/2012 195,000 226,200
Sprint Capital Corp. 8.375 3/15/2012 1,100,000 1,264,262
Sprint Capital Corp. 8.750 3/15/2032 870,000 1,013,794
-----------
3,078,244
-----------
CONSUMER CYCLICAL--0.5%
Coast Hotels & Casinos, Inc. 9.500 4/1/2009 350,000 367,500
Mohegan Tribal Gaming Authority 6.375 7/15/2009 670,000 671,675
Yum! Brands Inc. 8.875 4/15/2011 450,000 543,027
-----------
1,582,202
-----------
CONSUMER NONCYCLICAL--0.7%
Aramark Services Inc 7.000 7/15/2006 2,000,000 2,130,928
-----------
ENERGY--0.5%
Chesapeake Energy Corp. 8.125 4/1/2011 555,000 599,400
Salomon Brothers AF for OAO Siberian Oil Co. 10.750 1/15/2009 485,000 499,550
Pemex Project Funding Master Trust 2.820 6/15/2010 515,000 517,318
-----------
1,616,268
-----------
FINANCIAL--1.2%
Petronas Capital Ltd. * 7.875 5/22/2022 430,000 475,368
Banco Nacional de Desenvolvimento Economic (a) 9.622 6/16/2008 500,000 507,500
Banque Centrale de Tunisie 7.375 4/25/2012 580,000 629,300
Chevy Chase Bank FSB 6.875 12/1/2013 705,000 705,000
Glencore Funding LLC 6.000 4/15/2014 1,625,000 1,507,253
-----------
3,824,421
-----------
INDUSTRIAL--0.2%
Allied Waste North America 8.875 4/1/2008 615,000 673,425
-----------
UTILITIES--0.2%
AES Corp. 8.750 5/15/2013 610,000 653,463
-----------
Total Corporate (Cost $14,090,955) 14,341,764
-----------
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN BONDS--2.6%
Republic of Brazil 2.125% 4/15/2012 USD 658,824 $ 555,059
Republic of Brazil (a) 2.063 4/15/2006 472,000 463,740
Republic of Brazil (a) 7.309 6/29/2009 415,000 415,000
Republic of Bulgaria (a) 2.000 7/28/2024 220,000 219,725
Republic of Bulgaria 144A 8.250 1/15/2015 340,000 395,675
Republic of Columbia * 10.000 1/23/2012 505,000 522,675
Republic of El Salvador 8.500 7/25/2011 510,000 550,800
Republic of El Salvador 8.250 4/10/2032 370,000 343,175
Republic of Panama 8.875 9/30/2027 500,000 485,000
Republic of Peru FLIRB (a) 4.500 3/7/2017 415,000 336,150
Republic of South Africa 6.500 6/2/2014 540,000 542,700
Republic of Turkey 9.000 6/30/2011 240,000 240,600
Russian Federation 11.000 7/24/2018 360,000 453,600
Russian Federation 12.750 6/24/2028 190,000 275,975
Russian Federation 5.000 3/31/2030 700,000 639,625
Turkey Government International Bond 11.500 1/23/2012 400,000 448,000
Ukraine Government Senior Notes 11.000 3/15/2007 568,410 611,041
United Mexican States 9.875 2/1/2010 730,000 876,365
-----------
Total Sovereign Bonds (Cost $8,741,007) 8,374,905
-----------
YANKEE BONDS--2.1%
British Sky Broadcasting PLC 7.300 10/15/2006 1,035,000 1,117,427
British Sky Broadcasting PLC 6.875 2/23/2009 3,185,000 3,478,472
Hutchison Whampoa Ltd. 144A 5.450 11/24/2010 1,400,000 1,374,142
Rogers Cable, Inc. 6.250 6/15/2013 640,000 602,509
Royal Caribbean Cruises Ltd. * 8.250 4/1/2005 225,000 232,875
-----------
Total Yankee Bonds (Cost $6,856,420) 6,805,425
-----------
U.S. TREASURY OBLIGATIONS--1.3%
TREASURY NOTES--1.3%
United States Treasury Note 3.250 8/15/2008 2,395,000 2,365,343
United States Treasury Note 6.250 5/15/2030 1,720,000 1,925,795
-----------
Total U.S. Treasury Obligations (Cost $4,246,000) 4,291,138
-----------
FOREIGN DENOMINATED--80.6%
AUSTRALIA--5.0%
Australia Government Bond 7.500 9/15/2009 AUD 15,830,000 11,901,732
Australia Government Bond 6.500 5/15/2013 6,115,000 4,436,623
-----------
16,338,355
-----------
CANADA--0.5%
Canadian Pacific Railway Ltd 4.900 6/15/2010 CAD 2,000,000 1,482,404
DENMARK--3.4%
Denmark Government Bond 4.000 11/15/2004 DKK 53,200,000 8,778,707
Realkredit Danmark A/S 4.000 1/1/2006 13,965,000 2,331,622
-----------
11,110,329
-----------
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
EURO--65.1%
Allied Domecq Financial Services PLC 5.875% 6/12/2009 EUR 370,000 $ 481,886
Autostrade SpA 2.552 6/9/2011 900,000 1,094,531
Bank of America Corp. 4.625 2/18/2014 780,000 940,656
Barclays Bank PLC 7.500 12/15/2010 350,000 496,808
Belgium Government Bond 4.250 9/28/2013 5,100,000 6,187,958
Bundesobligation 5.000 5/20/2005 9,505,000 11,845,654
Bundesobligation 5.000 8/19/2005 7,715,000 9,667,351
Bundesobligation 3.500 10/10/2008 6,220,000 7,588,286
Buoni del Tesoro Poliennali 2.150 9/15/2014 1,565,000 1,902,071
Citigroup, Inc. (a) 2.237 6/3/2011 1,250,000 1,517,221
Depfa ACS Bank 3.875 7/15/2013 4,350,000 5,087,083
Deutsche Bundesrepublik 5.250 1/4/2011 340,000 445,834
Deutsche Bundesrepublik 5.000 7/4/2011 3,645,000 4,713,093
Deutsche Bundesrepublik 4.500 1/4/2013 5,090,000 6,337,248
Deutsche Bundesrepublik 4.000 1/4/2028 13,985,000 17,330,500
Deutsche Bundesrepublik 5.625 1/4/2028 695,000 930,520
Deutsche Bundesrepublik 4.750 7/4/2028 3,970,000 4,736,183
Deutsche Bundesrepublik 6.250 1/4/2030 4,175,000 6,052,180
Deutsche Telekom International Finance BV 8.125 5/29/2012 535,000 792,334
Dexia Municipal Agency * 5.375 4/26/2007 3,500,000 4,518,596
FBG Treasury Europe 5.750 3/17/2005 750,000 932,971
FCE Bank PLC 2.389 6/28/2006 880,000 1,065,275
France Government 3.150 7/25/2032 3,714,156 5,222,204
France Telecom 7.250 1/28/2013 1,285,000 1,808,582
French Treasury Note 5.000 1/12/2006 10,015,000 12,644,341
GE Capital European Funding 2.198 5/4/2011 1,260,000 1,529,927
General Motors Acceptance Corp. 3.710 7/5/2005 865,000 1,068,560
General Motors Corp. 8.375 7/5/2033 410,000 550,493
HBOS PLC 6.050 11/23/2049 390,000 513,194
Hellenic Republic 4.500 5/20/2014 2,900,000 3,531,318
Hilton Group Finance PLC 6.500 7/17/2009 565,000 752,672
HJ Heinz BV 5.125 4/10/2006 550,000 694,149
Honeywell Holding BV 5.250 12/20/2006 405,000 511,200
Household Finance Corp. 6.500 5/5/2009 335,000 452,395
International Paper Co. 5.375 8/11/2006 405,000 513,178
Italy Buoni Poliennali Del Tesoro 4.500 3/1/2007 10,675,000 13,497,362
Kappa Beheer BV 10.625 7/15/2009 365,000 469,214
KfW Bankengruppe 3.500 4/17/2009 5,935,000 7,191,892
Lear Corp. 8.125 4/1/2008 830,000 1,153,653
Linde Finance BV 6.000 7/29/2049 3,410,000 4,320,873
MBNA Master Credit Card Trust USA 4.375 8/19/2004 3,620,000 4,421,556
Morgan Stanley 5.750 4/1/2009 585,000 766,810
Nalco Co. 144A 7.750 11/15/2011 490,000 614,977
National Westminster Bank PLC 6.625 10/5/2009 225,000 303,543
Netherlands Government Bond 5.500 7/15/2010 10,000,000 13,250,542
Nordea Bank Sweden AB 6.000 12/13/2010 380,000 482,960
Parker Hannifin Corp. 6.250 11/21/2005 200,000 254,646
Pemex Project Funding Master Trust 6.625 4/4/2010 440,000 563,751
Republic of Bulgaria 7.500 1/15/2013 110,000 154,274
Republic of South Africa 5.250 5/16/2013 345,000 408,822
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXEDNCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Sara Lee Corp. 6.125% 7/27/2007 EUR 545,000 $ 713,935
Spain Government Bond 4.950 7/30/2005 9,980,000 12,487,313
Spain Government Bond 4.250 10/31/2007 11,820,000 14,865,370
Svenska Handelsbanken 5.500 3/7/2011 400,000 507,340
Teksid Aluminum SpA 11.375 7/15/2011 180,000 187,725
Telecom Italia Finance SA 7.250 4/20/2011 555,000 767,760
Telecom Italia SPA 6.250 2/1/2012 610,000 806,923
Telefonica Europe BV 5.125 2/14/2013 545,000 681,446
Telenor ASA 5.875 12/5/2012 1,100,000 1,452,666
ThyssenKrupp Finance Nederland BV 7.000 3/19/2009 420,000 561,361
Tyco International Group SA 5.500 11/19/2008 2,385,000 3,055,061
Valentia Telecommunications Ltd 7.250 8/15/2013 600,000 756,689
Veolia Environnement 5.875 6/27/2008 525,000 685,747
West LB Covered Bank PLC 4.000 3/25/2014 1,600,000 1,873,215
------------
211,713,878
------------
SINGAPORE--2.6%
Singapore Government Bond 3.500 7/1/2012 SGD 14,095,000 8,324,788
------------
TURKEY--0.3%
Turkey Government Bond (b) 0.000 8/24/2005 TRL 1,000,000 893,938
------------
UNITED KINGDOM--3.7%
Inco, Ltd. 15.750 7/15/2006 GBP 796,000 1,617,325
United Kingdom Gilt 8.000 9/27/2013 1,975,000 4,350,897
United Kingdom Gilt 4.000 3/7/2009 3,500,000 6,085,697
------------
12,053,919
------------
Total Foreign Denominated (Cost $245,202,654) 261,917,611
------------
TOTAL BONDS AND NOTES (Cost $280,731,082) 297,294,595
------------
PURCHASED OPTIONS--0.2% CONTRACT SIZE
-------------
USD Put/JPY Call, Strike Price 105, 7/6/04 (USD) 7,400,000 --
USD Put/EUR Call, Strike Price 1.30, 7/9/04 (USD) 5,610,000 561
USD Put/CAD Call, Strike Price 1.26, 7/13/04 (USD) 7,610,000 --
USD Put/AUD Call, Strike Price .7825, 7/23/04 (USD) 3,870,000 --
USD Put/JPY Call, Strike Price 105, 9/28/04 (USD) 7,700,000 97,028
USD Put/EUR Call, Strike Price 1.25, 11/18/04 (USD) 15,000,000 217,500
USD Put/CAD Call, Strike Price 1.34, 11/29/04 (USD) 5,820,000 128,040
USD Put/EUR Call, Strike Price 1.27, 11/29/04 (USD) 5,820,000 64,020
------------
TOTAL PURCHASED OPTIONS (Cost $1,193,901) 507,149
------------
SHORT TERM INVESTMENTS--8.6%
U.S. GOVERNMENT--0.1% PAR VALUE
----------
United States Treasury Bill **+ 1.150 USD 300,000 299,396
------------
INVESTMENT COMPANIES--8.5%
Dreyfus Institutional Preferred Plus ++ 1.000 27,549,837 27,549,837
------------
TOTAL SHORT TERM INVESTMENTS--(Cost $27,849,233) 27,849,233
------------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--0.6%
INVESTMENT COMPANIES--0.6%
Dreyfus Cash Management Plus Fund((+)(+)) (cost $2,059,850) 1.000% USD 2,059,850 $2,059,850
------------
TOTAL INVESTMENTS--100.9% (Cost $311,834,066) 327,710,827
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.9%) (2,930,429)
------------
NET ASSETS--100.0% $324,780,398
============
NOTES TO SCHEDULE OF INVESTMENTS:
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from registration
to qualified buyers.
AUD--Australian Dollar
CAD--Canadian Dollar
DKK--Danish Krone
EUR--Euro
FLIRB--Front Loaded Interest Reduction Bond
GBP--British Pound
SGD--Singapore Dollar
TRL--Turkish Lira
(a) Variable Rate Security; rate indicated is as of 6/30/2004.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
* Security, or a portion of thereof, was on loan at June 30, 2004.
+ Denotes all or part of security segregated as collateral.
++ Affiliated institutional money market fund. The effective yield is 1.00%. A
complete listing of the fund's holdings as of its most recent fiscal year
end is available.
** Rate noted is yield to maturity.
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- --------------------------------------------------------------------------------
Foreign Government 64.0%
Financial 11.0%
Short Term Investments 9.2%
Communications 4.5%
Industrial 3.3%
Consumer Noncyclical 1.9%
Asset Backed 1.8%
U.S. Government 1.3%
Consumer Cyclical 1.3%
Basic Materials 1.3%
Energy 0.8%
Utilities 0.5%
-------
100.9%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- --------------------------------------------------------------------------------
Germany 23.6%
United States 19.2%
Spain 8.4%
France 7.7%
Netherlands 6.8%
United Kingdom 5.7%
Italy 5.3%
Australia 5.0%
Denmark 3.4%
Ireland 2.8%
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon International Fixed Income Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
During the period ended June 30, 2004 the Fund had offered two classes of
shares: Institutional Class and Service Class. On April 30, 2004 the
Service Class was liquidated and closed. Expenses of the Fund, until the
time when the Service Class was closed, were borne pro-rata by the holders
of each class of shares, except for transfer agent fees and an account
service fee of up to 0.25% of the average daily net assets of the Service
Class of shares. Each class voted separately as a class only with respect
to its own service plan (Service Class only) or other matters that relate
only to that class. Shares of the Service Class received their pro-rata
share of the net assets of the Fund (after satisfaction of any
class-specific expenses) when the Service Class was liquidated.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in fixed income securities. The
Fund also invests, under normal circumstances, at least 65% of net assets
in non-U.S. dollar denominated fixed income securities of foreign
governments and companies located in various countries, including emerging
markets.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments. Net realized
gains and losses on foreign currency transactions represent gains and
losses on disposition of foreign currencies and forward foreign currency
exchange contracts, currency gains and losses realized between the trade
and settlement dates on securities transactions, and the difference between
the amount of investment income and foreign withholding taxes recorded on
the Fund's books and the U.S. dollar equivalent amounts usually received or
paid.
C. 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.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
D. 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.
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
for foreign currency transactions, futures, amortization and/or accretion
of premiums and discounts on certain securities, capital loss
carryforwards, losses deferred due to wash sales and excise tax
regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
H. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment advisory
and administrative services, and general office facilities is paid monthly
at the annual rate of 0.40% of the Fund's average daily net assets.
Standish Mellon voluntarily agreed to limit the Service Class operating
expenses (excluding brokerage commissions, taxes and extraordinary
expenses) for the period ended June 30, 2004, so that the Service Class
annual operating expenses did 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 June 30, 2004, Standish Mellon reimbursed the Service
Class $2,032 for class specific operating expenses.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
On February 23, 2004, the Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly owned subsidiary of Dreyfus which is an affiliate
of Standish Mellon to provide transfer agent services to the Fund. Pursuant
to this agreement the Fund was charged $3,500 during the period ended June
30, 2004 and $3,500 was owed at June 30, 2004.
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 $106,142 during the period ended June 30, 2004 and $
33,151 was owed at June 30, 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 in the Fund. The
fee does not apply to shares that are acquired through reinvestment of
distributions. For the period ended June 30, 2004, the Fund received $504
of redemption fees.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
------------ ------------
U.S. Government Securities $ 8,425,355 $ 7,752,374
=========== ============
Investments (non-U.S. Government Securities) $218,878,185 $264,428,943
============ ============
(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
INSTITUTIONAL CLASS: JUNE 30, 2004 DECEMBER 31, 2003
-------------------------------------------------------------------------------------------------------------------------------
Shares sold 2,359,203 11,910,779
Shares issued to shareholders in payment
of distributions declared -- --
Shares redeemed (4,593,678) (12,510,470)
---------- -----------
Net decrease (2,234,475) (599,691)
========== ===========
PERIOD ENDED YEAR ENDED
SERVICE CLASS: JUNE 30, 2004 DECEMBER 31, 2003
-------------------------------------------------------------------------------------------------------------------------------
Shares sold 1,242 52,864
Shares issued to shareholders in payment
of distributions declared -- --
Shares redeemed (4,616) (182,602)
----------- -----------
Net decrease (3,374) (129,738)
=========== ===========
At June 30, 2004, three shareholders held of record approximately 8%, 6%
and 6% of the total outstanding shares of the Fund.
A significant portion of the Fund's shares are beneficially owned by
fiduciary accounts over which Standish Mellon and its affiliates have
either sole or joint investment discretion. Investment activity of these
shareholders could have a material impact on the Fund.
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $291,079,643
============
Unrealized appreciation $ 19,197,053
Unrealized depreciation (3,320,295)
------------
Net unrealized appreciation/depreciation $ 15,876,758
------------
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any
open purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
A summary of the written put options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN PUT OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period -- --
Options written 1 $71,730
Options expired 0 0
Options closed (1) (71,730)
------- --------
Outstanding, end of period 0 0
======= ========
At June 30, 2004, the Fund no held written put option contracts.
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
A summary of the written call options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN CALL OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------
Outstanding, beginning of period -- --
Options written 1 $ 38,338
Options expired (1) (38,338)
Options closed -- --
-------- ---------
Outstanding, end of period -- --
======== =========
At June 30, 2004, the Fund held no written call option contracts.
A summary of the written currency options for the period ended June 30,
2004 is as follows:
NUMBER OF
WRITTEN CURRENCY OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 3 $ 184,869
Options written 10 543,781
Options expired (3) (147,943)
Options closed (4) (253,304)
-------- ---------
Outstanding, end of period 6 $327,403
======== =========
At June 30, 2004, the Fund held the following written currency option
contracts:
SECURITY CONTRACTS VALUE
---------------------------------------------------------------------------
USD PUT EUR CALL, Strike Price 1.37, 7/09/04 1 --
USD PUT AUD CALL, Strike Price 0.82, 7/23/04 1 --
USD PUT JPY CALL, Strike Price 100, 9/28/04 1 $ 32,325
USD PUT EUR CALL, Strike Price 1.32, 11/18/04 1 48,000
USD PUT EUR CALL, Strike Price 1.27, 11/29/04 1 32,592
USD PUT EUR CALL, Strike Price 1.34, 11/29/04 1 17,460
--------
Total (premiums received $327,403) $130,377
========
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004 the Fund held the following forward foreign currency
exchange contracts.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
----------------------------------------------------------------------------------------------------------------------------
Australian Dollar 23,830,000 9/15/2004 $ 16,456,168 $ 16,587,520 $ 131,352
Canadian Dollar 2,150,000 9/15/2004 1,609,284 1,585,546 (23,738)
Danish Krone 79,780,000 9/15/2004 13,066,283 12,947,095 (119,188)
Euro 181,324,000 9/15/2004 220,662,780 219,179,773 (1,483,007)
British Pound Sterling 6,290,000 9/15/2004 11,354,209 11,395,913 41,704
Swedish Krona 60,432,218 7/1/2004 8,038,700 8,050,116 11,416
Swedish Krona 56,360,000 9/15/2004 7,487,805 7,432,904 (54,901)
Singapore Dollar 15,805,000 9/15/2004 9,216,012 9,237,288 21,276
------------ ------------ -----------
Total $287,891,241 $286,416,155 $(1,475,086)
============ ============ ===========
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/(LOSS)
----------------------------------------------------------------------------------------------------------------------------
Euro 7,862,699 7/2/2004 $ 9,580,699 $ 9,567,332 $ 13,367
Euro 6,260,000 9/15/2004 7,618,126 7,581,461 36,665
British Pound Sterling 3,385,580 7/1/2004 6,154,084 6,158,371 (4,287)
Swedish Krona 56,360,000 9/15/2004 7,487,805 7,498,669 (10,864)
------------ ------------ ---------
Total $30,840,714 $30,805,833 $ 34,881
============ =========== =========
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
IN CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE EXCHANGE FOR VALUE VALUE DATE (LOSS)
----------------------------------------------------------------------------------------------------------------------------
Euro $4,071,219 Swedish Krona $4,050,013 9/2/2004 $(21,206)
---------
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The change
in value of futures contracts primarily corresponds with the value of their
underlying instruments or indices, which may not correlate with changes in
the value of hedged investments. Buying futures tends to increase the Fund's
exposure to the underlying instrument, while selling futures tends to
decrease the Fund's exposure to the underlying instrument or hedge other
Fund investments. In addition, there is the risk that the Fund may not be
able to enter into a closing transaction because of an illiquid secondary
market. Losses may arise if there is an illiquid secondary market or if the
counterparties do not perform under the contract's terms. The Fund enters
into financial futures transactions primarily to manage its exposure to
certain markets and to changes in securities prices and foreign currencies.
Gains and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
17
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004 the Fund held the following futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE (LOSS)
----------------------------------------------------------------------------------------------------------------------------
U.S. 5 Year Note (211 Contracts) Short 9/21/2004 $22,933,063 $(202,164)
U.S. 10 Year Note (45 Contracts) Short 9/21/2004 4,919,766 (56,827)
------------ ---------
$27,852,829 $(258,991)
============ =========
SWAP AGREEMENTS
The Fund may enter into swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a
particular corporate or sovereign issuer's default. In connection with
these agreements, cash or securities may be set aside as collateral in
accordance with the terms of the swap agreement. The Fund earns interest on
cash set aside as collateral. Swaps are marked to market daily based upon
quotations from market makers and change in value, if any, is recorded as
unrealized gain or loss in the Statement of Operations. These financial
instruments are not actively traded on financial markets. The values
assigned to these instruments are based upon the best available information
and because of the uncertainty of the valuation, these values may differ
significantly from the values that would have been realized had a ready
market for these instruments existed, and differences could be material.
Payments received or made from credit default swaps at the end of the
measurement period are recorded as realized gain or loss in the Statement
of Operations. Net payments of interest on interest rate swap agreements,
if any, are included as part of realized gain or loss. Entering into these
agreements involves, to varying degrees, elements of credit, market, and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will
be no liquid market for these agreements, that the counterparty to the
agreements may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, and that there may be
unfavorable changes in interest rates.
At June 30, 2004, the Fund held no open swap contracts:
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
in $9,913 of security lending income. At June 30, 2004 the Fund had
$1,952,464 worth of securities on loan.
See the Statement of Investments for further detail on the security
positions on loan.
(8) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition,
a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $1,500 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
18
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
20
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[Logo] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0931SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
INTERNATIONAL FIXED INCOME FUND II
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (Note 1A) (including securities on loan, valued at $512,646 (Note 7))
Unaffiliated issuers, at value (cost $30,574,066) $31,494,807
Affiliated issuers, at value (cost $3,548,531) (Note 1G) 3,548,531
Cash 2,948,871
Foreign Currency (cost $388,882) 388,774
Receivable for Fund shares sold 5,167,860
Receivable for securities sold 439,049
Unrealized appreciation on forward currency exchange contracts (Note 6) 116,349
Interest and dividends receivable 809,558
Prepaid expenses 9,398
-----------
Total assets 44,923,197
LIABILITIES
Payable for Fund shares redeemed $ 454,393
Payable for investments purchased 6,733,667
Liability for securities on loan (Note 7) 548,531
Unrealized depreciation on forward currency exchange contracts (Note 6) 59,539
Options written, at value (Note 6) (premiums received, $24,452) 10,665
Payable for variation margin 8,656
Accrued accounting, custody and transfer agent fees (Note 2) 14,763
Accrued trustees' fees and expenses (Note 2) 1,462
Accrued expenses and other liabilities 20,410
-----------
Total liabilities 7,852,086
-----------
NET ASSETS $37,071,111
===========
NET ASSETS CONSIST OF:
Paid-in capital $36,152,808
Accumulated net realized loss (300,512)
Undistributed net investment income 217,351
Net unrealized depreciation 1,001,464
-----------
TOTAL NET ASSETS $37,071,111
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,666,415
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $22.25
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $2,050 (Note 7)) $ 749,150
EXPENSES
Investment advisory fee (Note 2) $ 52,777
Accounting, custody, and transfer agent fees (Note 2) 42,862
Legal and audit services 20,165
Registration fees 9,448
Trustees' fees and expenses (Note 2) 2,478
Insurance expense 3,161
Miscellaneous 4,859
-----------
135,750
DEDUCT:
Waiver of investment advisory fee (Note 2) (37,582)
-----------
Net expenses 98,168
-----------
Net investment income 650,982
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (88,856)
Financial futures contracts 43,974
Foreign currency transactions and forward currency exchange contracts 461,357
Written options transactions 51,473
-----------
Net realized gain 467,948
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (1,445,838)
-----------
Change in net unrealized appreciation (depreciation) (1,445,838)
-----------
Net realized and unrealized loss on investments (977,890)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (326,908)
===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 650,982 $ 784,044
Net realized gain 467,948 3,073,507
Change in net unrealized appreciation (depreciation) (1,445,838) 556,179
----------- ------------
Net decrease in net assets from investment operations (326,908) 4,413,730
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (539,551) (3,060,410)
----------- ------------
Total distributions to shareholders (539,551) (3,060,410)
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 18,930,775 10,008,544
Value of shares issued to shareholders in payment of distributions declared 535,327 3,046,737
Cost of shares redeemed (5,511,838) (11,627,410)
----------- ------------
Net increase in net assets from Fund share transactions 13,954,264 1,427,871
----------- ------------
TOTAL INCREASE IN NET ASSETS 13,087,805 2,781,191
NET ASSETS
At beginning of period 23,983,306 21,202,115
----------- ------------
At end of period (including undistributed
net investment income of $217,351 and $105,920) $37,071,111 $ 23,983,306
=========== ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE PERIOD JUNE 30, 1999
ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2004 -------------------------------------- OPERATIONS) TO
(UNAUDITED) 2003 2002 2001(a) 2000 DECEMBER 31, 1999
------------- ------- ------- ------- ------- -----------------
NET ASSET VALUE, BEGINNING OF YEAR $ 22.97 $ 21.66 $ 17.83 $ 18.87 $ 19.47 $ 20.00
------- ------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1)* 0.53 0.77 0.73 0.73 0.98 0.61
Net realized and unrealized gain (loss) on
investments (0.85) 3.81 3.10 (1.74) (1.50) (0.04)
------- ------- ------- ------- ------- -------
Total from investment operations (0.32) 4.58 3.83 (1.01) (0.52) 0.57
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.40) (3.27) -- (0.03) (0.08) (1.10)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.40) (3.27) -- (0.03) (0.08) (1.10)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 22.25 $ 22.97 $ 21.66 $ 17.83 $ 18.87 $ 19.47
======= ======= ======= ======= ======= =======
TOTAL RETURN+++ (1.39)%++ 21.51% 21.48% (5.31)% (2.73)% 2.84%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.75%+ 0.55% 0.55% 0.55% 0.27% 0.00%+
Net Investment Income (to average daily
net assets)* 4.94%+ 3.34% 3.87% 3.99% 5.30% 5.93%+
Portfolio Turnover 60%++ 192% 178% 205% 216% 91%++
Net Assets, End of Year (000's omitted) $37,071 $23,983 $21,202 $40,337 $41,614 $23,999
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed the
Fund for a portion of its operating expenses. If this voluntary action had not
been taken, the investment income per share and the ratios would have been:
Net investment income per share(1) $ 0.50 $ 0.60 $ 0.60 $ 0.68 $ 0.86 $ 0.51
Ratios (to average daily net assets):
Expenses 1.03%+ 1.30% 1.23% 0.85% 0.90% 1.02%+
Net investment income 4.66%+ 2.59% 3.19% 3.69% 4.67% 4.91%+
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an effective
yield basis. The effect of this change for the year ended December 31, 2001
was to decrease net investment income per share by $0.002, increase net
realized and unrealized gains and losses per share by $0.002 and decrease
the ratio of net investment income to average net assets from 4.00% to
3.99%. Per share data and ratios/supplemental data for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis using a 366 day calendar year.
++ Not annualized.
+++ Total return would have been lower in the absence of fee waivers and expense
limitations.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--81.2%
ASSET BACKED--0.2%
Household Automotive Trust 2003-1 A2 1.300% 9/18/2006 USD 65,549 $ 65,517
Whole Auto Loan Trust 2002-1 A2 1.880 6/15/2005 8,896 8,898
--------
Total Asset Backed (Cost $74,437) 74,415
--------
CORPORATE--2.2%
BASIC MATERIALS--0.1%
International Steel Group, Inc. 144A 6.500 4/15/2014 50,000 46,875
--------
COMMUNICATIONS--0.6%
AT&T Wireless Services, Inc. 8.750 3/1/2031 45,000 54,863
CSC Holdings, Inc. 7.875 12/15/2007 20,000 20,800
RH Donnelley Finance Corp. I 144A 8.875 12/15/2010 5,000 5,488
RH Donnelley Finance Corp. I 144A 10.875 12/15/2012 10,000 11,600
Salem Communications Corp. 7.750 12/15/2010 15,000 15,319
Sprint Capital Corp. 8.375 3/15/2012 55,000 63,213
Sprint Capital Corp. 8.750 3/15/2032 50,000 58,264
--------
229,547
--------
CONSUMER CYCLICAL--0.3%
Coast Hotels & Casinos, Inc. 9.500 4/1/2009 25,000 26,250
Mohegan Tribal Gaming Authority 6.375 7/15/2009 20,000 20,050
Mohegan Tribal Gaming Authority 8.375 7/1/2011 20,000 21,600
Yum! Brands Inc. 8.875 4/15/2011 25,000 30,168
--------
98,068
--------
ENERGY--0.4%
Chesapeake Energy Corp. 8.125 4/1/2011 30,000 32,400
Halliburton Co. 5.500 10/15/2010 40,000 40,468
Pemex Project Funding Master Trust 144A (a) 2.820 6/15/2010 45,000 45,203
Salomon Brothers AF for OAO Siberian Oil Co. 10.750 1/15/2009 30,000 30,900
Southern Natural Gas Co. * 8.875 3/15/2010 15,000 16,388
--------
165,359
--------
FINANCIAL--0.5%
Banco Nacional de Desenvolvimento Economic (a) 9.622 6/16/2008 30,000 30,450
Chevy Chase Bank FSB 6.875 12/1/2013 45,000 45,000
Glencore Funding LLC 144A 6.000 4/15/2014 105,000 97,392
--------
172,842
--------
INDUSTRIAL--0.2%
Allied Waste North America 8.875 4/1/2008 65,000 71,175
--------
UTILITIES--0.1%
AES Corp 144A 8.750 5/15/2013 25,000 26,781
--------
Total Corporate (Cost $932,291) 810,647
--------
SOVEREIGN BONDS--1.5%
Republic of Brazil (a) 2.063 4/15/2006 38,400 37,728
Republic of Brazil (a) 7.309 6/29/2009 35,000 35,000
Republic of Brazil (a) 2.125 4/15/2012 42,353 35,682
Republic of Bulgaria Series A (a) 2.000 7/28/2024 15,000 14,981
Republic of Bulgaria 144A 8.250 1/15/2015 25,000 29,094
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN BONDS (CONTINUED)
Republic of Colombia * 10.000% 1/23/2012 USD 30,000 $ 31,050
Republic of El Salvador 8.500 7/25/2011 25,000 27,000
Republic of El Salvador 8.250 4/10/2032 25,000 23,188
Republic of Panama 8.875 9/30/2027 40,000 38,800
Republic of Peru FLIRB (a) 4.500 3/7/2017 25,000 20,250
Republic of South Africa 6.500 6/2/2014 45,000 45,225
Republic of Turkey 9.000 6/30/2011 20,000 20,050
Republic of Turkey 11.500 1/23/2012 25,000 28,000
Russian Federation 11.000 7/24/2018 20,000 25,200
Russian Federation 12.750 6/24/2028 10,000 14,525
Russian Federation 5.000 3/31/2030 60,000 54,825
Ukraine Government Senior Notes 11.000 3/15/2007 47,601 51,171
United Mexican States 9.875 2/1/2010 35,000 42,018
----------
Total Sovereign Bonds (Cost $595,823) 573,787
----------
YANKEE BONDS--1.3%
Banque Centrale de Tunisie 7.375 4/25/2012 30,000 32,550
British Sky Broadcasting PLC 7.300 10/15/2006 70,000 75,575
British Sky Broadcasting PLC 6.875 2/23/2009 180,000 196,586
HBOS PLC 144A 5.375 11/1/2013 30,000 28,911
Hutchison Whampoa Ltd. 144A 5.450 11/24/2010 100,000 98,153
Rogers Cable, Inc. 6.250 6/15/2013 30,000 28,243
Royal Caribbean Cruises Ltd. * 8.250 4/1/2005 15,000 15,525
----------
Total Yankee Bonds (Cost $478,994) 475,543
----------
U.S. TREASURY OBLIGATIONS--1.2%
United States Treasury Note * 3.250 8/15/2008 200,000 197,523
United States Treasury Note 6.250 5/15/2030 225,000 251,921
----------
Total U.S. Treasury Obligations (Cost $443,886) 449,444
----------
FOREIGN DENOMINATED--74.8%
AUSTRALIA--4.5%
Australian Government Bond 7.500 9/15/2009 AUD 1,340,000 1,007,475
Australian Government Bond 6.500 5/15/2013 920,000 667,489
----------
1,674,964
----------
CANADA--0.2%
Canadian Pacific Railway Ltd. 144A 4.900 6/15/2010 CAD 95,000 70,414
----------
UNITED STATES--0.7%
Philip Morris Capital Corp. 4.000 5/31/2006 CHF 320,000 257,218
----------
DENMARK--1.7%
Realkredit Danmark A/S 4.000 1/1/2006 DKK 735,000 122,717
Kingdom of Denmark 4.000 11/15/2004 3,080,000 508,241
----------
630,958
----------
EURO--63.4%
Allied Domecq Financial Services PLC 5.875 6/12/2009 EUR 20,000 26,048
Bank of America Corp. 4.625 2/18/2014 50,000 60,298
Barclays Bank PLC 7.500 12/15/2010 20,000 28,389
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Bundesobligation 5.000% 5/20/2005 EUR 1,135,000 $1,414,499
Bundesobligation 5.000 8/19/2005 760,000 952,325
Bundesobligation 4.500 8/17/2007 1,445,000 1,829,494
Bundesobligation 3.500 10/10/2008 515,000 628,291
Buoni del Tesoro Poliennali 2.150 9/15/2014 100,000 121,538
Citigroup, Inc. (a) 2.237 6/3/2011 110,000 133,515
Depfa ACS Bank 144A 3.875 7/15/2013 200,000 233,889
Deutsche Bundesrepublik 5.250 1/4/2011 20,000 26,226
Deutsche Bundesrepublik 5.000 7/4/2011 230,000 297,397
Deutsche Bundesrepublik 4.500 1/4/2013 830,000 1,033,382
Deutsche Bundesrepublik 4.000 7/4/2009 725,000 898,435
Deutsche Bundesrepublik 5.625 1/4/2028 370,000 495,385
Deutsche Bundesrepublik 4.750 7/4/2028 675,000 805,270
Deutsche Telekom International Finance BV 8.125 5/29/2012 40,000 59,240
Dexia Municipal Agency (*) 5.375 4/26/2007 185,000 238,840
Eurohypo AG 144A 4.500 1/21/2013 50,000 61,587
FBG Treasury Europe 5.750 3/17/2005 40,000 49,758
FCE Bank PLC (a) 2.522 6/28/2006 75,000 90,790
France Government 3.150 7/25/2032 190,866 268,363
France Telecom 7.250 1/28/2013 90,000 126,671
French Treasury Note 5.000 1/12/2006 1,440,000 1,818,058
GE Capital European Funding 2.198 5/4/2011 110,000 133,565
General Motors Acceptance Corp. (a) 3.710 7/5/2005 75,000 92,650
General Motors Corp. 8.375 7/5/2033 60,000 80,560
HBOS PLC 6.050 11/23/2049 20,000 26,318
Hellenic Republic 4.500 5/20/2014 455,000 554,264
Hilton Group Finance PLC 6.500 7/17/2009 30,000 39,965
HJ Heinz BV 5.125 4/10/2006 50,000 63,104
Honeywell Holding BV 5.250 12/20/2006 20,000 25,244
Household Finance Corp. 6.500 5/5/2009 45,000 60,769
Inco, Ltd. 15.750 7/15/2006 200,000 406,363
International Paper Co. 5.375 8/11/2006 20,000 25,342
Italy Buoni Poliennali Del Tesoro 4.500 3/1/2007 1,190,000 1,504,624
Kappa Beheer BV 10.625 7/15/2009 20,000 25,710
KFW Bankengruppe 3.500 4/17/2009 415,000 502,887
Kingdom of Belgium Series 41 4.250 9/28/2013 675,000 818,994
Lear Corp. 8.125 4/1/2008 50,000 69,497
Linde Finance BV 6.000 7/29/2049 180,000 228,081
Morgan Stanley 5.750 4/1/2009 30,000 39,324
Nalco Co. 144A 7.750 11/15/2011 30,000 37,652
National Westminster Bank PLC 6.625 10/5/2009 20,000 26,982
Netherlands Government Bond 5.500 7/15/2010 1,620,000 2,146,588
Parker Hannifin Corp. 6.250 11/21/2005 10,000 12,732
Pemex Project Funding Master Trust 14A 6.625 4/4/2010 20,000 25,625
Republic of Austria 5.750 4/11/2007 710,000 924,293
Republic of South Africa 5.250 5/16/2013 15,000 17,775
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
EURO (CONTINUED)
Sara Lee Corp. 6.125% 7/27/2007 EUR 30,000 $ 39,299
Spain Government Bond 4.950 7/30/2005 1,695,000 2,120,841
Spain Government Bond 4.250 10/31/2007 780,000 980,964
Telecom Italia Finance SA 7.250 4/20/2011 30,000 41,501
Telecom Italia SpA 6.250 2/1/2012 50,000 66,141
Telefonica Europe BV 5.125 2/14/2013 35,000 43,763
Telenet Communications NV 144A 9.000 12/15/2013 60,000 72,744
Telenor ASA 5.875 12/5/2012 60,000 79,236
ThyssenKrupp Finance Nederland BV 7.000 3/19/2009 25,000 33,414
Tyco International Group SA 5.500 11/19/2008 175,000 224,166
Valentia Telecommunications Ltd 7.250 8/15/2013 40,000 50,446
Veolia Environnement 5.875 6/27/2008 35,000 45,717
West LB Covered Bank PLC 144A 4.000 3/25/2014 100,000 117,076
-----------
23,501,904
-----------
UNITED KINGDOM--2.5%
United Kingdom Gilt 4.000 3/7/2009 GBP 315,000 547,713
United Kingdom Gilt 8.000 9/27/2013 165,000 363,491
-----------
911,204
-----------
SINGAPORE--1.6%
Singapore Government Bond 3.500 7/1/2012 SGD 1,000,000 590,620
-----------
TURKEY--0.2%
Turkey Government Bond (b) 0.000 8/24/2005 TRL 100,000 89,394
-----------
Total Foreign Denominated (Cost $26,621,080) 27,726,676
-----------
TOTAL BONDS AND NOTES (Cost $29,146,511) 30,110,512
-----------
PURCHASED OPTIONS--0.1% CONTRACT SIZE
--------------
USD Put/JPY Call, Strike Price 105, 7/6/04 (USD) 470,000 --
USD Put/EUR Call, Strike Price 1.30, 7/9/04 (USD) 350,000 35
USD Put/CAD Call, Strike Price 1.26, 7/13/04 (USD) 410,000 --
USD Put/AUD Call, Strike Price .7825, 7/23/04 (USD) 250,000 --
USD Put/JPY Call, Strike Price 105, 9/28/04 (USD) 520,000 6,553
USD Put/ EUR Call, Strike Price 1.25, 11/18/04 (USD) 1,280,000 18,560
USD Put/CAD Call, Strike Price 1.34, 11/29/04 (USD) 510,000 11,220
USD Put/ Eur Call, Strike Price 1.27, 11/29/04 (USD) 510,000 5,610
-----------
Total Purchased Options (Cost $85,238) 41,978
-----------
SHORT TERM INVESTMENTS--11.7%
U.S. GOVERNMENT--3.6% PAR VALUE
---------
United States Treasury Bill**+ 1.230 USD 1,345,000 1,342,317
INVESTMENT COMPANIES--8.1%
Dreyfus Institutional Preferred Plus++ 1.000 3,000,000 3,000,000
-----------
TOTAL SHORT TERM INVESTMENTS--(Cost $4,342,317) 4,342,317
-----------
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE VALUE (NOTE 1A)
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--1.5%
INVESTMENT COMPANIES--1.5%
Dreyfus Cash Management Plus Fund++ (Cost $548,531) 1.000% USD 548,531 $ 548,531
-----------
TOTAL INVESTMENTS--94.5% (Cost $34,122,597) 35,043,338
OTHER ASSETS, LESS LIABILITIES--5.5% 2,027,773
-----------
NET ASSETS--100.0% $37,071,111
NOTES TO SCHEDULE OF INVESTMENTS:
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
AUD--Australian Dollar
CAD--Canadian Dollar
CHF--Swiss Franc
DKK--Danish Krone
EUR--Euro
FLIRB--Front Loaded Interest Reduction Bond
GBP--British Pound
SGD--Singapore Dollar
TRL--Turkish Lira
(a) Variable Rate Security; rate indicated is as of 6/30/2004.
(b) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
* Security, or a portion of thereof, was on loan at June 30, 2004.
+ Denotes all or part of security segregated as collateral.
++ Affiliated institutional money market fund. The effective yield is 1.00%.
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.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
INDUSTRY SECTOR ASSETS
- --------------------------------------------------------------------------------
Foreign Government 64.9%
Short Term Investments 13.2%
Financial 6.3%
Industrial 2.9%
Communications 2.7%
Consumer Noncyclical 1.2%
U.S. Government 1.2%
Consumer Cyclical 0.8%
Energy 0.5%
Basic Materials 0.4%
Asset Backed 0.2%
Utilities 0.2%
-------
94.5%
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- --------------------------------------------------------------------------------
Germany 24.2%
United States 19.4%
Spain 8.4%
Netherlands 7.2%
France 6.7%
Italy 4.6%
Australia 4.5%
United Kingdom 3.9%
Austria 2.5%
Belgium 2.4%
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon International Fixed Income Fund II (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return while realizing a
market level of income consistent with preserving principal and liquidity.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in fixed income securities, and at
least 65% of net assets in non-U.S. dollar denominated fixed income
securities of foreign government and companies located in various countries,
including emerging markets.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price in the principal
market in which such securities are primarily traded. Market quotations are
not considered to be readily available for certain debt obligations; such
investments are stated at fair value on the basis of valuations furnished by
a pricing service or dealers, approved by the Trustees, which determine
valuations for normal institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
variable relationships between securities that are generally recognized by
institutional traders. Securities (including illiquid securities) for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis. The Fund does not isolate that
portion of the results of operations resulting from changes in foreign
exchange rates on investments from the fluctuations arising from changes in
market prices of securities held. Such fluctuations are included with the
net realized and unrealized gain or loss from investments. Net realized
gains and losses on foreign currency transactions represent gains and losses
on disposition of foreign currencies and forward foreign currency exchange
contracts, currency gains and losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amount of investment income and foreign withholding taxes recorded on the
Fund's books and the U.S. dollar equivalent amounts usually received or
paid.
C. 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.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
D. 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.
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from accounting principles generally accepted in the United
States of America. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for foreign
currency transactions, futures, amortization and/or accretion of premiums
and discounts on certain securities, capital loss carryforwards, losses
deferred due to wash sales and excise tax regulations.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in capital.
Undistributed net investment income and accumulated net realized gain (loss)
on investments and foreign currency transactions may include temporary book
and tax basis differences which will reverse in a subsequent period. Any
taxable income or gain remaining at fiscal year end is distributed in the
following year.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the nature
and type of expense and the relative size of the funds.
H. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
G. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment advisory
and administrative services, and general office facilities is paid monthly
at the annual rate of 0.40% of the Fund's average daily net assets. Standish
Mellon voluntarily agreed to limit the Fund's total annual operating
expenses (excluding brokerage commissions, taxes and extraordinary expenses)
to 0.75% of the Fund's average daily net assets for the period ended June
30, 2004. Pursuant to this agreement, for the period ended June 30, 2004,
Standish Mellon voluntarily did not impose $37,582 of its investment
advisory fee. This agreement is voluntary and temporary and may be
discontinued or revised by Standish Mellon at any time.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
On February 23, 2004, the The Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly owned subsidiary of Dreyfus, which is an affiliate
of Standish Mellon, to perform transfer agency services for the Fund.
Pursuant to this agreement the Fund was charged $2,983 during the period
ended June 30, 2004 and $2,492 was owed at June 30, 2004.
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 $39,579 during the period ended June 30, 2004 and owed $12,271
at June 30, 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 in the Fund. The fee does
not apply to shares that are acquired through reinvestment of distributions.
For the period ended June 30, 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 Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an annual
fee and a per meeting fee as well as reimbursement for travel and out of
pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $ 765,812 $ 346,935
=========== ===========
Investments (non-U.S.Government Securities) $22,706,435 $14,584,027
=========== ===========
(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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
Shares sold 840,656 425,279
Shares issued to shareholders in payment
of distributions declared 23,977 132,785
Shares redeemed (242,191) (495,664)
------------ -----------
Net increase 622,442 62,400
============ ===========
At June 30, 2004, two shareholders held of record approximately 73% and 10%
of the total outstanding shares of the Fund.
A significant portion of the Fund's shares are beneficially owned by
fiduciary accounts over which Standish Mellon and its affiliates have either
sole or joint investment discretion. Investment activity of these
shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal
year.
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $34,037,359
===========
Unrealized appreciation $ 1,241,628
Unrealized depreciation (277,627)
-----------
Net unrealized appreciation/depreciation $ 964,001
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any open
purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or if
the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be sold
(call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
At June 30, 2004, the Fund held the following option contracts:
NUMBER OF
WRITTEN CURRENCY OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 3 $ 10,814
Options written 10 38,130
Options expired (3) (9,340)
Options closed (4) (15,152)
----------- --------
Outstanding, end of period 6 $ 24,452
=========== ========
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
SECURITY CONTRACTS VALUE
---------------------------------------------------------------------------
USD PUT EUR CALL, Strike Price 1.37, 7/09/04 1 --
USD PUT AUD CALL, Strike Price 0.82, 7/23/04 1 --
USD PUT JPY CALL, Strike Price 100, 9/28/04 1 $ 2,183
USD PUT EUR CALL, Strike Price 1.32, 11/18/04 1 4,096
USD PUT CAD CALL, Strike Price 1.27, 11/29/04 1 2,856
USD PUT EUR CALL, Strike Price 1.34, 11/29/04 1 1,530
-------
Total (premiums received 24,452) $10,665
=======
NUMBER OF
WRITTEN CALL OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period -- --
Options written 1 $2,519
Options expired (1) (2,519)
Options closed -- --
----------- -------
Outstanding, end of period -- --
=========== =======
NUMBER OF
WRITTEN PUT OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period -- --
Options written 1 $4,713
Options expired -- --
Options closed (1) (4,713)
----------- -------
Outstanding, end of period -- --
=========== =======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency exchange
contracts for the purchase or sale of a specific foreign currency at a fixed
price on a future date. Risks may arise upon entering these contracts from
the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar and other foreign currencies. The
forward foreign currency and cross currency exchange contracts are marked to
market using the forward foreign currency rate of the underlying currency
and any gains or losses are recorded for financial statement purposes as
unrealized until the contract settlement date or upon the closing of the
contract. Forward currency exchange contracts are used by the Fund primarily
to protect the value of the Fund's foreign securities from adverse currency
movements. Unrealized appreciation and depreciation of forward currency
exchange contracts is included in the Statement of Assets and Liabilities.
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004 the Fund held the following forward foreign currency
exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/LOSS
----------------------------------------------------------------------------------------------------------------------------
Canadian Dollar 855,000 9/15/2004 $ 639,971 $ 630,531 $ 9,440
Danish Krone 470,000 9/15/2004 76,976 76,274 702
Euro 444,856 7/2/2004 542,057 541,301 756
Euro 1,370,000 9/15/2004 1,667,226 1,658,780 8,446
British Pound Sterling 304,702 7/1/2004 553,918 554,558 (640)
British Pound Sterling 485,000 9/15/2004 875,484 879,863 (4,379)
Japanese Yen 1,321,950,000 9/15/2004 12,191,205 12,108,519 82,686
Swedish Krona 4,100,000 9/15/2004 544,713 545,503 (790)
----------- ----------- -------
Total $17,091,550 $16,995,329 $96,221
=========== =========== =======
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN/LOSS
----------------------------------------------------------------------------------------------------------------------------
Australian Dollar 2,030,000 9/15/2004 $ 1,401,847 $ 1,412,960 $ 11,113
Swiss Franc 340,000 9/15/2004 272,582 272,000 (582)
Euro 5,480,000 9/15/2004 6,668,902 6,621,208 (47,694)
British Pound Sterling 310,000 9/15/2004 559,587 560,480 893
Swedish Krona 4,250,652 7/1/2004 565,434 566,225 791
Swedish Krona 4,100,000 9/15/2004 544,713 540,719 (3,994)
Singapore Dollar 1,130,000 9/15/2004 658,911 660,433 1,522
----------- ----------- --------
Total $10,671,976 $10,634,025 $(37,951)
=========== =========== ========
FORWARD FOREIGN CROSS CURRENCY EXCHANGE CONTRACTS
MARKET IN CONTRACT UNREALIZED
CONTRACTS TO DELIVER VALUE EXCHANGE FOR VALUE VALUE DATE LOSS
----------------------------------------------------------------------------------------------------------------------------
Euro $279,934 Swedish Krona $278,474 9/2/2004 $(1,460)
======== ======== =======
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the
17
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Fund. There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments or
indices, which may not correlate with changes in the value of hedged
investments. Buying futures tends to increase the Fund's exposure to the
underlying instrument, while selling futures tends to decrease the Fund's
exposure to the underlying instrument or hedge other Fund investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. Losses may
arise if there is an illiquid secondary market or if the counterparties do
not perform under the contract's terms. The Fund enters into financial
futures transactions primarily to manage its exposure to certain markets and
to changes in securities prices and foreign currencies. Gains and losses are
realized upon the expiration or closing of the futures contracts. Futures
contracts are valued at the quoted daily settlement prices established by
the exchange on which they trade.
At June 30, 2004 the Fund held the following futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE LOSS
----------------------------------------------------------------------------------------------------------------------------
U.S. 5 Year Note (13 Contracts) Short 9/21/2004 $(1,412,938) $(12,450)
U.S. 10 Year Note (3 Contracts) Short 9/21/2004 (327,984) (3,786)
----------- --------
$ 1,740,922 $(16,236)
=========== ========
SWAP AGREEMENTS
The Fund may enter into swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a particular
corporate or sovereign issuer's default. In connection with these
agreements, cash or securities may be set aside as collateral in accordance
with the terms of the swap agreement. The Fund earns interest on cash set
aside as collateral. Swaps are marked to market daily based upon quotations
from market makers and change in value, if any, is recorded as unrealized
gain or loss in the Statement of Operations. These financial instruments are
not actively traded on financial markets. The values assigned to these
instruments are based upon the best available information and because of the
uncertainty of the valuation, these values may differ significantly from the
values that would have been realized had a ready market for these
instruments existed, and differences could be material. Payments received or
made from credit default swaps at the end of the measurement period are
recorded as realized gain or loss in the Statement of Operations. Net
payments of interest on interest rate swap agreements, if any, are included
as part of realized gain or loss. Entering into these agreements involves,
to varying degrees, elements of credit, market, and documentation risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for
these agreements, that the counterparty to the agreements may default on its
obligation to perform or disagree as to the meaning of contractual terms in
the agreements, and that there may be unfavorable changes in interest rates.
At June 30, 2004, the Fund held no open swap contracts.
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value of
the securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on the
next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and also receives compensation from the investment of the collateral.
As with other extensions of credit, the Fund bears the risk of delay in
recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its obligations to
the Fund. In
18
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERNATIONAL FIXED INCOME FUND II
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
the event of borrower default, the Fund generally has the right to use the
collateral to offset losses incurred. The Fund may incur a loss in the event
it was delayed or prevented from exercising its rights to dispose of the
collateral. The Fund also bears the risk in the event that the interest
and/or dividends received on invested collateral is not sufficient to meet
the Fund's obligations due on the loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
in $2,050 of security lending income. At June 30, 2004 the Fund had $512,646
worth of securities on loan.
See the Schedule of Investments for the securities that are on loan.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. This Fund segregates securities having a value
at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the principal
value has not been finalized. However, the amount of the commitments will
not fluctuate more than 0.01% from the principal amount. The Fund holds, and
maintains until settlement date, cash or high-grade debt obligations in an
amount sufficient to meet the purchase price, or the Fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities in themselves, and involve
a risk of loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of the decline
in the value of the Fund's other assets. Unsettled TBA purchase commitments
are valued at the current market value of the underlying securities,
according to the procedures described under "Investment security valuations"
above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Investment security valuations" above. The contract is 'marked-to-market'
daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund realizes a gain
or loss from the sale of the securities based upon the unit price
established at the date the commitment was entered into.
At June 30, 2004, the Fund did not have any delayed delivery transactions.
(9) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1_2 of 1%. In addition,
a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $105 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
19
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
20
Principal Officers who are Not Trustees
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
21
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THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0945SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
INVESTMENT GRADE BOND FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (including securities on loan, valued at $7,794,809)
(Note 7)
Unaffiliated issuers, at value (Note 1A)(cost $68,018,581) $67,736,944
Affiliated issuers, at value (Note 1A)(cost $9,246,645) (Note 1F) 9,246,645
Unrealized appreciation on open swap contracts (Note 6) 5,960
Receivable for investments sold 2,853,860
Receivable for Fund shares sold 70,000
Interest receivable 476,432
Variation margin receivable 859
Prepaid expenses 19,767
-----------
Total assets 80,410,467
LIABILITIES
Payable for investments purchased $ 9,684,460
Liability for securities on loan (Note 7) 7,962,398
Premium for option contracts written (amount received $51,434) (Note 6) 21,955
Unrealized depreciation on open swap contracts (Note 6) 980
Accrued accounting, custody and transfer agent fees (Note 2) 13,166
Accrued trustees' fees and expenses (Note 2) 3,501
Accrued expenses and other liabilities 21,442
-----------
Total liabilities 17,707,902
-----------
NET ASSETS $62,702,565
===========
Net Assets consist of:
Paid-in capital $62,604,295
Accumulated net realized gain 362,599
Distributions in excess of net investment income (3,035)
Net unrealized depreciation (261,294)
-----------
TOTAL NET ASSETS $62,702,565
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,135,563
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 20.00
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $4,672 (Note 7)) $1,226,006
EXPENSES
Investment advisory fee (Note 2) $ 126,308
Accounting, custody, and transfer agent fees (Note 2) 44,993
Legal and audit services 25,220
Registration fees 4,686
Trustees' fees and expenses (Note 2) 5,927
Insurance expense 5,207
Miscellaneous 5,438
----------
217,779
DEDUCT:
Waiver of investment advisory fee (Note 2) (91,471)
----------
Net expenses 126,308
----------
Net investment income 1,099,698
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 280,326
Financial futures contracts 27,069
Options transactions 51,560
----------
Net realized gain 358,955
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (1,359,344)
----------
Change in net unrealized appreciation (depreciation) (1,359,344)
----------
Net realized gains and unrealized loss on investments (1,000,389)
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 99,309
==========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
STATEMENTS OF CHANGES IN NETS ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 1,099,698 $ 2,430,959
Net realized gains 358,955 1,612,628
Change in net unrealized appreciation (depreciation) (1,359,344) (996,641)
----------- -----------
Net increase in net assets from investment operations 99,309 3,046,946
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (1,091,458) (2,606,499)
From net realized gains on investments -- (1,540,028)
----------- -----------
Total distributions to shareholders (1,091,458) (4,146,527)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 1,585,000 4,213,048
Value of shares issued to shareholders in payment of distributions declared 278,027 2,270,143
Cost of shares redeemed (792,702) (26,860,158)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 1,070,325 (20,376,967)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 78,176 (21,476,548)
NET ASSETS
At beginning of period 62,624,389 84,100,937
----------- -----------
At end of period (including distributions in excess of
net investment income of $3,035 and $11,275) $62,702,565 $62,624,389
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE JUNE 30, 2000
PERIOD ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2004 ---------------------------- OPERATIONS) TO
(UNAUDITED) 2003 2002 2001(a) DECEMBER 31, 2000
------------- ------- ------- ------- -----------------
NET ASSET VALUE, BEGINNING OF THE PERIOD $ 20.31 $ 20.80 $ 20.41 $ 20.65 $ 20.00
------- ------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income(1) 0.35 0.69 0.89 1.27 0.86
Net realized and unrealized gain (loss) on investments (0.31) 0.09 0.79 0.59 0.89
------- ------- ------- ------- -------
Total from investment operations 0.04 0.78 1.68 1.86 1.75
------- ------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.35) (0.78) (0.91) (1.30) (0.88)
From net realized gain on investments -- (0.49) (0.38) (0.80) (0.22)
------- ------- ------- ------- -------
Total distributions to shareholders (0.35) (1.27) (1.29) (2.10) (1.10)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 20.00 $ 20.31 $ 20.80 $ 20.41 $ 20.65
======= ======= ======= ======= =======
TOTAL RETURN+++ 0.18%++ 3.81% 8.44% 9.21% 8.87%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets) 0.40%+ 0.40% 0.40% 0.21% 0.00%+
Net Investment Income (to average daily net assets) 3.49%+ 3.30% 4.30% 6.00% 7.21%+
Portfolio Turnover 60%++ 457% 391% 357% 136%++
Net Assets, End of Year (000's omitted) $62,703 $62,624 $84,101 $63,564 $57,447
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share (1) $ 0.32 $ 0.63 $ 0.83 $ 1.17 $ 0.78
Ratios (to average daily net assets):
Expenses 0.69%+ 0.70% 0.69% 0.68% 0.72%++
Net investment income 3.20%+ 3.00% 4.01% 5.53% 6.48%++
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an effective
yield basis. The effect of this change for the year ended December 31, 2001
was to decrease net investment income per share by $0.004, increase net
realized and unrealized gains and losses per share by $0.004 and decrease
the ratio of net investment income to average net assets from 6.02% to
6.00%. Per share data and ratios/supplemental data for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
+ Computed on an annualized basis using a 366 day calendar year.
++ Not annualized.
+++ Total return would have been lower in the absence of expense waivers
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--107.8%
ASSET BACKED--25.2%
Advanta Mortgage Loan Trust 1997-4 M1 7.040% 1/25/2029 $ 161,679 $ 161,386
American Express Credit Account Master Trust 2000-2 B(a) 1.589 9/17/2007 150,000 150,127
American Express Credit Account Master Trust 2003-4 A 1.690 1/15/2009 875,000 852,184
American Express Master Trust 2002-1 A(a) 1.309 12/15/2005 475,000 475,271
Americredit Automobile Receivables Trust 2001-D A3(a) 1.450 9/12/2006 121,191 121,219
BMW Vehicle Owner Trust 2004-A A1 1.180 5/25/2005 523,345 522,761
BMW Vehicle Owner Trust 2004-A A4 3.320 2/25/2009 655,000 648,944
Capital Auto Receivables Asset Trust 2004-1 A4 2.640 11/17/2008 625,000 608,893
Capital One Multi-Asset Execution Trust 2002-B1 B1(a) 1.919 7/15/2008 625,000 628,167
Capital One Multi-Asset Execution Trust 2004-C1 C1 3.400 11/16/2009 260,000 255,830
Capital One Prime Auto Receivables Trust 2004-1 A3 2.020 11/15/2007 50,000 49,436
Centex Home Equity 2004-B AF2 2.375 12/25/2021 150,000 147,184
Chase Credit Card Master Trust 2000-3 A(a) 1.369 1/15/2008 270,000 270,385
Chase Credit Card Master Trust 2002-2 C(a) 2.139 7/16/2007 315,000 316,217
Chase Credit Card Master Trust 2002-6 B(a) 1.589 1/15/2008 250,000 250,675
Chase Credit Card Master Trust 2002-8 A(a) 1.299 3/17/2008 215,000 215,112
Chase Funding Mortgage Loan Asset-Backed Certificates 2003-4 2A1(a) 1.420 2/25/2021 345,981 345,979
Chase Manhattan Auto Owner Trust 2003-C CTFS 2.780 6/15/2010 225,000 222,575
Citibank Credit Card Issuance Trust 2002-A2 A2(a) 1.280 2/15/2007 480,000 479,992
Citibank Credit Card Master Trust I 1997-6 B (b) 0.000 8/15/2006 500,000 499,941
Citibank Credit Card Master Trust I 1999-7 B 6.900 11/15/2006 350,000 356,503
Citifinancial Mortgage Securities, Inc. 2003-2 AV1(a) 1.400 5/25/2033 5,550 5,550
Daimler Chrysler Auto Trust 2003-A A4 2.880 10/8/2009 315,000 312,825
Daimler Chrysler Auto Trust 2003-B A4 2.860 3/9/2009 575,000 566,844
Daimler Chrysler Auto Trust 2004-A A4 2.580 4/8/2009 310,000 302,309
First USA Credit Card Master Trust 1997-7 B(a) 1.579 5/17/2007 1,500,000 1,500,629
Ford Credit Auto Owner Trust 2004-A A4 3.540 11/15/2008 185,000 184,539
Honda Auto Receivables Owner Trust 2003-4 A3 2.190 5/15/2007 250,000 248,393
Honda Auto Receivables Owner Trust 2003-5 A3 2.300 10/18/2007 590,000 585,596
Honda Auto Receivables Owner Trust 2004-1 A1 1.139 4/21/2005 467,277 466,861
Honda Auto Receivables Owner Trust 2004-1 A3 2.400 2/21/2008 310,000 306,286
Housing Securities, Inc. 1994-2 A1 6.500 7/25/2009 29,952 30,189
John Deere Owner Trust 2004-A A1 1.140 5/13/2005 492,162 491,236
MBNA Credit Card Master Note Trust 2001-C3 C3 6.550 12/15/2008 225,000 237,372
MBNA Credit Card Master Note Trust 2002-A1 A1 4.950 6/15/2009 305,000 317,425
MBNA Master Credit Card Trust USA 1997-J A(a) 1.359 2/15/2007 350,000 350,065
Morgan Stanley Auto Loan Trust 2004-HB1 A1 1.330 5/15/2006 113,620 113,501
Nissan Auto Receivables Owner Trust 2003-C A4 2.700 12/17/2007 640,000 633,340
Residential Asset Mortgage Products, Inc. 2003-RS11 AI2 3.047 3/25/2025 155,000 153,962
Residential Asset Securities Corp. 2004-KS3 AI2 2.170 11/25/2024 295,000 288,915
Residential Asset Securities Corp. 2003-KS11 AI1(a) 1.470 9/25/2021 241,776 241,718
USAA Auto Owner Trust 2004-1 A3 2.060 4/15/2008 625,000 615,705
Whole Auto Loan Trust 2003-1 C 3.130 3/15/2010 240,000 239,492
----------
Total Asset Backed (Cost $15,675,541) 15,771,533
----------
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--6.4%
Bear Stearns Commercial Mortgage Securities 2003-T12 A3 4.240% 8/13/2039 $190,000 $ 183,727
Calwest Industrial Trust 2002-CALW A 144A 6.127 2/15/2017 135,000 144,088
Capco America Securitization Corp. 1998-D7 A1B 6.260 10/15/2030 130,000 139,721
Fannie Mae Grantor Trust 2001-T6 B 6.088 5/25/2011 340,000 362,539
FNMA Grantor Trust 2002-T11 A 4.769 4/25/2012 170,943 174,118
GNMA 2002-48 PF(a) 1.553 5/15/2029 12,163 12,165
GNMA 2003-48 AC 2.712 2/16/2020 297,116 287,154
GNMA 2003-72 A 3.206 4/16/2018 144,070 141,062
GNMA 2003-88 AC 2.914 6/16/2018 145,496 141,361
GNMA 2003-96 B 3.607 8/16/2018 310,000 305,715
GNMA 2004-12 A 3.110 1/16/2019 295,512 287,048
GNMA 2004-25 AB 1.698 11/16/2006 586,682 585,106
GNMA 2004-25 AC 3.377 1/16/2023 275,000 267,407
GNMA 2004-43 A 2.822 12/16/2019 175,000 169,575
GNMA 2004-51 A 4.145 9/20/2008 275,000 275,000
LB Commercial Conduit Mortgage Trust 1999-C1 B 6.930 6/15/2031 120,000 132,238
Permanent Financing PLC 3 1A NCL (a) 1.140 12/10/2004 360,000 359,937
Structured Asset Mortgage Investments, Inc. 1998-2 B 6.750 4/30/2030 14,458 14,458
----------
Total Collateralized Mortgage Obligations (Cost $4,065,011) 3,982,419
----------
CORPORATE--28.2%
BASIC MATERIALS--1.4%
Cabot Corp. 144A 5.250 9/1/2013 165,000 160,396
Chevron Phillips Chemical Co. LLC 7.000 3/15/2011 170,000 186,365
ICI Wilmington, Inc. 4.375 12/1/2008 205,000 201,093
International Paper Co. 6.750 9/1/2011 140,000 151,741
Potash Corp. of Saskatchewan 4.875 3/1/2013 165,000 158,106
----------
857,701
----------
COMMUNICATIONS--3.0%
AT&T Wireless Services, Inc. 7.875 3/1/2011 85,000 96,684
AT&T Wireless Services, Inc. 8.750 3/1/2031 175,000 213,355
Comcast Corp. 5.500 3/15/2011 155,000 156,480
COX Communications, Inc.* 7.125 10/1/2012 135,000 147,953
Liberty Media corp.* 5.700 5/15/2013 225,000 221,652
Sprint Capital Corp. 8.375 3/15/2012 115,000 132,173
Sprint Capital Corp. 8.750 3/15/2032 210,000 244,709
Time Warner, Inc. 6.750 4/15/2011 225,000 242,324
Verizon Global Funding Corp. 6.875 6/15/2012 320,000 349,129
Verizon Global Funding Corp.* 7.750 6/15/2032 70,000 78,705
----------
1,883,164
----------
CONSUMER CYCLICAL--0.3%
Daimler Chrysler NA Holding Corp. 4.750 1/15/2008 85,000 85,704
Pulte Homes, Inc. 5.250 1/15/2014 80,000 75,536
----------
161,240
----------
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL--2.1%
Aramark Services, Inc. 7.000% 7/15/2006 $ 95,000 $ 101,219
Archer-Daniels-Midland Co. 7.000 2/1/2031 325,000 361,832
Erac USA Finance Co. 144A 7.950 12/15/2009 130,000 149,580
Kroger Co. 8.050 2/1/2010 165,000 189,983
Laboratory Corp. of America Holdings 5.500 2/1/2013 85,000 85,573
RR Donnelley & Sons Co. 144A 4.950 4/1/2014 160,000 152,371
Safeway Inc.* 5.800 8/15/2012 40,000 40,325
Safeway, Inc. 4.125 11/1/2008 110,000 107,673
Wyeth 6.450 2/1/2024 65,000 61,811
Wyeth 6.500 2/1/2034 60,000 56,553
----------
1,306,920
----------
ENERGY--0.8%
Amoco Co. 6.500 8/1/2007 225,000 244,186
ConocoPhillips Holding Co. 6.950 4/15/2029 45,000 49,543
Halliburton Co. 5.500 10/15/2010 90,000 91,052
XTO Energy, Inc. 7.500 4/15/2012 130,000 146,687
----------
531,468
----------
FINANCIAL--14.9%
Ace Ina Holdings, Inc. 5.875 6/15/2014 80,000 80,935
Allstate Corp. 7.200 12/1/2009 125,000 142,522
Amsouth Bank NA 4.850 4/1/2013 125,000 120,546
Archstone-Smith Operating Trust REIT 5.000 8/15/2007 75,000 77,164
Bank of America Corp. 7.400 1/15/2011 205,000 232,330
Bear Stearns Co., Inc. 4.500 10/28/2010 95,000 93,136
Boeing Capital Corp. 4.750 8/25/2008 100,000 101,854
Boeing Capital Corp. 7.375 9/27/2010 125,000 141,342
Boston Properties, Inc. 6.250 1/15/2013 170,000 178,293
Boston Properties, Inc. 5.625 4/15/2015 70,000 68,348
Branch Banking & Trust Co. Wilson North Carolina* 5.200 12/23/2015 315,000 303,438
Caterpillar Financial Service Corp. 3.100 5/15/2007 155,000 153,069
CBA Capital Trust I 144A 5.805 6/30/2015 325,000 317,655
City National Corp. 5.125 2/15/2013 375,000 364,113
Credit Suisse First Boston USA, Inc. 6.125 11/15/2011 175,000 184,192
Duke Realty Corp. REIT* 7.750 11/15/2009 150,000 171,405
Duke Realty LP REIT 3.500 11/1/2007 150,000 148,628
EOP Operating LP 7.000 7/15/2011 145,000 158,038
ERP Operating LP 4.750 6/15/2009 60,000 60,064
ERP Operating LP 6.625 3/15/2012 40,000 43,224
Exxon Capital Corp. 6.125 9/8/2008 140,000 150,247
First Industrial LP 5.250 6/15/2009 115,000 115,789
Ford Motor Credit Co. 6.500 1/25/2007 85,000 89,312
Ford Motor Credit Co. 7.875 6/15/2010 40,000 43,523
Ford Motor Credit Co. 7.250 10/25/2011 345,000 360,280
General Electric Capital Corp. 6.750 3/15/2032 200,000 215,003
General Motors Acceptance Corp. 6.875 8/28/2012 345,000 350,954
Glencore Funding LLC 144A 6.000 4/15/2014 60,000 55,652
Goldman Sachs Group, Inc. 6.875 1/15/2011 280,000 307,376
Healthcare Realty Trust, Inc. 8.125 5/1/2011 135,000 155,212
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Household Finance Corp. 4.125% 12/15/2008 $280,000 $ 276,001
Jefferies Group, Inc. 7.500 8/15/2007 195,000 216,061
Jefferies Group, Inc. 5.500 3/15/2016 25,000 23,917
JP Morgan Chase & Co. 5.750 1/2/2013 220,000 223,599
MassMutual Global Funding II 144A 3.800 4/15/2009 100,000 98,153
Morgan Stanley 4.750 4/1/2014 265,000 244,495
National City Corp. 6.875 5/15/2019 375,000 411,605
Nationwide Mutual Insurance Co. 144A 8.250 12/1/2031 115,000 135,585
Principal Life Income Funding Trusts(a) 1.152 10/14/2005 210,000 210,533
Protective Life Secured Trust 4.000 4/1/2011 345,000 326,528
Regions Financial Corp. 6.375 5/15/2012 90,000 96,296
Rouse Co. 3.625 3/15/2009 100,000 95,004
SLM Corp. 5.000 4/15/2015 200,000 189,263
Southtrust Corp. 5.800 6/15/2014 80,000 81,513
Suntrust Bank 5.450 12/1/2017 100,000 98,336
Sun Trust Banks, Inc. 7.750 5/1/2010 275,000 322,765
US Bank National Association 6.375 8/1/2011 145,000 156,637
Wachovia Corp. 4.875 2/15/2014 310,000 296,114
Washington Mutual, Inc.* 4.625 4/1/2014 415,000 378,494
Wells Fargo & Company 6.375 8/1/2011 135,000 146,202
Zions Bancorp 2.700 5/1/2006 145,000 143,917
Zions Bancorp 6.000 9/15/2015 160,000 161,320
----------
9,315,982
----------
INDUSTRIAL--2.0%
Fedex Corp. 144A 2.650 4/1/2007 115,000 111,676
Lockheed Martin Corp. 8.200 12/1/2009 200,000 234,364
Raytheon Co. 5.500 11/15/2012 35,000 35,319
Republic Services, Inc. 6.750 8/15/2011 195,000 213,323
Sealed Air Corp. 144A 5.625 7/15/2013 80,000 79,025
Union Pacific Corp. 3.875 2/15/2009 250,000 243,035
Waste Management, Inc. 7.375 8/1/2010 25,000 28,088
Waste Management, Inc. 7.000 7/15/2028 50,000 51,900
Waste Management, Inc.* 6.875 5/15/2009 220,000 241,553
----------
1,238,283
----------
UTILITIES--3.7%
Appalachian Power Co. 5.950 5/15/2033 85,000 78,377
CenterPoint Energy Houston Electric LLC 5.750 1/15/2014 275,000 279,286
Dominion Resources, Inc.* 5.700 9/17/2012 180,000 183,081
DTE Energy Co.* 6.650 4/15/2009 225,000 240,192
KeySpan Corp.* 4.650 4/1/2013 95,000 90,738
Niagara Mohawk Power Corp. 7.750 10/1/2008 200,000 225,132
Nisource Finance Corp. 7.875 11/15/2010 110,000 126,103
Oncor Electric Delivery Co. 6.375 5/1/2012 135,000 144,474
Pacific Gas & Electric Co. 3.600 3/1/2009 65,000 62,569
Pepco Holdings, Inc. 5.500 8/15/2007 125,000 129,043
Progress Energy, Inc. 7.750 3/1/2031 165,000 184,945
Public Service Co. of Colorado 4.375 10/1/2008 125,000 125,309
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
Southern California Edison Co. 1.440% 1/13/2006 $200,000 $ 200,261
Southern California Edison Co. 8.000 2/15/2007 120,000 132,560
Wisconsin Electric Power* 5.625 5/15/2033 130,000 121,420
----------
2,323,490
----------
Total Corporate (Cost $17,916,145) 17,618,248
----------
MUNICIPAL OBLIGATIONS--0.4%
Sacramento County California Pension Funding (b) 0.000 7/10/2030 250,000 233,750
----------
Total Municipal Obligations (Cost $233,395) 233,750
----------
SOVEREIGN BONDS--1.0%
Republic of South Africa 6.500 6/2/2014 215,000 216,075
United Mexican States* 6.375 1/16/2013 175,000 174,650
United Mexican States 8.300 8/15/2031 235,000 245,928
----------
Total Sovereign Bonds (Cost $648,127) 636,653
----------
YANKEE BONDS--5.8%
Amvescap PLC 6.600 5/15/2005 110,000 113,294
Amvescap PLC 5.900 1/15/2007 200,000 211,217
British Telecommunications PLC 8.375 12/15/2010 70,000 81,747
Carnival Corp. 6.650 1/15/2028 75,000 74,910
Deutsche Telekom International Finance BV 8.000 6/15/2010 260,000 303,825
Deutsche Telekom International Finance BV 8.250 6/15/2030 180,000 219,084
Domtar, Inc. 5.375 12/1/2013 175,000 166,408
French Telecom 9.000 3/1/2011 125,000 144,853
HBOS PLC 144A(a) 5.375 12/31/2049 250,000 240,928
Hutchison Whampoa Ltd. 144A 5.450 11/24/2010 165,000 161,952
National Westminster Bank PLC (a) 7.750 4/29/2049 545,000 603,669
Nordea Bank Sweden AB 144A 5.250 11/30/2012 205,000 203,657
Northern Rock PLC 144A 5.600 4/30/2014 90,000 87,446
Pearson Dollar Finance PLC 144A 4.700 6/1/2009 90,000 90,117
Province of Quebec 5.000 7/17/2009 115,000 118,191
Royal KPN NV 8.375 10/1/2030 90,000 109,342
St. George Bank Ltd. 144A 5.300 10/15/2015 140,000 136,169
Telecom Italia Capital SA 144A 4.000 11/15/2008 385,000 378,202
Telus Corp. 8.000 6/1/2011 155,000 176,167
----------
Total Yankee Bonds (Cost $3,609,543) 3,621,178
----------
NON-AGENCY--7.2%
PASS THRU SECURITIES--7.2%
Chase Commercial Mortgage Securities Corp. 1997-1 D Non-ERISA 7.370 6/19/2029 175,000 189,771
Chase Commercial Mortgage Securities Corp. 1997-1 E Non-ERISA 7.370 6/19/2029 300,000 326,012
Chase Commercial Mortgage Securities Corp. 1997-2 C 6.600 12/19/2029 75,000 80,605
DLJ Commercial Mortgage Corp. 1998-CF2 B1(a) 7.286 11/12/2031 215,000 232,583
DLJ Commercial Mortgage Corp. 1999-CG1 A1A 6.080 3/10/2032 322,286 337,407
JP Morgan Commercial Mortgage Finance Corp. 1997-C5 A3 7.088 9/15/2029 125,000 135,172
Morgan Stanley Capital I 1998-HF1 C 6.750 3/15/2030 180,000 195,136
Morgan Stanley Capital I 1998-HF1 E(a) 7.377 3/15/2030 330,000 359,959
Morgan Stanley Capital I 1999-CAM1 A4 7.020 3/15/2032 165,000 182,932
Morgan Stanley Capital I 1999-RM1 A2 6.710 12/15/2031 370,000 403,589
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
PASS THRU SECURITIES (CONTINUED)
Morgan Stanley Dean Witter Capital I 2001-PPM A2 6.400% 2/15/2031 $ 240,077 $ 255,511
Morgan Stanley Dean Witter Capital I 2001-PPM A3 6.540 2/15/2031 350,000 377,277
Mortgage Capital Funding, Inc. 1996-MC1 C 7.800 6/15/2028 410,000 439,001
Mortgage Capital Funding, Inc. 1997-MC2 C 6.881 11/20/2027 310,000 333,974
Mortgage Capital Funding, Inc. 1997-MC2 D 7.117 11/20/2027 350,000 377,640
Washington Mutual 2003-AR10 A5 4.090 10/25/2033 325,000 317,611
----------
Total Non-Agency (Cost $4,494,959) 4,544,180
----------
U.S. GOVERNMENT AGENCY--20.8%
PASS THRU SECURITIES--20.8%
FHLMC Gold 6.000 5/1/2017 354,476 369,887
FNMA 3.530 7/1/2010 172,272 163,563
FNMA 5.000 7/1/2018 156,890 157,448
FNMA 7.000 11/1/2031 8,953 9,484
FNMA 5.500 1/1/2034 246,138 245,672
FNMA 5.500 1/1/2034 158,870 158,569
FNMA 4.060 6/1/2013 125,000 114,231
FNMA 6.500 12/1/2015 87,457 92,581
FNMA 6.000 4/1/2017 566,270 590,637
FNMA 6.000 6/1/2017 151,237 157,811
FNMA 6.000 7/1/2017 61,459 64,103
FNMA 7.500 2/1/2029 22,662 24,384
FNMA 7.500 9/1/2029 2,058 2,206
FNMA 6.500 12/1/2031 121,513 126,859
FNMA 7.000 5/1/2032 201,878 213,064
FNMA 6.500 6/1/2032 514,608 536,663
FNMA 6.500 6/1/2032 210,454 219,290
FNMA 7.000 6/1/2032 297,474 313,957
FNMA 6.500 7/1/2032 109,942 114,558
FNMA 5.500 2/1/2033 826,939 825,840
FNMA 5.500 8/1/2033 402,084 401,322
FNMA 5.500 10/1/2033 783,720 782,234
FNMA 5.500 10/1/2033 584,971 583,862
FNMA (TBA)# 5.000 7/1/2019 675,000 675,633
FNMA (TBA)# 6.000 7/1/2019 25,000 26,031
FNMA (TBA)# 5.500 7/1/2034 1,935,000 1,925,325
FNMA (TBA)# 6.500 7/1/2034 705,000 733,861
FNMA (TBA)# 6.000 8/1/2034 3,205,000 3,258,081
GNMA 8.000 8/15/2025 20,448 22,517
GNMA 8.000 11/15/2025 35,106 38,659
GNMA 8.000 5/15/2026 9,340 10,274
GNMA 8.000 11/15/2026 31,844 35,025
GNMA 6.500 7/15/2032 25,717 26,902
GNMA 6.500 10/15/2032 15,841 16,571
----------
Total U.S. Government Agency (Cost $12,996,762) 13,037,104
----------
U.S. TREASURY OBLIGATIONS--12.8%
United States Treasury Note+ 7.875 11/15/2004 50,000 51,160
United States Treasury Note+ 6.750 5/15/2005 100,000 104,051
United States Treasury Note* 1.875 1/31/2006 1,335,000 1,322,276
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ----------------------------------------------------------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (CONTINUED)
United States Treasury Note* 2.375% 8/15/2006 $1,170,000 $ 1,159,991
United States Treasury Note* 3.250 8/15/2008 845,000 834,536
United States Treasury Note* 4.000 11/15/2012 1,805,000 1,747,536
United States Treasury Note 6.250 5/15/2030 2,482,000 2,778,964
-----------
Total U.S. Treasury Obligations (Cost $8,054,479) 7,998,514
-----------
TOTAL BONDS AND NOTES (Cost $67,693,962) 67,443,579
-----------
PURCHASED OPTIONS--0.0% CONTRACT SIZE
-------------
U.S. Treasury Note 3.25% Call, Strike Price 100.59, 07/26/2004 12,250 48
U.S. Treasury Note 3.00% Call, Strike Price 101.10, 02/18/2005 24,750 1,740
U.S. Treasury Note 4.00% Put, Strike Price 96.80, 08/05/2004 12,550 16,854
-----------
TOTAL PURCHASED OPTIONS (Cost $49,896) 18,642
-----------
SHORT-TERM INVESTMENTS--2.3%
PAR VALUE
U.S. GOVERNMENT AGENCY--0.3% ------------
FNMA Discount Note++ 1.250% 7/30/2004 $ 275,000 274,723
INVESTMENT COMPANIES--2.0%
Dreyfus Institutional Preferred Plus+++ 1.000 1,284,247 1,284,247
-----------
TOTAL SHORT TERM INVESTMENTS--(Cost $1,558,970) 1,558,970
-----------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--12.7%
INVESTMENT COMPANIES--12.7%
Dreyfus Cash Management Plus Fund+++ (cost $7,962,398) 1.000 7,962,398 7,962,398
-----------
TOTAL INVESTMENTS-- 122.8% (COST $77,265,226) 76,983,589
LIABILITIES IN EXCESS OF OTHER ASSETS--(22.8%) (14,281,024)
-----------
NET ASSETS--100.0% 62,702,565
===========
- ----------
NOTES TO SCHEDULE OF INVESTMENTS:
144A--Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
FHLMC--Federal Home Loan Mortgage Company
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
NCL--Non-callable
REIT--Real Estate Investment Trust
(a) Variable Rate Security; rate indicated is as of 6/30/04.
(b) Zero coupon security.
* Security, or a portion of thereof, was on loan at 6/30/04.
TBA--To Be Announced
# Delayed Delivery contract.
+ Denotes all of part of security pledged as collateral.
++ Rate noted is yield to maturity
+++ Affiliated institutional money market fund. The effective yield is 1.00%. 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 INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Investment Grade Bond Fund (the "Fund") is a separate
diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal and liquidity, primarily through the generation of
current income and, to a lesser extent, capital appreciation. The Fund seeks
to achieve its objective by investing, under normal circumstances, at least
80% of net assets in investment grade fixed income securities including, but
not limited to, government, agency, corporate and mortgage and asset-backed
issues.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price in the principal
market in which such securities are primarily traded. Market quotations are
not considered to be readily available for certain debt obligations; such
investments are stated at fair value on the basis of valuations furnished by
a pricing service or dealers, approved by the Trustees, which determine
valuations for normal institutional-size trading units of such securities
using methods based on market transactions for comparable securities and
variable relationships between securities that are generally recognized by
institutional traders. Securities (including illiquid securities) for which
quotations are not readily available are valued at their fair value as
determined in good faith under consistently applied procedures under the
general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless the
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These differences,
which may result in distribution reclassifications, are primarily due to
differing treatments for losses deferred due to wash sales, amortization
and/or accretion of premiums and discounts on certain securities and the
timing of recognition of gains and losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in capital.
Undistributed net investment income and accumulated net realized gain (loss)
on investments may include temporary book and tax basis differences which
will reverse in a subsequent period. Any taxable income or gain remaining at
fiscal year end is distributed in the following year.
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.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND 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.
F. AFFILIATED ISSUERS
Issuers in which the Fund held investments in other investment companies
advised by to Standish Mellon Asset Management Company LLC ("Standish
Mellon") or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment advisory
and administrative services and general office facilities, is paid monthly
at the annual rate of 0.40% of the Fund's average daily net assets. Standish
Mellon voluntarily agreed to limit total Fund operating expenses (excluding
brokerage commissions, taxes and extraordinary expenses) to 0.40% of the
Fund's average daily net assets for the period ended June 30, 2004. Pursuant
to this agreement, for the period ended June 30, 2004, Standish Mellon
voluntarily did not impose $91,471 of its investment advisory fee. This
agreement is voluntary and temporary and may be discontinued or revised by
Standish Mellon at any time.
As of February 23, 2004, the The Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, which is an affiliate of Standish
Mellon, 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 $2,428 during the period ended June 30,
2004 and $2,428 was owed at June 30, 2004.
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 $41,459 during the period ended June 30, 2004 and $10,461 was
owed at June 30, 2004.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an annual
fee and a per meeting fee as well as reimbursement for travel and out of
pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $27,049,024 $29,588,563
=========== ===========
Investments (non-U.S. Government Securities) $18,629,114 $11,386,862
=========== ===========
(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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
Shares sold 77,028 201,404
Shares issued to shareholders in payment
of distributions declared 13,714 110,742
Shares redeemed (38,332) (1,271,678)
------- ----------
Net increase (decrease) 52,410 (959,532)
======= ==========
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004, three shareholders of record held approximately 67%, 15%
and 9% of the total outstanding shares of the Fund. Investment activity of
these shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes all of its taxable income for its fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $77,215,330
-----------
Unrealized appreciation $557,331
Unrealized depreciation (807,714)
-----------
Net unrealized appreciation/depreciation $(250,383)
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any open
purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or if
the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be sold
(call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
A summary of the written put options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN PUT OPTION TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 5 39,804
Options written 9 85,474
Options expired (8) (60,177)
Options closed (3) (22,841)
----------- ---------
Outstanding, end of period 3 42,260
=========== =========
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004, the Fund held the following written put options:
SECURITY CONTRACTS VALUE
----------------------------------------------------------------------------
UST 3.25% Put, Strike Price 97.40, 7/26/04 1 2,967
UST 4.00% Put, Strike Price 93.39, 8/05/04 1 8,141
UST 2.50% Put, Strike Price 99.38, 7/02/04 1 2,316
-------
Total (premiums received 42,260) 13,424
=======
A summary of the written call options for the period ended June 30, 2004 is
as follows:
NUMBER OF
WRITTEN CALL OPTIONS TRANSACTIONS CONTRACTS PREMIUMS
----------------------------------------------------------------------------
Outstanding, beginning of period 5 26,225
Options written 8 47,071
Options expired (4) (20,905)
Options closed (7) (43,217)
------- -------
Outstanding, end of period 2 9,174
======= =======
At June 30, 2004, the Fund held the following written call option contracts:
SECURITY CONTRACTS VALUE
------------------------------------------------------------------------------
UST 3.25% Call, Strike Price 103.78, 7/26/04 1 --
UST 2.50% Call, Strike Price 99.38, 7/02/04 1 8,531
-------
Total (premiums received 9,174) 8,531
=======
At June 30, 2004, the Fund had segregated sufficient securities for open
written options:
INTEREST RATE FLOORS
Interest rate floors purchased by the Fund entitle the Fund to receive
payments on a notional principal amount from the party selling such floor to
the extent that a specified index falls below a predetermined interest rate
amount. Credit and market risk exist with respect to these instruments. If
forecasts of interest rates and other market factors are incorrect,
investment performance will diminish compared to what performance would have
been if these investment techniques were not used. Even if the forecasts are
correct, there are risks that the positions may correlate imperfectly with
the asset or liability being hedged, a liquid secondary market may not
always exist, or counterparty to a transaction may not perform. The Fund
expects to enter these transactions primarily for hedging purposes
including, but not limited to, preserving a return or spread on a particular
investment or portion of its portfolio, protecting against currency
fluctuations, as a duration management technique or protecting against an
increase in the price of securities the Fund anticipates purchasing at a
later date. Interest rate floors are marked-to-market daily based on
quotations from market makers and the change, if any, is recorded as
unrealized appreciation or depreciation in the Statement of Operations.
Realized gains or losses from these agreements are disclosed in the
Statement of Operations.
At June 30, 2004, the Fund held no open interest rate floor agreements.
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The change
in value of futures contracts primarily corresponds with the value of their
underlying instruments or indices, which may not correlate with changes in
the value of hedged investments. Buying futures tends to increase the Fund's
exposure to the underlying instrument, while selling futures tends to
decrease the Fund's exposure to the underlying instrument or hedge other
Fund investments. In addition, there is the risk that the Fund may not be
able to enter into a closing transaction because of an illiquid secondary
market. Losses may arise if there is an illiquid secondary market or if the
counterparties do not perform under the contract's terms. The Fund enters
into financial futures transactions primarily to manage its exposure to
certain markets and to changes in securities prices and foreign currencies.
Gains and losses are realized upon the expiration or closing of the futures
contracts. Futures contracts are valued at the quoted daily settlement
prices established by the exchange on which they trade.
At June 30,2004, the Fund held the following financials futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE GAIN
----------------------------------------------------------------------------------------------------------------------------
U.S. 5 Year Note (5 Contracts) Short 9/21/2004 $542,578 $859
----------- ---------
SWAP AGREEMENTS
The Fund may enter into swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a particular
corporate or sovereign issuer's default. In connection with these
agreements, cash or securities may be set aside as collateral in accordance
with the terms of the swap agreement. The Fund earns interest on cash set
aside as collateral. Swaps are marked to market daily based upon quotations
from market makers and change in value, if any, is recorded as unrealized
gain or loss in the Statement of Operations. These financial instruments are
not actively traded on financial markets. The values assigned to these
instruments are based upon the best available information and because of the
uncertainty of the valuation, these values may differ significantly from the
values that would have been realized had a ready market for these
instruments existed, and differences could be material. Payments received or
made from credit default swaps at the end of the measurement period are
recorded as realized gain or loss in the Statement of Operations. Net
payments of interest on interest rate swap agreements, if any, are included
as part of realized gain or loss. Entering into these agreements involves,
to varying degrees, elements of credit, market, and documentation risk in
excess of the amounts recognized on the Statement of Assets and Liabilities.
Such risks involve the possibility that there will be no liquid market for
these agreements, that the counterparty to the agreements may default on its
obligation to perform or disagree as to the meaning of contractual terms in
the agreements, and that there may be unfavorable changes in interest rates.
At June 30, 2004, the Fund held the following open swap contracts:
17
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
NET UNREALIZED
NOTIONAL AMOUNT EXPIRATION APPRECIATION
PORTFOLIO/COUNTERPARTY DATE DESCRIPTION (DEPRECIATION)
----------------------------------------------------------------------------------------------------------------------------
1,235,000 USD 7/31/04 Agreement with Bear Stearns, dated 1/30/04 to
pay the notional amount multiplied by the 1
month LIBOR adjusted by a specified spread and
receive the notional amount multiplied by the
total return of The Lehman Brothers, Inc. CMBS
Investment Grade ERISA-eligible Index. $2,742
1,285,000 USD 10/31/2004 Agreement with Goldman Sachs, dated 4/28/04 to
pay the notional amount multiplied by the 1
month LIBOR adjusted by a specified spread and
receive the notional amount multiplied by the
total return of The Lehman Brothers, Inc. CMBS
Investment Grade ERISA-eligible Index. $2,904
140,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 6/18/04 to
pay 0.77% per year times the notional amount.
The Portfolio receives payment only upon a
default event by Clear Channel Communications,
Inc., the notional amount times the difference
between the par value and the then-market of
Clear Channel Communications, Inc., 7.65% due
9/15/10. $(219)
305,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 5/19/04 to
pay 0.77% per year times the notional amount.
The Portfolio receives payment only upon a
default event by Inco, Ltd., the notional amount
times the difference between the par value and
the then-market of Inco Ltd., 5.625% due 5/15/12. $(761)
305,000 USD 6/20/2009 Agreement with Merrill Lynch, dated 5/19/04 to
pay 0.44% per year times the notional amount.
The Portfolio receives payment only upon a
default event by Commercial Metals Co., the
notional amount times the difference between
the par value and the then-market of
Commercial Metals Co., 5.625% due 11/15/13. $314
------
Total Net Unrealized Appreciation $4,980
======
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value of
the securities on loan. The market value of securities loaned is determined
daily and any additional required collateral is allocated to the Fund on the
next business day. For the duration of a loan, the Fund receives the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and also receives compensation from the investment of the collateral.
As with other extensions of credit, the Fund bears the risk of delay in
recovery or even loss of rights in its securities on loan should the
borrower of the securities fail financially or default on its obligations to
the Fund. In the event of borrower default, the Fund generally has the right
to use the collateral to offset losses incurred. The Fund may incur a loss
in the event it was delayed or prevented from exercising its rights to
dispose of the collateral. The Fund also bears the risk in the event that
the interest and/or dividends received on invested collateral is not
sufficient to meet the Fund's obligations due on the loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
in $4,672 of security lending income. At June 30, 2004, the Fund had
$7,794,809 worth of securities on loan.
See the Schedule of Investments for the securities that are on loan.
18
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INVESTMENT GRADE BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. This Fund segregates securities having a value
at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the principal
value has not been finalized. However, the amount of the commitments will
not fluctuate more than 0.01% from the principal amount. The Fund holds, and
maintains until settlement date, cash or high-grade debt obligations in an
amount sufficient to meet the purchase price, or the Fund may enter into
offsetting contracts for the forward sale of other securities it owns.
Income on the securities will not be earned until settlement date. TBA
purchase commitments may be considered securities in themselves, and involve
a risk of loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of the decline
in the value of the Fund's other assets. Unsettled TBA purchase commitments
are valued at the current market value of the underlying securities,
according to the procedures described under "Investment security valuations"
above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of the
underlying securities, generally according to the procedures described under
"Investment security valuations" above. The contract is 'marked-to-market'
daily and the change in market value is recorded by the Fund as an
unrealized gain or loss. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund realizes a gain
or loss from the sale of the securities based upon the unit price
established at the date the commitment was entered into.
See the Schedule of Investments for outstanding delayed delivery contracts.
(9) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition,
a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $250 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
19
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
20
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
21
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THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0946SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
OPPORTUNISTIC EMERGING MARKETS DEBT FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (including securities on loan, valued at $519,521) (Note 7)
Unaffiliated issuers, at value (Note 1A) (cost $15,446,964) $15,005,960
Affiliated issuers, at value (Note 1A) (cost $1,071,837) (Note 1H) 1,071,837
Cash 663,419
Interest and dividends receivable 375,959
Prepaid expenses 5,733
-----------
Total assets 17,122,908
LIABILITIES
Liability for securities on loan (Note 7) $547,056
Payable for investments purchased 561,261
Unrealized depreciation on forward currency exchange contracts (Note 6) 369
Accrued accounting, custody and transfer agent fees (Note 2) 9,633
Accrued trustees' fees and expenses (Note 2) 1,016
Accrued expenses and other liabilities 19,147
--------
Total liabilities 1,138,482
-----------
NET ASSETS $15,984,426
===========
NET ASSETS CONSIST OF:
Paid-in capital $16,455,264
Accumulated net realized loss (149,646)
Undistributed net investment income 113,052
Net unrealized depreciation (434,244)
-----------
TOTAL NET ASSETS $15,984,426
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 836,258
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 19.11
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $2,687 (Note 7)) $ 619,632
EXPENSES
Investment advisory fee (Note 2) $ 38,338
Accounting, custody, and transfer agent fees (Note 2) 25,898
Legal and audit services 17,509
Registration fees 2,087
Trustees' fees and expenses (Note 2) 1,818
Insurance expense 2,581
Miscellaneous 3,521
---------
91,752
DEDUCT:
Waiver of investment advisory fee (Note 2) (38,338)
Reimbursement of Fund operating expenses (Note 2) (30,411)
---------
Total expense deductions (68,749)
---------
Net expenses 23,003
-----------
Net investment income 596,629
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions (155,899)
Financial futures contracts (6,411)
Foreign currency transactions and forward currency exchange contracts 10,552
Written options transactions 12,063
---------
Net realized loss (139,695)
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (976,955)
---------
Change in net unrealized appreciation (depreciation) (976,955)
-----------
Net realized and unrealized loss on investments (1,116,650)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (520,021)
===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 596,629 $ 717,550
Net realized loss (139,695) 1,285,953
Change in net unrealized appreciation (depreciation) (976,955) 222,613
----------- -----------
Net increase (decrease) in net assets from investment operations (520,021) 2,226,116
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1E)
From net investment income (478,752) (694,242)
From net realized gains on investments (178,805) (1,050,575)
----------- -----------
Total distributions to shareholders (657,557) (1,744,817)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 3,025,000 11,826,248
Value of shares issued to shareholders in payment of distributions declared 430,148 1,543,165
Cost of shares redeemed (2,525,456) (4,887,894)
----------- -----------
Net increase in net assets from Fund share transactions 929,692 8,481,519
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (247,886) 8,962,818
NET ASSETS
At beginning of period 16,232,312 7,269,494
----------- -----------
At end of period (including undistributed net investment income of $113,052 and
distributions in excess of net investment income of $4,825) $15,984,426 $16,232,312
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE PERIOD MARCH 26, 2001
ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
JUNE 30, 2004 ------------------------- OPERATIONS) TO
(UNAUDITED) 2003 2002 DECEMBER 31, 2001
-------------- ------- ------ -----------------
NET ASSET VALUE, BEGINNING OF YEAR $ 20.81 $ 18.39 $17.67 $20.00
------- ------- ------ ------
FROM INVESTMENT OPERATIONS:
Net investment income (1)* 0.79 1.61 1.59 1.58
Net realized and unrealized
gain (loss) on investments (1.66) 3.59 0.65 0.10
------- ------- ----- ------
Total from investment operations (0.87) 5.20 2.24 1.68
------- ------- ----- ------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.60) (1.32) (1.52) (3.90)
From net realized gain on investments (0.23) (1.46) -- --
From tax return of capital -- -- -- (0.11)
------- ------- ------ ------
Total distributions to shareholders (0.83) (2.78) (1.52) (4.01)
------- ------- ------ ------
NET ASSET VALUE, END OF YEAR $ 19.11 $ 20.81 $18.39 $17.67
======= ======= ====== ======
TOTAL RETURN+++ (4.31)%++ 28.82% 13.20% 8.94%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.30%+ 0.30% 0.30% 0.30%+
Net Investment Income
(to average daily net assets)* 7.80%+ 7.64% 8.83% 10.33%+
Portfolio Turnover 129%++ 224% 421% 505%++
Net Assets, End of Year (000's omitted) $15,984 $16,232 $7,269 $3,702
- --------------
* The Fund periods indicated, the investment adviser voluntarily agreed not
to impose all or a portion of its investment advisory fee and/ or
reimbursed the Fund for a portion of its operating expenses. If this
voluntary action had not been taken, the investment income per share and
the ratios would have been:
Net investment income per share(1) $ 0.69 $ 1.26 $ 1.23 $ 1.34
Ratios (to average daily net assets):
Expenses 1.20%+ 1.92% 2.31% 1.82%+
Net investment income 6.90%+ 6.02% 6.82% 8.81%+
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis using a 366 day calendar year.
++ Not annualized.
+++ Total return would have been lower in the absence of fee waivers and
expense limitations.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--93.9%
CORPORATE--9.4%
ENERGY--2.6%
Gazprom Oao 9.625% 3/1/2013 USD 115,000 $ 118,622
Petroliam Nasional Berhad 144A 7.750 8/15/2015 265,000 301,123
----------
419,745
----------
FINANCIAL--6.8%
Banco Nacional de Comercio Exterior SNC 144A 3.875 1/21/2009 400,000 373,000
Pemex Project Funding Master Trust 7.375 12/15/2014 210,000 214,200
Pemex Project Funding Master Trust 8.625 2/1/2022 240,000 248,400
Pemex Project Funding Master Trust 144A(a) 2.820 6/15/2010 245,000 246,103
----------
1,081,703
----------
Total Corporate (Cost $1,558,442) 1,501,448
----------
SOVEREIGN BONDS--80.1%
Argentina Bonos(a) 1.234 8/3/2012 310,000 206,770
Dominican Republic 144A 9.500 9/27/2006 60,000 40,800
Nigeria Promissory Notes Series RC 5.092 1/5/2010 470,000 164,500
Republic of Argentina(b) 0.000 6/19/2018 328,988 88,004
Republic of Argentina 6.000 3/31/2023 445,000 225,838
Republic of Argentina 12.000 6/19/2031 222,600 58,989
Republic of Brazil(a) 2.063 4/15/2006 84,800 83,316
Republic of Brazil* 10.000 1/16/2007 65,000 68,250
Republic of Brazil 11.500 3/12/2008 215,000 228,653
Republic of Brazil 7.309 6/29/2009 100,000 100,000
Republic of Brazil 14.500 10/15/2009 125,000 145,000
Republic of Brazil 9.250 10/22/2010 505,000 478,488
Republic of Brazil 2.125 4/15/2012 465,883 392,506
Republic of Brazil(a)* 8.000 4/15/2014 903,033 827,404
Republic of Brazil 10.125 5/15/2027 320,000 284,238
Republic of Brazil 11.000 8/17/2040 570,000 533,520
Republic of Bulgaria 144A 8.250 1/15/2015 190,000 221,113
Republic of Bulgaria(a) 2.000 7/28/2011 112,800 112,377
Republic of Colombia 10.500 7/9/2010 150,000 160,500
Republic of Colombia 10.000 1/23/2012 210,000 217,350
Republic of Colombia 11.750 2/25/2020 95,000 103,788
Republic of Ecuador 7.000 8/15/2030 180,000 123,300
Republic of El Salvador 9.500 8/15/2006 80,000 87,200
Republic of El Salvador 8.250 4/10/2032 70,000 64,925
Republic of El Salvador 144A 7.750 1/24/2023 75,000 77,813
Republic of El Salvador 144A* 8.500 7/25/2011 20,000 21,600
Republic of Indonesia 144A* 6.750 3/10/2014 25,000 22,313
Republic of Panama 9.625 2/8/2011 195,000 215,475
Republic of Panama 8.875 9/30/2027 205,000 198,850
Republic of Peru 9.875 2/6/2015 145,000 151,163
Republic of Peru FLIRB(a) 4.500 3/7/2017 150,000 121,500
Republic of Peru PDI(a) 5.000 3/7/2017 91,000 77,578
Republic of Philippines 9.375 1/18/2017 220,000 221,375
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SOVEREIGN BONDS (CONTINUED)
Republic of Philippines 10.625% 3/16/2025 USD 65,000 $ 67,27
Republic of Philippines* 8.375 2/15/2011 294,000 291,428
Republic of South Africa 9.125 5/19/2009 95,000 110,319
Republic of South Africa 6.500 6/2/2014 220,000 221,100
Republic of Turkey 11.750 6/15/2010 280,000 314,300
Republic of Turkey 9.000 6/30/2011 75,000 75,188
Republic of Turkey 11.500 1/23/2012 200,000 224,000
Republic of Turkey* 11.875 1/15/2030 120,000 141,750
Republic of Uruguay 7.500 3/15/2015 208,000 152,880
Republic of Venezuela 10.750 9/19/2013 35,000 34,388
Republic of Venezuela 9.250 9/15/2027 180,000 152,100
Republic of Venezuela(a) 2.750 12/18/2007 249,991 237,491
Republic of Venezuela(a) 2.150 4/20/2011 75,000 57,938
Republic of Venezuela* 5.375 8/7/2010 110,000 87,175
Russian Federation 8.250 3/31/2010 75,000 80,625
Russian Federation 11.000 7/24/2018 230,000 289,800
Russian Federation 12.750 6/24/2028 205,000 297,763
Russian Federation 5.000 3/31/2030 1,825,000 1,667,594
Ukraine Government 144A 7.650 6/11/2013 100,000 95,000
Ukraine Government Senior Notes 11.000 3/15/2007 201,604 216,724
United Mexican States* 10.375 2/17/2009 115,000 138,795
United Mexican States 9.875 2/1/2010 425,000 510,213
United Mexican States 7.500 1/14/2012 140,000 150,780
United Mexican States 6.625 3/3/2015 195,000 192,563
United Mexican States 8.125 12/30/2019 315,000 337,050
United Mexican States 8.000 9/24/2022 140,000 145,600
United Mexican States 8.300 8/15/2031 90,000 94,185
United Mexican States 7.500 4/8/2033 304,000 293,360
-----------
Total Sovereign Bonds (Cost $13,128,064) 12,801,880
-----------
YANKEE BONDS--1.2%
Salomon Brothers AF for OAO Siberian Oil Co. 10.750 1/15/2009 195,000 200,850
-----------
Total Yankee Bonds (Cost $217,216) 200,850
-----------
FOREIGN DENOMINATED--1.9%
FRENCH--0.2%
Ivory Coast FLIRB~(a) 2.000 3/29/2018 FRF 1,170,000 31,514
-----------
TURKEY--1.7%
Republic of Turkey (b) 0.000 8/24/2005 TRL 300,000 268,182
-----------
Total Foreign Denominated (Cost $345,195) 299,696
-----------
U.S. TREASURY OBLIGATIONS--1.3%
U.S. Treasury Note 4.750 5/15/2014 USD 200,000 202,086
-----------
Total U.S. Treasury Obligations (Cost $198,047) 202,086
-----------
TOTAL BONDS AND NOTES (Cost $15,446,964) 15,005,960
===========
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- --------------------------------------------------------------------------------------------------------------------------------
SHORT TERM INVESTMENTS--3.3%
INVESTMENT COMPANIES--3.3%
Dreyfus Institutional Preferred Plus+ 1.000% USD 524,781 $ 524,781
-----------
TOTAL SHORT TERM INVESTMENTS--(Cost $524,781) 524,781
-----------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--3.4%
INVESTMENT COMPANIES--3.4%
Dreyfus Cash Management Plus Fund+ (cost $547,056) 1.000 547,056 547,056
-----------
TOTAL INVESTMENTS--100.6% (Cost $16,518,801) 16,077,797
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.06)% (93,371)
-----------
NET ASSETS--100.0% $15,984,426
===========
NOTES TO SCHEDULE OF INVESTMENTS:
USD-- United States Dollar
144A-- Securities exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
(a) Variable Rate Security; rate indicated is as of 6/30/04.
(b) Zero coupon security.
* Security, or a portion of thereof, was on loan at 6/30/04.
FLIRB--Front Loaded Interest Reduction Bond
PDI-- Past Due Interest Bonds
~ Defaulted security.
FRF-- French Franc
TRL-- Turkish Lira
+ Affiliated institutional money market fund. The effective yield is 1.00%.
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.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE
OF NET
TOP TEN COUNTRIES ASSETS
- --------------------------------------------------------------------------------
Brazil 19.7%
Mexico 18.9%
Russia 15.4%
United States of America 8.0%
Turkey 6.4%
Argentina 3.6%
Philippines 3.6%
Venezuela 3.6%
Columbia 3.0%
Panama 2.6%
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Opportunistic Emerging Markets Debt Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to generate a high total return through a
combination of capital appreciation and income. The fund seeks to achieve
its objective by investing, under normal circumstances, at least 80% of net
assets in fixed income securities issued by governments, companies and
banks of emerging markets, as well as preferred stocks, warrants and
tax-exempt bonds.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
C. 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.
D. 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
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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.
E. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless the shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in distribution reclassifications, are primarily due to
differing treatments for losses deferred due to wash sales, foreign
currency gains and losses, post-October losses, amortization and/or
accretion of premiums and discounts on certain securities and the timing of
recognition of gains and losses on futures contracts.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
F. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
H. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment advisory
and administrative services, and general office facilities, is paid monthly
at the annual rate of 0.50% of the Fund's average daily net assets.
Standish Mellon voluntarily agreed to limit total Fund operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.30% of the Fund's average daily net assets for the period ended June 30,
2004. Pursuant to this agreement, for the period ended June 30, 2004,
Standish Mellon voluntarily did not impose $38,338 of its investment
advisory fee and reimbursed the Fund for $30,411 of its operating expenses.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time.
As of February 23, 2004, the The Fund compensates Dreyfus Transfer, Inc.,
a wholly owned subsidiary of Dreyfus, which is an affiliate of Standish
Mellon, 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 $2,301 during the period ended June 30,
2004 and $2,301 was owed at June 30, 2004.
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 $22,675 during the period ended June 30, 2004 and $7,131
was owed at June 30, 2004.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
----------- -----------
U.S. Government Securities $ 198,047 $ --
=========== ===========
Investments (non-U.S. Government Securities) $19,833,196 $18,858,530
=========== ===========
(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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- ------------------
Shares sold 158,814 548,758
Shares issued to shareholders in payment
of distributions declared 21,328 74,295
Shares redeemed (123,952) (238,253)
-------- --------
Net decrease 56,190 384,800
======== ========
At June 30, 2004, four shareholders of record held approximately 28%, 24%,
13% and 10% of the total outstanding shares of the Fund.
All of the Fund's shares are beneficially owned by fiduciary accounts over
which Standish Mellon and its affiliates have either sole or joint
investment discretion.
(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 all of its taxable income for its fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $16,518,801
===========
Unrealized appreciation $ 63,560
Unrealized depreciation (504,564)
-----------
Net unrealized appreciation/depreciation $ (441,004)
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
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 Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any
open purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
At June 30, 2004, the Fund held no written or purchased options.
During the period ended June 30, 2004 the Funds option transactions were as
follows:
NUMBER OF
WRITTEN PUT OPTIONS TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 1 4,688
Options written 1 4,219
Options expired (2) (8,906)
Options closed -- --
------ ------
Outstanding, end of period -- --
====== ======
NUMBER OF
WRITTEN CALL OPTIONS TRANSACTIONS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Outstanding, beginning of period 1 3,500
Options written 1 4,219
Options expired -- --
Options closed (2) (7,719)
------ ------
Outstanding, end of period -- --
====== ======
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At June 30, 2004, the Fund held the following forward foreign currency or
cross currency exchange contracts:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
LOCAL PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS
----------------------------------------------------------------------------------------------------------------------------
Euro 45,000 9/15/2004 54,763 54,394 $(369)
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The
change in value of futures contracts primarily corresponds with the value
of their underlying instruments or indices, which may not correlate with
changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At June 30, 2004, the Fund held no outstanding financial futures contracts
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
$2,687 of security lending income. At June 30, 2004, the Fund had $519,521
worth of securities on loan.
See the Statement of Investments for further detail on the security
positions on loan.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. This Fund segregates securities having a value
at least equal to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the forward
sale of other securities it owns. Income on the securities will not be
earned until settlement date. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Portfolio's other
assets. Unsettled TBA purchase commitments are valued at the current market
value of the underlying securities, according to the procedures described
under "Investment security valuations" above.
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
"marked-to-market" daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Portfolio
realizes a gain or loss. If the Portfolio delivers securities under the
commitment, the Portfolio realizes a gain or a loss from the sale of the
securities based upon the unit price established at the date the commitment
was entered into.
At June 30, 2004, the Fund held no delayed delivery transactions.
(9) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition,
a commitment fee, computed at an annual rate of .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 June 30, 2004, the expense related to the commitment
fee was $60 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
15
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
16
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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
17
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THIS PAGE INTENTIONALLY LEFT BLANK
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0947SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
OPPORTUNISTIC HIGH YIELD FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (including securities on loan, valued at $4,800,499) (Note 7)
Unaffiliated issuers, at value (Note 1A) (cost $31,941,993) $ 32,774,349
Affiliated issuers, at value (Note 1A) (cost $5,338,765) (Note 1G) 5,338,765
Cash 180,183
Foreign currency, at value (identified cost $126,089) 126,218
Receivable for investments sold 93,625
Interest and dividends receivable 648,459
Unrealized appreciation on forward currency exchange contracts (Note 6) 739
Prepaid expenses 9,502
-----------
Total assets 39,171,840
LIABILITIES
Liability for securities on loan (Note 7) $4,906,110
Payable for investments purchased 190,089
Unrealized depreciation on forward currency exchange contracts (Note 6) 11,688
Accrued accounting, custody and transfer agent fees (Note 2) 12,256
Accrued trustees' fees and expenses (Note 2) 1,893
Accrued expenses and other liabilities 20,244
----------
Total liabilities 5,142,280
-----------
NET ASSETS $ 34,029,560
============
NET ASSETS CONSIST OF:
Paid-in capital $ 50,470,033
Accumulated net realized loss (17,607,634)
Undistributed net investment income 214,015
Net unrealized appreciation 953,146
------------
TOTAL NET ASSETS $ 34,029,560
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,970,557
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 17.27
============
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $3,345 (Note 7)) $ 1,448,174
Dividend income 22,748
-----------
Total investment income 1,470,922
EXPENSES
Investment advisory fee (Note 2) $ 76,890
Accounting, custody, and transfer agent fees (Note 2) 31,704
Legal and audit services 21,600
Registration fees 3,319
Trustees' fees and expenses (Note 2) 3,267
Insurance expense 4,428
Miscellaneous 3,323
-----------
144,531
DEDUCT:
Waiver of investment advisory fee (Note 2) (76,890)
Reimbursement of Fund operating expenses (Note 2) (48,419)
-----------
Total expense deductions (125,309)
-----------
Net expenses 19,222
-----------
Net investment income 1,451,700
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 801,532
Foreign currency transactions and forward currency exchange contracts 145,348
Written options transactions (11,839)
-----------
Net realized gain 935,041
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments (1,788,498)
-----------
Change in net unrealized appreciation (depreciation) (1,788,498)
-----------
Net realized and unrealized gain on investments (853,457)
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 598,243
===========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 1,451,700 $ 2,973,253
Net realized gains 935,041 1,430,331
Change in net unrealized appreciation (depreciation) (1,788,498) 2,875,365
----------- -----------
Net increase in net assets from investment operations 598,243 7,278,949
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1D)
From net investment income (1,142,770) (3,206,052)
----------- -----------
Total distributions to shareholders (1,142,770) (3,206,052)
----------- -----------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 440,000 30,966,852
Value of shares issued to shareholders in payment of distributions declared 624,885 2,344,012
Cost of shares redeemed (8,334,156) (34,572,371)
----------- -----------
Net (decrease) in net assets from Fund share transactions (7,269,271) (1,261,507)
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (7,813,798) 2,811,390
NET ASSETS
At beginning of period 41,843,358 39,031,968
----------- -----------
At end of period (including undistributed net investment income of $214,015 and
distributions in excess of net investment income of $94,915) $34,029,560 $ 41,843,358
=========== ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD YEAR ENDED FOR THE PERIOD
ENDED DECEMBER 31, APRIL 2, 2001
JUNE 30, 2004 ---------------------- (COMMENCEMENT OF OPERATIONS)
(UNAUDITED) 2003 2002 TO DECEMBER 31, 2001
------------ --------- ---------- ----------------------------
NET ASSET VALUE, BEGINNING OF YEAR $ 17.64 $ 15.72 $ 16.36 $ 20.00
------- ------- ------- -------
FROM INVESTMENT OPERATIONS:
Net investment income (1)* 0.68 1.36 1.41 1.34
Net realized and unrealized gain (loss) on investments (0.50) 1.97 (0.46) (1.93)
------- ------- ------- -------
Total from investment operations 0.18 3.33 0.95 (0.59)
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.55) (1.41) (1.58) (2.98)
From tax return of capital -- -- (0.01) (0.07)
------- ------- ------- -------
Total distributions to shareholders (0.55) (1.41) (1.59) (3.05)
------- ------- ------- -------
NET ASSET VALUE, END OF YEAR $ 17.27 $ 17.64 $ 15.72 $ 16.36
======= ======= ======= =======
TOTAL RETURN+++ 1.01%++ 21.77% 6.07% (2.91)%++
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.10%(2) 0.10% 0.10% 0.10%+
Net Investment Income (to average daily net assets)* 7.58%(2) 8.00% 8.78% 9.46%+
Portfolio Turnover 17%++ 133% 121% 191%++
Net Assets, End of Year (000's omitted) $34,030 $41,843 $39,032 $46,193
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share(1) $ 0.62 $ 1.22 $ 1.31 $ 1.28
Ratios (to average daily net assets):
Expenses 0.75%(2) 0.91% 0.73% 0.54%+
Net investment income 6.93%(2) 7.19% 8.15% 9.02%+
(1) Calculated based on average shares outstanding.
+ Computed on an annualized basis.
++ Not annualized.
+++ Total return would have been lower in the absence of fee waivers and expense
limitations.
(2) Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES -- 93.1%
CONVERTIBLE CORPORATE BONDS -- 0.8%
Centerpoint Energy, Inc. 144A 2.875% 1/15/2024 USD 55,000 $ 58,163
Royal Caribbean Cruises--Step Up Notes CVT (a) 0.000 5/18/2021 225,000 157,500
Xcel Energy, Inc. 144A CVT 7.500 11/21/2007 40,000 59,646
-----------
Total Convertible Corporate Bonds (Cost $275,871) 275,309
-----------
CORPORATE -- 80.4%
BASIC MATERIALS -- 7.3%
Airgas, Inc. 144A 6.250 7/15/2014 25,000 23,938
Boise Cascade Corp. 6.500 11/1/2010 90,000 91,575
Earle M Jorgenson Co. 9.750 6/1/2012 100,000 109,500
Equistar Chemicals LP/ Equistar Funding Corp. 10.125 9/1/2008 190,000 208,050
Equistar Chemicals LP/ Equistar Funding Corp.* 10.625 5/1/2011 15,000 16,650
Freeport-McMoRan Copper & Gold, Inc. * 10.125 2/1/2010 75,000 82,875
Freeport-McMoRan Copper & Gold, Inc. 6.875 2/1/2014 145,000 132,675
Georgia Pacific Corp. 144A 8.000 1/15/2024 300,000 300,000
Georgia-Pacific Corp. 7.375 7/15/2008 220,000 234,300
Georgia-Pacific Corp. 8.875 2/1/2010 125,000 141,563
International Steel Group, Inc. 144A 6.500 4/15/2014 160,000 150,000
Kansas City Southern 7.500 6/15/2009 100,000 100,000
Lyondell Chemical Co.* 9.625 5/1/2007 225,000 235,125
Nalco Co. 144A 7.750 11/15/2011 175,000 183,313
Steel Dynamics, Inc.* 9.500 3/15/2009 200,000 221,000
United States Steel Corp.* 9.750 5/15/2010 97,000 107,428
Westlake Chemical Corp. 8.750 7/15/2011 160,000 173,599
-----------
2,511,591
-----------
COMMUNICATIONS -- 11.1%
ACC Escrow Corp. 10.000 8/1/2011 50,000 43,125
American Media Operation, Inc. 10.250 5/1/2009 95,000 98,563
Block Communications, Inc. 9.250 4/15/2009 400,000 420,000
Cablevision Systems Corp. 144A 15.670 4/1/2009 200,000 205,000
CBD Media, Inc. 8.625 6/1/2011 230,000 242,075
CSC Holdings, Inc. 8.125 7/15/2009 100,000 104,000
CSC Holdings, Inc. 7.875 12/15/2007 100,000 104,000
Dex Media West LLC/Dex Media Finance Co.* 8.500 8/15/2010 85,000 92,650
Dex Media West LLC/Dex Media Finance Co. 9.875 8/15/2013 85,000 93,288
DirecTV Holdings LLC 8.375 3/15/2013 186,000 205,763
Echostar DBS Corp. 9.125 1/15/2009 131,000 143,609
Echostar DBS Corp. 5.750 10/1/2008 395,000 389,569
Entercom Radio LLC/Entercom Capital, Inc. 7.625 3/1/2014 50,000 51,688
Entravision Communications Corp. 8.125 3/15/2009 250,000 257,813
Lamar Media Corp. 7.250 1/1/2013 20,000 20,350
Nextel Communications, Inc.* 6.875 10/31/2013 245,000 242,856
Qwest Corp. 6.875 9/15/2033 115,000 95,738
Radio One, Inc. 8.875 7/1/2011 75,000 81,844
RH Donnelley Finance Corp. I 144A 8.875 12/15/2010 140,000 153,650
RH Donnelley Finance Corp. I 144A 10.875 12/15/2012 135,000 156,600
Rural Cellular Corp. 144A 8.250 3/15/2012 50,000 51,125
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS (CONTINUED)
Salem Communications Corp. 7.750% 12/15/2010 USD 280,000 $285,950
Sinclair Broadcast Group, Inc. 4.875 7/15/2018 60,000 55,350
Spanish Broadcasting System 9.625 11/1/2009 175,000 184,624
----------
3,779,230
----------
CONSUMER CYCLICAL -- 19.5%
Advanced Accessory Systems LLC 10.750 6/15/2011 185,000 179,450
American Casino & Entertainment Properties LLC 144A 7.850 2/1/2012 55,000 55,825
Amerigas Partners LP/Amerigas Eagle Finance Corp. 8.875 5/20/2011 200,000 213,000
Ameristar Casinos, Inc. 10.750 2/15/2009 290,000 330,600
Argosy Gaming Co. 144A 7.000 1/15/2014 440,000 429,000
Chumash Casino & Resort Enterprise 144A 9.000 7/15/2010 280,000 303,800
Cinemark USA, Inc. 9.000 2/1/2013 75,000 81,844
Coast Hotels & Casinos, Inc. 9.500 4/1/2009 465,000 488,250
Domino's, Inc. 8.250 7/1/2011 105,000 111,300
Friendly Ice Cream Corp. 144A 8.375 6/15/2012 25,000 24,250
INVISTA 144A 9.250 5/1/2012 100,000 100,500
Isle of Capri Casinos, Inc. 144A 7.000 3/1/2014 400,000 371,000
John Q Hammons Hotels Finance Corp. III 8.875 5/15/2012 235,000 254,975
Keystone Automotive Operations, Inc. 144A 9.750 11/1/2013 80,000 85,600
Mohegan Tribal Gaming Authority 8.125 1/1/2006 164,000 173,020
Mohegan Tribal Gaming Authority 8.375 7/1/2011 580,000 626,400
Mohegan Tribal Gaming Authority 8.000 4/1/2012 25,000 26,625
National Waterworks, Inc. 10.500 12/1/2012 55,000 61,050
Norcraft Co LP/Norcraft Finance Corp. 144A 9.000 11/1/2011 40,000 42,200
Rite Aid Corp.* 12.500 9/15/2006 215,000 243,488
Rite Aid Corp. 2/15/2011 75,000 82,688
Rite Aid Corp. 8.125 5/1/2010 190,000 199,975
Royal Caribbean Cruises Ltd. 7.000 10/15/2007 100,000 105,250
Royal Caribbean Cruises Ltd. 7.500 10/15/2027 255,000 238,425
Royal Caribbean Cruises Ltd.* 8.750 2/2/2011 495,000 548,213
Russell Corp. 9.250 5/1/2010 125,000 132,813
Six Flags, Inc.* 9.500 2/1/2009 185,000 190,088
Speedway Motorsports, Inc. 6.750 6/1/2013 250,000 252,500
Station Casinos, Inc. 6.500 2/1/2014 250,000 240,625
True Temper Sports, Inc. 8.375 9/15/2011 65,000 65,000
TRW Automotive, Inc. 9.375 2/15/2013 152,000 171,380
Turning Stone Casino Resort Enterprise 144A 9.125 12/15/2010 195,000 203,775
----------
6,632,909
----------
CONSUMER NONCYCLICAL -- 7.8%
Altria Group, Inc. 7.000 11/4/2013 100,000 101,832
Chattem, Inc.(b) 4.310 3/1/2010 50,000 51,250
Chattem, Inc. 7.000 3/1/2014 160,000 153,600
Constellation Brands, Inc. 8.000 2/15/2008 95,000 102,125
Corn Products International, Inc. 8.250 7/15/2007 75,000 81,656
Corrections Corp Of America 7.500 5/1/2011 30,000 30,300
Del Monte Corp. 8.625 12/15/2012 280,000 301,700
Elizabeth Arden, Inc. 144A* 7.750 1/15/2014 40,000 40,700
Great Lakes Dredge and Dock Corp. 7.750 12/15/2013 115,000 97,175
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
CONSUMER NONCYCLICAL (CONTINUED)
HCA, Inc. 8.360% 4/15/2024 USD 175,000 $ 185,31
Ingles Markets, Inc. 8.875 12/1/2011 125,000 128,438
Kinetic Concepts, Inc. 7.375 5/15/2013 91,000 95,095
Medex, Inc. 8.875 5/15/2013 20,000 21,100
NeighborCare, Inc. 144A 6.875 11/15/2013 30,000 31,800
Pathmark Stores, Inc.* 8.750 2/1/2012 195,000 195,000
Pinnacle Foods Holding Corp. 144A 8.250 12/1/2013 235,000 226,775
RJ Reynolds Tobacco Holdings, Inc.* 7.750 5/15/2006 130,000 135,200
Scotts Co. 6.625 11/15/2013 65,000 65,000
Smithfield Foods, Inc. 7.750 5/15/2013 70,000 73,500
Standard Commercial Corp. 144A 8.000 4/15/2012 50,000 49,000
Stater Brothers Holdings 144A 5.060 6/15/2010 125,000 127,031
Stater Brothers Holdings 144A 8.125 6/15/2012 350,000 351,313
----------
2,644,901
----------
ENERGY -- 10.8%
ANR Pipeline Co. 7.000 6/1/2025 25,000 25,375
ANR Pipeline Co.* 7.375 2/15/2024 310,000 288,300
Chesapeake Energy Corp. 8.125 4/1/2011 30,000 32,400
Chesapeake Energy Corp. 8.375 11/1/2008 150,000 162,000
Citgo Petroleum Corp. 11.375 2/1/2011 170,000 197,200
Dynegy Holdings, Inc. 144A 9.875 7/15/2010 385,000 413,875
El Paso Natural Gas Co. 8.625 1/15/2022 225,000 219,375
El Paso Natural Gas Co. 8.375 6/15/2032 230,000 219,650
El Paso Production Holding Co. 7.750 6/1/2013 95,000 87,163
Houston Exploration Co. 7.000 6/15/2013 100,000 100,500
Newfield Exploration Co. 8.375 8/15/2012 100,000 108,500
Northwest Pipeline Corp. 6.625 12/1/2007 325,000 334,750
Peabody Energy Corp.* 6.875 3/15/2013 80,000 81,000
Pogo Producing Co. 8.250 4/15/2011 75,000 82,125
Premcor Refining Group, Inc. 9.500 2/1/2013 190,000 218,975
Southern Natural Gas Co.* 8.875 3/15/2010 25,000 27,313
Tennessee Gas Pipeline Co. 8.375 6/15/2032 100,000 97,500
Tesoro Petroleum Corp.* 8.000 4/15/2008 35,000 37,450
Transcontinental Gas Pipe Line Corp. 6.125 1/15/2005 175,000 177,625
Transcontinental Gas Pipe Line Corp. 8.875 7/15/2012 200,000 226,000
Williams Cos, Inc. 7.750 6/15/2031 100,000 91,500
Williams Cos, Inc. 7.875 9/1/2021 375,000 360,938
Williams Cos, Inc. 8.625 6/1/2010 70,000 77,000
----------
3,666,514
----------
FINANCIAL -- 6.6%
Arch Western Finance LLC 144A 6.750 7/1/2013 55,000 55,000
BF Saul REIT 7.500 3/1/2014 225,000 222,750
Chevy Chase Bank FSB 6.875 12/1/2013 575,000 575,000
Consolidated Communications Illinois 144A 9.750 4/1/2012 165,000 167,475
Couche-Tard 7.500 12/15/2013 75,000 75,000
Felcor Lodging LP* 10.000 9/15/2008 46,000 48,530
Felcor Lodging LP 144A(b) 5.840 6/1/2011 105,000 105,525
Host Marriott Corp. 7.875 8/1/2008 85,000 87,125
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
Host Marriott LP 144A 3.250% 4/15/2024 USD 80,000 $ 75,600
KRATON Polymers LLC/Capital Corp. 144A 8.125 1/15/2014 15,000 15,150
Leucadia National Corp. 144A 3.750 4/15/2014 80,000 79,200
Leucadia National Corp. 7.000 8/15/2013 250,000 247,234
Meristar Hospitality Operating Partnership LP* 10.500 6/15/2009 280,000 298,200
PX Escrow Corp. 9.625 2/1/2006 330,000 204,600
----------
2,256,389
----------
INDUSTRIAL -- 8.8%
Alliant Techsystems, Inc. 8.500 5/15/2011 100,000 108,000
Alliant Techsystems, Inc. 144A 2.750 2/15/2024 35,000 36,925
Allied Waste North America 8.875 4/1/2008 250,000 273,750
Allied Waste North America 8.500 12/1/2008 70,000 76,563
Ball Corp. 6.875 12/15/2012 200,000 203,000
Berry Plastic Corp. 10.750 7/15/2012 55,000 61,050
Browning-Ferris Industries 9.250 5/1/2021 200,000 216,000
Communications & Power Industries, Inc. 8.000 2/1/2012 25,000 25,000
Crown Cork & Seal Co, Inc. 8.000 4/15/2023 250,000 217,500
Crown Cork & Seal Co, Inc. 7.375 12/15/2026 225,000 186,750
Esterline Technologies Corp. 7.750 6/15/2013 70,000 72,100
Jefferson Smurfit Corp. 8.250 10/1/2012 85,000 88,400
K&F Industries, Inc. 9.625 12/15/2010 65,000 71,256
L-3 Communications Corp. 7.625 6/15/2012 160,000 168,800
Owens-Brockway* 7.750 5/15/2011 55,000 57,200
Owens-Illinois, Inc.* 7.500 5/15/2010 210,000 205,800
Sylvan Holdings, Inc. 6.750 11/15/2013 85,000 82,450
Solo Cup Co. 144A* 8.500 2/15/2014 50,000 46,500
SPX Corp.* 7.500 1/1/2013 90,000 92,250
SPX Corp. 6.250 6/15/2011 55,000 53,488
Stone Container Corp. 8.375 7/1/2012 145,000 151,525
Texas Industries, Inc. 10.250 6/15/2011 210,000 234,150
Trinity Industries, Inc. 144A 6.500 3/15/2014 285,000 260,775
----------
2,989,232
----------
UTILITIES -- 8.5%
AES Corp.* 8.875 2/15/2011 123,000 127,613
AES Corp. 144A 10.000 7/15/2005 94,703 96,834
AES Corp. 144A* 8.750 5/15/2013 610,000 653,463
CMS Energy Corp. 8.900 7/15/2008 500,000 523,750
CMS Energy Corp. 144A 7.750 8/1/2010 50,000 49,750
DPL, Inc.* 6.875 9/1/2011 175,000 176,313
First Energy Corp. 6.450 11/15/2011 155,000 160,698
FPL Energy Wind Funding LLC 144A 6.876 6/27/2017 94,600 92,708
Ipalo Enterprises, Inc. 8.375 11/14/2008 155,000 168,175
Monongahela Power Co. 144A 6.700 6/15/2014 65,000 65,620
MSW Energy Holdings II LLC 144A 7.375 9/1/2010 240,000 238,800
Nevada Power Co. 144A 6.500 4/15/2012 90,000 85,500
NRG Energy, Inc. 144A 8.000 12/15/2013 95,000 95,950
Reliant Energy, Inc. 9.250 7/15/2010 55,000 58,713
The accompanying notes are an integral part of the financial statements.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
UTILITIES (CONTINUED)
TECO Energy, Inc. 7.500% 6/15/2010 USD 50,000 $ 50,500
TXU Gas Capital (b) 2.950 7/1/2028 250,000 232,772
-----------
2,877,159
-----------
Total Corporate (Cost $26,423,640) 27,357,925
-----------
MUNICIPAL OBLIGATIONS--0.1%
South Carolina Tobacco Settlement Authority 6.000 5/15/2022 50,000 44,693
-----------
Total Municipal Obligations (Cost $44,531)
YANKEE BONDS--4.9%
BCP Caylux Holdings Luxembourg SCA 144A* 9.625 6/15/2014 150,000 155,438
Crown European Holdings SA 9.500 3/1/2011 275,000 299,750
Donohue Forest Products 7.625 5/15/2007 215,000 221,620
Eircom Funding* 8.250 8/15/2013 50,000 52,000
GT Group Telecom, Inc. Senior Notes Step Up Notes~(a) 0.000 2/1/2010 900,000 90
JSG Funding PLC 9.625 10/1/2012 100,000 109,500
Norampac, Inc.* 6.750 6/1/2013 45,000 44,100
Nova Chemicals Corp.* 6.500 1/15/2012 55,000 54,175
Quebecor Media, Inc. 11.125 7/15/2011 95,000 108,419
Rogers Wireless Communications, Inc. 144A 6.375 3/1/2014 100,000 92,000
Russel Metals, Inc. 6.375 3/1/2014 50,000 46,875
Stena AB 144A 7.500 11/1/2013 70,000 69,213
Tyco International Group SA 6.750 2/15/2011 35,000 38,030
Tyco International Group SA 6.375 10/15/2011 200,000 212,756
Vivendi Universal SA 9.250 4/15/2010 150,000 177,283
-----------
Total Yankee Bonds (Cost $2,002,358) 1,681,249
-----------
NON-AGENCY -- 1.5%
PASS THRU SECURITIES--1.5%
Continental Airlines, Inc. 1999-1 B 6.795 8/2/2018 75,729 59,218
Continental Airlines, Inc. 1999-2 7.566 3/15/2020 58,357 45,716
Continental Airlines, Inc. 2000-2 8.307 4/2/2018 319,295 262,495
Northwest Airlines, Inc. 1999-2 C 8.304 9/1/2010 178,893 140,569
-----------
Total Non-Agency (Cost $477,200) 507,998
-----------
FOREIGN DENOMINATED -- 5.4%
EURO -- 5.4%
Eircom Funding 6.750 8/15/2013 EUR 170,000 218,538
Nalco Co. 144A 7.750 11/15/2011 100,000 125,506
NTL Cable PLC 144A 8.750 4/15/2014 235,000 289,211
Remy Cointreau 144A 6.500 7/1/2010 40,000 49,227
Teksid Aluminum SpA 11.375 7/15/2011 95,000 99,077
Telenet Communications NV 144A Senior Notes 9.000 12/15/2013 270,000 327,350
Tyco International Group SA 5.500 11/19/2008 280,000 358,665
Valentia Telecommunications Ltd 7.250 8/15/2013 285,000 359,427
-----------
Total Foreign Denominated (Cost $1,645,842) 1,827,001
-----------
TOTAL BONDS AND NOTES (Cost $30,869,442) 31,694,175
-----------
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY DESCRIPTION RATE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS -- 3.2%
CONVERTIBLE PREFERRED STOCKS--3.2% SHARES
----------
Ford Motor Co. Capital Trust II 6.50% CVT Pfd 2,250 $ 123,210
General Motors Corp. Series C 6.25% CVT Pfd 2,750 79,860
Kansas City Southern Railway 4.25% 144A CVT Pfd 160 96,780
Omnicare, Inc. 4.00% CVT Pfd 700 42,875
Sovereign Capital Trust II 4.375% CVT Pfd 12,000 567,000
Tyco International Group SA 3.125% 144A CVT Pfd 105,000 169,969
-----------
TOTAL PREFERRED STOCKS (Cost $984,689) 1,079,694
-----------
WARRANTS -- 0.0%
COMMUNICATIONS -- 0.0%
GT Group Telecom, Inc., 02/01/10** 1,900 19
McLeodUSA, Inc., 04/16/2007** 3,291 461
-----------
TOTAL WARRANTS (Cost $87,862) 480
-----------
SHORT-TERM INVESTMENTS--1.3% PAR
INVESTMENT COMPANIES--1.3% VALUE
----------
Dreyfus Institutional Preferred Plus+ 1.000% USD 432,655 432,655
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $432,655)
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED -- 14.4%
INVESTMENT COMPANIES -- 14.4%
Dreyfus Cash Management Plus Fund+ (cost $4,906,110) 1.000% 4,906,110 4,906,110
-----------
TOTAL INVESTMENTS -- 112.0% (COST $37,280,758) 38,113,114
LIABILITIES IN EXCESS OF OTHERS ASSETS -- (12.0%) (4,083,554)
-----------
NET ASSETS -- 100.0% $34,029,560
===========
NOTES TO SCHEDULE OF INVESTMENTS:
144A -- Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration to qualified buyers.
Step Up Notes -- Coupon rate increases in increments to maturity. Rate disclosed
is as of June 30, 2004. Maturity date disclosed is the ultimate maturity.
CVT--Convertible
(a) Debt obligation initially issued in zero coupon form which converts to
coupon form at a specific rate and date. The rate shown is the rate at
period end. The maturity date shown is the ultimate maturity.
* Security, or a portion of thereof, was on loan at June 30, 2004.
REIT--Real Estate Investment Trust
(b) Variable Rate Security; rate indicated is as if 6/30/2004.
** Non-income producing security.
+ Affiliated institutional money market fund. The effective yield is 1.00% A
complete listing of the fund's holdings as of its most recent fiscal year
end is available.
USD--United States Dollar
EUR--Euro
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Opportunistic High Yield Fund (the "Fund") is a separate
non-diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal, primarily through the generation of current income
and, to a lesser extent, capital appreciation by investing, under normal
circumstances, at least 80% of net assets in below investment grade fixed
income securities.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size tr
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent amounts usually received or paid.
C. 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.
12
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
D. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income will be declared and distributed
quarterly. The Fund's dividends from short-term and long-term capital
gains, if any, after reduction of capital losses will be declared and
distributed at least annually. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless the shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences, which may result in distribution
reclassifications, are primarily due to differing treatments for losses
deferred due to wash sales, capital loss carryforwards, foreign currency,
and amortization and/or accretion of premiums and discounts on certain
securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
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.
G. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment advisory
and administrative services, and general office facilities, is paid monthly
at the annual rate of 0.40% of the Fund's average daily net assets.
Standish Mellon voluntarily agreed to limit total Fund operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.10% of the Fund's average daily net assets for the period ended June 30,
2004. Pursuant to this agreement, for the period ended June 30, 2004,
Standish Mellon voluntarily did not impose $76,890 of its investment
advisory fee and reimbursed the Fund for $48,419 of its operating expenses.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time.
As of February 23, 2004, the Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus, Which is an affiliate of Standish
Mellon, 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 $2,361 during the period ended June 30,
2004 and $2,361 was owed at June 30, 2004.
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 $28,458 during the period ended June 30, 2004 and $9,745
was owed at June 30, 2004.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
13
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
investments, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
---------- -----------
U.S. Government Securities $ -- $ --
========== ===========
Investments (non-U.S. Government Securities) $6,322,289 $13,238,954
========== ===========
(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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
-------------- ------------------
Shares sold 24,910 1,812,094
Shares issued to shareholders in payment
of distributions declared 35,693 137,526
Shares redeemed (461,845) (2,061,476)
-------- ----------
Net decrease (401,242) (111,856)
======== ==========
At June 30, 2004, three shareholders of record held approximately 28%, 24%
and 12% of the total outstanding shares of the Fund. All of the Fund's
shares are beneficially owned by fiduciary accounts over which Standish
Mellon and its affiliates have either sole or joint investment discretion.
Investment activity of these shareholders could have a material impact on
the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $32,374,648
===========
Unrealized appreciation $ 1,713,464
Unrealized depreciation (881,108)
-----------
Net unrealized appreciation/depreciation $ 832,356
===========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
14
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
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 Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any
open purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Fund entered into no such transactions during the period ended June 30,
2004.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by
the Fund primarily to protect the value of the Fund's foreign securities
from adverse currency movements. Unrealized appreciation and depreciation
of forward currency exchange contracts is included in the Statement of
Assets and Liabilities.
At June 30, 2004, the Fund held the following forward foreign currency
exchange contracts:
LOCAL
PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO DELIVER AMOUNT VALUE DATE VALUE FACE AMOUNT LOSS
- ------------------------------------------------------------------------------------------------------------------------------------
EURO 1,431,000 9/15/2004 $1,741,460 $1,729,772 $(11,688)
LOCAL
PRINCIPAL CONTRACT AGGREGATE UNREALIZED
CONTRACTS TO RECEIVE AMOUNT VALUE DATE VALUE FACE AMOUNT GAIN
- ------------------------------------------------------------------------------------------------------------------------------------
EURO 75,000 9/15/2004 $91,272 $90,533 $739
SWAP AGREEMENTS
The Fund may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
15
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a
particular corporate or sovereign issuer's default. In connection with
these agreements, cash or securities may be set aside as collateral in
accordance with the terms of the swap agreement. The Fund earns interest on
cash set aside as collateral. Swaps are marked to market daily based upon
quotations from market makers and change in value, if any, is recorded as
unrealized gain or loss in the Statement of Operations. These financial
instruments are not actively traded on financial markets. The values
assigned to these instruments are based upon the best available information
and because of the uncertainty of the valuation, these values may differ
significantly from the values that would have been realized had a ready
market for these instruments existed, and differences could be material.
Payments received or made from credit default swaps at the end of the
measurement period are recorded as realized gain or loss in the Statement
of Operations. Net payments of interest on interest rate swap agreements
are included as part of interest income. Entering into these agreements, if
any, involves, to varying degrees, elements of credit, market, and
documentation risk in excess of the amounts recognized on the Statement of
Assets and Liabilities. Such risks involve the possibility that there will
be no liquid market for these agreements, that the counterparty to the
agreements may default on its obligation to perform or disagree as to the
meaning of contractual terms in the agreements, and that there may be
unfavorable changes in interest rates.
At June 30, 2004, the Fund held no credit default swap contracts.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The
change in value of futures contracts primarily corresponds with the value
of their underlying instruments or indices, which may not correlate with
changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
The Fund entered into no such transactions during the period ended June 30,
2004.
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
in $3,345 of security lending income. At June 30, 2004 the Fund had
$4,800,499 worth of securities on loan.
See the Statement of Investments for further detail on the security
positions on loan.
16
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON OPPORTUNISTIC HIGH YIELD FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. This Fund segregates securities having a value
at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or the
Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
The Fund entered into no such transactions during the period ended June 30,
2004.
(9) CONCENTRATION OF RISK:
The Fund invests in low rated (non-investment grade) and comparable quality
unrated high yield securities. Investments in high yield securities are
accompanied by a greater degree of credit risk and the value of high yield
securities tends to be more sensitive to economic conditions than higher
rated securities. The risk of loss due to default of an issuer may be
significantly greater for holders of high yield securities, because such
securities are generally unsecured and are often subordinated to other
creditors of the issuer.
(10) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition,
a commitment fee, computed at an annual rate of .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 June 30, 2004, the expense related to the commitment
fee was $150 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
17
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
18
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
19
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0949SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
SHORT-TERM ASSET RESERVE FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET
RESERVE FUND
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investment in Standish Mellon Short-Term Asset Reserve Portfolio ("Portfolio"), at value (Note 1A) $69,076,188
Receivable for Fund shares sold 158,378
Prepaid expenses 31,602
-----------
Total assets 69,266,168
LIABILITIES
Payable for Fund shares redeemed $1,071,195
Distributions payable 86,711
Accrued transfer agent fees (Note 2) 2,701
Accrued expenses and other liabilities 10,556
---------
Total liabilities 1,171,163
-----------
NET ASSETS $68,095,005
===========
NET ASSETS CONSIST OF:
Paid-in capital $70,869,254
Accumulated net realized loss (2,443,525)
Undistributed net investment loss (164,746)
Net unrealized depreciation (165,978)
-----------
TOTAL NET ASSETS $68,095,005
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,517,110
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 19.36
===========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income allocated from Portfolio $ 984,798
Expenses allocated from Portfolio (231,447)
---------
Net investment income allocated from Portfolio 753,351
EXPENSES
Transfer agent fees (Note 2) $ 3,719
Registration fees 11,204
Legal and audit fees 13,395
Trustees' fees and expenses (Note 2) 994
Insurance expense 674
Miscellaneous 9,483
-------
Total expenses 39,469
---------
Net investment income 713,882
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) allocated from Portfolio on:
Investment transactions 5,774
Change in unrealized appreciation (depreciation)
on investments allocated from Portfolio (404,184)
---------
Net realized and unrealized loss on investments (398,410)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 315,472
=========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
STATEMENTS OF CHANGES IN NETS ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS: FROM INVESTMENT OPERATIONS
Net investment income $ 713,882 $ 2,842,200
Net realized gains 5,774 509,269
Change in net unrealized appreciation (404,184) (754,524)
------------- -------------
Net increase in net assets from investment operations 315,472 2,596,945
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (845,561) (3,213,940)
------------- -------------
Total distributions to shareholders (845,561) (3,213,940)
------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 52,269,225 153,359,955
Value of shares issued to shareholders in payment of distributions declared 677,645 2,836,562
Cost of shares redeemed (126,158,370) (160,362,595)
------------- -------------
Net decrease in net assets from Fund share transactions (73,211,500) (4,166,078)
------------- -------------
TOTAL DECREASE IN NET ASSETS (73,741,589) (4,783,073)
NET ASSETS
At beginning of period 141,836,594 146,619,667
------------- -------------
At end of period (inscluding distributions in excess
of net investment income of $164,746 and $33,067) $ 68,095,005 $ 141,836,594
============= =============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST STANDISH MELLON SHORT-TERM ASSET
RESERVE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
---------- -------- -------- -------- -------- --------
Net Asset Value, Beginning of the period $ 19.48 $ 19.55 $ 19.55 $ 19.36 $ 19.23 $ 19.44
------- -------- -------- -------- -------- --------
From Investment Operations:
Net investment income* (1) 0.12 0.31 0.58 0.95 1.15 1.08
Net realized and unrealized gain (loss)
on investments (0.10) (0.04) 0.03 0.21 0.13 (0.21)
------- -------- -------- -------- -------- --------
Total from investment operations 0.02 0.27 0.61 1.16 1.28 0.87
------- -------- -------- -------- -------- --------
Less Distributions to Shareholders:
From net investment income (0.14) (0.34) (0.61) (0.97) (1.15) (1.08)
------- -------- -------- -------- -------- --------
Total distributions to shareholders (0.14) (0.34) (0.61) (0.97) (1.15) (1.08)
------- -------- -------- -------- -------- --------
Net Asset Value, End of Year $ 19.36 $ 19.48 $ 19.55 $ 19.55 $ 19.36 $ 19.23
======= ======== ======== ======== ======== ========
Total Return+ 0.09%(2) 1.48% 3.14% 6.14% 6.94% 4.61%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.44%++ 0.36% 0.36% 0.36% 0.36% 0.35%
Net Investment Income (to average daily net assets)* 1.17%++ 1.60% 2.99% 4.89% 6.07% 5.60%
Net Assets, End of Year (000's omitted) $68,095 $141,837 $146,620 $133,939 $183,858 $301,965
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share(1) N/A $0.30 $0.56 $0.94 $1.15 N/A
Ratios (to average daily net assets):
Expenses N/A 0.43% 0.46% 0.41% 0.38% N/A
Net investment income N/A 1.53% 2.89% 4.84% 6.05% N/A
(a) Through its investment in the Portfolio, the Fund has adopted the
provisions of the revised AICPA Audit and Accounting Guide for Investment
Companies effective January 1, 2001 and began amortizing premium and
discount on all debt securities on an effective yield basis. The effect of
this change for the year ended December 31, 2001 was to increase net
investment income per share by $0.001, decrease net realized and unrealized
gains and losses per share by $0.001 and increase the ratio of net
investment income to average net assets by less than 0.01%. Per share data
and ratios/supplemental data for the periods prior to January 1, 2001 have
not been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding,
(2) Not annualized.
+ Total return would have been lower in the absence of expense waivers.
++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Short-Term Asset Reserve Fund (the "Fund") is a separate
diversified investment series of the Trust.
The objective of the Fund is to achieve a high level of current income
consistent with preserving principal and liquidity. The Fund seeks to
achieve its objective by investing all of its investable assets in an
interest of the Standish Mellon Short-Term Asset Reserve Portfolio (the
"Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio
(the "Portfolio Trust"), which is organized as a New York trust and which
has the same investment objective as the Fund. The Portfolio seeks to
achieve its objective by investing, under normal circumstances, at least
80% of net assets in dollar-denominated money market instruments,
short-term fixed income securities and asset-backed securities of U.S. and
foreign governments, banks and companies. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio (approximately 100% at June 30, 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 the ex-dividend date.
Dividends from net investment income will be declared daily and distributed
monthly. The Fund's dividends from short-term and long-term capital gains,
if any, after reduction of capital losses will be declared and distributed
at least annually. In determining the amounts of its dividends, the Fund
will take into account its share of the income, gains or losses, expenses,
and any other tax items of the Portfolio. Dividends from net investment
income and distributions from capital gains, if any, are reinvested in
additional shares of the Fund unless a shareholder elects to receive them
in cash. Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences,
which may result in distribution reclassifications, are primarily due to
differing treatments for capital loss carryforwards and amortization and/or
accretion of premiums and discounts on certain securities.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications to undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments and foreign currency transactions may include
temporary book and tax basis differences which will reverse in a subsequent
period. Any taxable income or gain remaining at fiscal year end is
distributed in the following year.
D. EXPENSES
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the
nature and type of expense and the relative size of the funds.
E. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM ASSET RESERVE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(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
Standish Mellon Asset Management Company LLC ("Standish Mellon"), a
wholly-owned subsidiary of Mellon Financial Corporation, for such services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Standish Mellon voluntarily agreed to
limit the total operating expenses of the Fund and its pro rata share of
the Portfolio expenses (excluding brokerage commissions, taxes and
extraordinary expenses) to 0.45% of the Fund's average daily net assets for
the period ended June 30, 2004. This agreement is voluntary and temporary
and may be discontinued or revised by Standish Mellon at any time.
On February 23, 2004, the Fund entered into an agreement with Dreyfus
Transfer, Inc., a wholly owned subsidiary of Dreyfus, which is an affiliate
of Standish Mellon, to provide transfer agent services to the Fund.
Pursuant to this agreement the Fund was charged $2,701 during the period
ended June 30, 2004 and $2,701 was owed at June 30, 2004.
The Portfolio compensates Mellon Bank, N.A. under a administration and
accounting services agreement for providing fund administration and fund
accounting services for the Portfolio.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) INVESTMENT TRANSACTIONS:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended June 30, 2004, aggregated $52,946,871 and $126,082,112,
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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
Shares sold 2,682,037 7,856,671
Shares issued to shareholders in payment
of distributions declared 34,848 145,331
Shares redeemed (6,480,625) (8,221,254)
---------- ----------
Net decrease (3,763,740) (219,252)
========== ==========
At June 30, 2004, one shareholder of record held approximately 14% and of
the total outstanding shares of the Fund. Investment activity of these
shareholders could have a material impact on the Fund.
(5) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
7
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
EXPECTED PAR VALUE
SECURITY RATE MATURITY MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--94.8%
ASSET BACKED--33.1%
American Express Master Trust 2001-1 A(a) 1.190% 10/15/04 9/15/05 680,000 $ 680,129
American Express Master Trust 2002-1 A(a) 1.170 1/14/05 12/15/05 2,735,000 2,736,561
BMW Vehicle Owner Trust 2002-A A3 3.800 11/25/04 5/25/06 955,339 959,622
Capital Auto Receivables Asset Trust 2002-2 A3 3.820 11/15/04 7/15/05 1,138,968 1,143,089
Chase Funding Mortgage Loan Asset Backed 2003-3 2A2(a) 1.370 7/30/06 4/25/33 1,900,000 1,909,810
Chase Manhattan Auto Owner Trust 2002-A A3 3.490 10/15/04 3/15/06 148,051 148,414
Chase Manhattan Auto Owner Trust 2002-B A3 3.580 1/15/05 5/15/06 593,258 595,972
Citibank Credit Card Issuance Trust 2004-A1 A1 2.550 1/20/07 1/20/09 1,250,000 1,224,287
Discover Card Master Trust I 2000-5 A(a) 1.280 5/18/05 11/15/07 725,000 726,060
Fleet Credit Card Master Trust II 2001-C A 3.860 9/15/04 3/15/07 2,725,000 2,737,572
Ford Credit Auto Owner Trust 2002-A A3B 1.359 9/23/04 1/15/06 614,687 614,808
Gracechurch Card Funding PLC 4 A 1.150 3/15/06 6/15/06 2,000,000 2,000,677
Honda Auto Receivables Owner Trust 2002-1 A3 3.500 10/15/04 10/17/05 626,221 628,095
MBNA Credit Card Master Trust 2001-A4 A(a) 1.230 9/16/04 2/15/07 2,440,000 2,440,508
Nissan Auto Receivables Owner Trust 2002-A A3 3.580 9/15/04 9/15/05 487,879 488,772
Residential Asset Securities Corp. 1998 KS3 A16(a) 1.600 7/30/04 10/25/29 555,482 559,243
SLM Student Loan Trust 2002-4 A2 1.140 1/25/05 12/15/09 1,094,129 1,094,229
Toyota Auto Receivables Owner Trust 2002-A A3(a) 1.299 11/15/04 1/16/06 172,755 172,760
Toyota Auto Receivables Owner Trust 2003-B A3(a) 1.130 10/26/05 8/15/07 2,000,000 2,000,429
----------
Total Asset Backed (Cost $23,002,601) 22,861,037
----------
COLLATERALIZED MORTGAGE OBLIGATIONS--5.8%
Mound Financing PLC 3A A1-1(a) 1.320 2/7/06 2/8/08 2,500,000 2,515,625
Permanent Financing PLC 3A(a) 1.530 12/9/05 6/10/07 1,490,000 1,490,412
----------
Total Collateralized Mortgage Obligations (Cost $3,990,000) 4,006,037
----------
CORPORATE--49.1%
COMMUNICATIONS--1.4%
Verizon Wireless Capital LLC 1.350 5/23/05 1,000,000 999,052
----------
CONSUMER NONCYCLICAL--8.1%
Coca-Cola Enterprises 2.500 9/15/06 1,559,000 1,535,972
Diageo Capital PLC 6.125 8/15/05 2,000,000 2,079,150
General Mills, Inc. 2.625 10/24/06 2,000,000 1,956,872
----------
5,571,994
----------
FINANCIAL--38.1%
Allstate Corp. Senior Notes 7.875 5/1/05 1,500,000 1,565,514
Bear Stearns Co., Inc. MTN(a) 1.469 9/15/06 2,000,000 2,000,280
CIT Group, Inc. 1.330 6/19/06 500,000 500,947
CIT Group, Inc. Senior Notes(a) 1.510 9/22/06 1,550,000 1,557,826
Citigroup Global Markets Holdings, Inc. 1.500 6/6/06 2,000,000 2,002,802
Countrywide Home Loans, Inc.* 1.400 2/17/06 700,000 699,917
Credit Agricole Indosuez(a) 1.198 2/28/05 2,000,000 1,999,660
CS First Boston (USA), Inc. Notes MTN(a) 1.390 6/19/06 2,000,000 2,007,592
JP Morgan Chase & Co. 1.599 12/12/06 850,000 851,573
Merrill Lynch & Co. 1.430 2/6/09 1,000,000 1,000,158
Morgan Stanley 5.800 4/1/07 935,000 988,702
Morgan Stanley Dean Witter 7.750 6/15/05 2,000,000 2,097,460
Morgan Stanley Dean Witter Senior Notes(a) 1.580 1/31/06 620,000 623,238
National City Bank of Indiana(a) 1.190 9/16/05 440,000 440,427
The accompanying notes are an integral part of the financial statements.
8
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL (CONTINUED)
SLM Corp. Notes MTN(a) 1.370% 1/13/06 700,000 $ 701,61
Textron Financial Corp. MTN 2.690 10/3/06 500,000 492,275
US Bancorp Notes MTN 2.625 3/15/06 500,000 498,656
US Bank NA Senior Notes(a) 1.669 6/14/05 570,000 571,043
Washington Mutual, Inc.(a) 1.449 11/3/05 2,000,000 2,002,708
Wells Fargo Financial Senior Notes(a) 1.569 9/12/05 2,700,000 2,703,264
Zions Bancorp 2.700 5/1/06 1,000,000 992,533
-----------
26,298,193
-----------
TECHNOLOGY--1.5%
First Data Corp. 4.700 11/1/06 1,000,000 1,032,264
-----------
Total Corporate (Cost $33,951,142) 33,901,503
-----------
YANKEE BONDS--6.5%
HBOS Treasury Services PLC(a) 1.220 1/12/07 1,500,000 1,501,101
Nationwide Building Society 144A Senior Notes(a) 1.274 7/21/06 2,000,000 2,002,854
Province of Quebec(a) 1.173 7/2/04 1,000,000 1,000,000
-----------
Total Yankee Bonds (Cost $4,500,001) 4,503,955
-----------
U.S. GOVERNMENT AGENCY - 0.3%
Pass Thru Securities - 0.3%
FHLMC Discount Note+ 1.040 8/19/04 200,000 199,717
-----------
Total U.S. Government Agency (Cost $199,717) 199,717
-----------
TOTAL BONDS AND NOTES (Cost $ 65,643,461) 65,472,249
-----------
SHORT TERM INVESTMENTS--5.0%
COMMERCIAL PAPER--4.9%
Alpine Securitization+ 1.200 7/6/04 1,000,000 999,833
Clipper Receivable+ 1.500 7/1/04 1,400,000 1,400,000
PB Finance+ 1.180 7/7/04 1,000,000 999,803
-----------
3,399,636
-----------
INVESTMENT COMPANIES--0.1%
Dreyfus Institutional Preferred Plus ++ 1.000 47,126 47,126
-----------
TOTAL SHORT TERM INVESTMENTS (Cost $3,446,762) 3,446,762
-----------
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--1.0%
INVESTMENT COMPANIES--1.0%
Dreyfus Cash Management Plus Fund++ (Cost $714,000) 1.000 714,000 714,000
-----------
TOTAL INVESTMENTS--100.8% (COST $69,804,223) 69,633,011
LIABILITIES IN EXCESS OF OTHER ASSETS--(0.8)% (556,823)
-----------
NET ASSETS--100.0% $69,076,188
-----------
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Variable Rate Security; rate indicated is as of 6/30/04.
* Security, or a portion of thereof, was on loan at 6/30/04.
MTN-Medium Term Notes
FHLMC-Federal Home Loan Mortgage Company
+ Rate noted is yield to maturity
++ Affiliated institutional money market fund. The effective yield is 1.00%.
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.
9
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (Note 1A) (including securities on loan, valued at $698,630 (Note 6))
Unaffiliated issuers, at value (cost $69,043,097) $68,871,885
Affiliated issuers, at value (cost $761,126) (Note 1E) 761,126
Receivable for variation margin on open financial futures contracts (Note 5) 32,563
Receivable for investments sold 6,344
Interest and dividends receivable 194,450
Prepaid expenses 8,737
-----------
Total assets 69,875,105
LIABILITIES
Liability for securities on loan (Note 6) $714,000
Due to custodian for cash overdraft (Note 2) 61,993
Accrued accounting and custody fees (Note 2) 3,978
Accrued trustee fees and expenses (Note 2) 5,973
Accrued expenses and other liabilities 12,973
--------
Total liabilities 798,917
-----------
NET ASSETS (APPLICABLE TO INVESTORS' BENEFICIAL INTEREST) $69,076,188
===========
The accompanying notes are an integral part of the financial statements.
10
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities lending income of $776 (Note 6)) $ 984,798
EXPENSES
Investment advisory fee (Note 2) $ 152,809
Accounting and custody fees (Note 2) 47,089
Legal and audit services 13,171
Trustees' fees and expenses (Note 2) 11,821
Insurance expense 6,090
Miscellaneous 467
---------
Total expenses 231,447
---------
Net investment income 753,351
---------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 154,897
Future transactions (149,123)
---------
Net realized gain 5,774
Change in unrealized appreciation (depreciation)
Investment securities and financial instruments $(404,184)
---------
Change in net unrealized appreciation (depreciation) (404,184)
---------
Net realized and unrealized loss (398,410)
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 354,941
=========
The accompanying notes are an integral part of the financial statements.
11
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
STATEMENTS OF CHANGES IN NETS ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 753,351 $ 2,845,203
Net realized gains 5,774 509,270
Change in net unrealized appreciation (depreciation) (404,184) (754,526)
------------- -------------
Net increase in net assets from investment operations 354,941 2,599,947
------------- -------------
CAPITAL TRANSACTIONS
Contributions 52,946,871 153,343,305
Withdrawals (126,082,112) (160,857,552)
------------- -------------
Net decrease in net assets from capital transactions (73,135,241) (7,514,247)
------------- -------------
TOTAL DECREASE IN NET ASSETS (72,780,300) (4,914,300)
NET ASSETS
At beginning of period 141,856,488 146,770,788
------------- -------------
At end of period $ 69,076,188 $ 141,856,488
============= =============
The accompanying notes are an integral part of the financial statements.
12
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
PERIOD ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ------------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
------------- -------- -------- -------- -------- --------
TOTAL RETURN+ 0.09%(b) 1.48% 3.14% 6.15% 6.96% 4.64%
RATIOS:
Expenses (to average daily net assets)* 0.38%++ 0.36% 0.36% 0.35% 0.34% 0.32%
Net Investment Income
(to average daily net assets)* 1.24%++ 1.60% 2.99% 4.89% 6.07% 5.62%
Portfolio Turnover 13%(b) 113% 160% 174% 70% 86%
Net Assets, End of Year (000's omitted) $69,076 $141,856 $146,771 $134,055 $180,548 $302,244
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not t
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Ratios (to average daily net assets):
Expenses N/A 0.37% 0.38% N/A N/A N/A
Net investment income N/A 1.59% 2.97% N/A N/A N/A
(a) The Portfolio has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to increase the ratio of the net investment income to
average net assets by less than 0.01%. Ratios for the periods prior to
January 1, 2001 have not been restated to reflect this change in
presentation.
(b) Not annualized.
+ Total return for the Portfolio has been calculated based on the total
return for the invested Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
13
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of
1940, as amended, as an open-end, management investment company. Standish
Mellon Short-Term Asset Reserve Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
At June 30, 2004 there was one fund, Standish Mellon Short-Term Asset
Reserve Fund (the "Fund"), invested in the Portfolio. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate
interest in the net assets of the Portfolio. The Fund's proportionate
interest at June 30, 2004 was approximately 100%.
The objective of the Portfolio is to achieve a high level of current income
consistent with preserving principal and liquidity. The Portfolio seeks to
achieve its objective by investing, under normal circumstances, at least
80% of net assets in dollar-denominated money market instruments,
short-term fixed income securities and asset-backed securities of U.S. and
foreign governments, banks and companies.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could
differ from those estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are normally traded. Market
quotations are not considered to be readily available for certain debt
obligations, such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Portfolio are valued at amortized cost, which
approximates market value. If the Portfolio acquires a short-term
instrument with more than sixty days remaining to its maturity, it is
valued at current market value until the sixtieth day prior to maturity and
will then be valued at amortized value based upon the value on such date
unless the Trustees determine during such sixty-day period that amortized
value does not represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Realized gains and losses from securities sold
are recorded on the identified cost basis.
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.
14
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
E. AFFILIATED ISSUERS
Issuers in which the Portfolio held investments in other investment
companies advised by Standish Mellon Asset Management Company LLC
("Standish Mellon") or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon for overall investment
advisory and administrative services is paid monthly at the annual rate of
0.25% of the Portfolio's average daily net assets.
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 $47,089 during the period ended
June 30, 2004 and was owed $3,978 at June 30, 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 June 30, 2004 were as follows:
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
-------------- ------------------
U.S. Government Securities $5,739,188 $16,646,534
========== ===========
Investments (non-U.S. Government Securities) $8,856,046 $56,255,000
========== ===========
(4) FEDERAL TAXES:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $69,804,223
-----------
Gross unrealized appreciation 93,034
Gross unrealized depreciation (264,246)
-----------
Net unrealized depreciation (171,212)
===========
15
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(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 entered into no such transactions during the period ended
June 30, 2004.
INTEREST RATE FLOORS
Interest rate floors purchased by the Portfolio entitle the Portfolio to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined
interest rate amount. Credit and market risk exist with respect to these
instruments. If forecasts of interest rates and other market factors are
incorrect, investment performance will diminish compared to what
performance would have been if these investment techniques were not used.
Even if the forecasts are correct, there are risks that the positions may
correlate imperfectly with the asset or liability being hedged, a liquid
secondary market may not always exist, or a counterparty to a transaction
may not perform. The Portfolio expects to enter these transactions
primarily for hedging purposes including, but not limited to, preserving a
return or spread on a particular investment or portion of its portfolio,
protecting against currency fluctuations, as a duration management
technique or protecting against an increase in the price of securities the
Portfolio anticipates purchasing at a later date. Interest rate floors are
"marked-to-market" daily based on quotations from market makers and the
change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations. Periodic payments of interest, if any, are
reported as additions to interest income in the Statement of Operations.
Realized gains or losses from these agreements are disclosed in the
Statement of Operations.
At June 30, 2004, the Portfolio did not hold any open interest rate floor
agreements.
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures
16
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
tends to decrease the Portfolio's exposure to the underlying instrument or
hedge other investments. In addition, there is the risk that the Portfolio
may not be able to enter into a closing transaction because of an illiquid
secondary market. Losses may arise if there is an illiquid secondary market
or if the counterparty does not perform under the contract's terms. The
Portfolio enters into financial futures transactions primarily to seek to
manage its exposure to certain markets and to changes in securities prices
and foreign currencies. Gains and losses are realized upon the expiration
or closing of the futures contracts. Futures contracts are valued at the
quoted daily settlement prices established by the exchange on which they
trade.
At June 30, 2004, the Portfolio held the following financials futures
contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE GAIN/(LOSS)
----------------------------------------------------------------------------------------------------------------------------
Euro Bond (41 Contracts) Long 9/13/2004 10,042,950 $ 10,643
Euro Bond (30 Contracts) Long 9/13/2004 7,311,375 10,726
Euro Bond (44 Contracts) Long 3/14/2005 10,673,300 (10,644)
--------
$ 10,725
========
At June 30, 2004, the Portfolio had segregated sufficient cash and/or
securities to cover margin requirements on open 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 June 30, 2004
resulting in $776 of security lending income. At June 30, 2004, the
Portfolio had $699,896 worth of securities on loan.
See the Statement of Investments for further detail on the security
positions on loan.
(7) DELAYED DELIVERY TRANSACTIONS:
The Portfolio may purchase securities on a when-issued, delayed delivery or
forward commitment basis. Payment and delivery may take place a month or
more after the date of the transactions. The price of the underlying
securities and the date when the securities will be delivered and paid for
are fixed at the time the transaction is negotiated. Income on the
securities will not be earned until settlement date. The Portfolio
instructs its custodian to segregate securities having value at least equal
to the amount of the purchase commitment.
The Portfolio may enter into to be announced ("TBA") purchase commitments
to purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Portfolio holds, and maintains until settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price, or the Portfolio may enter into offsetting contracts for the forward
sale of other securities it owns. Income on the securities will not be
earned until settlement date. TBA purchase commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of the decline in the value of the Portfolio's
other assets. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, according to the procedures
described under "Investment security valuations" above.
17
MELLON INSTITUTIONAL FUNDS MASTER PORTFOLIO
STANDISH MELLON SHORT-TERM ASSET RESERVE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Portfolio may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Portfolio as an unrealized gain or loss. If the TBA sale commitment is
closed through the acquisition of an offsetting purchase commitment, the
Portfolio realizes a gain or loss from the sale of the securities based
upon the unit price established at the date the commitment was entered
into.
At June 30, 2004, the Portfolio did not have any delayed delivery
transactions.
(8) LINE OF CREDIT:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Trust are parties to a committed line of credit facility, which enables
each portfolio/fund to borrow, in the aggregate, up to $35 million.
Interest is charged to each participating portfolio/fund based on its
borrowings at a rate equal to the Federal Funds effective rate plus 1-2 of
1%. In addition, a commitment fee, computed at an annual rate of 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 June 30, 2004, the expense related to the commitment
fee was $428 for the Portfolio.
During the period ended June 30, 2004, the Portfolio had not borrowed under
the credit facility.
18
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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 Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
20
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0926SA0604
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Financial Statements STANDISH MELLON
SHORT-TERM FIXED INCOME FUND
- --------------------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, 2004 (UNAUDITED)
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities (including securities on loan, valued at $45,362) (Note 7)
Unaffiliated issuers, at value (Note 1A) (cost $3,069,653) $3,077,827
Affiliated issuers, at value (Note 1A) (cost $459,335) (Note 1F) 459,335
Receivable for Fund shares sold 200,200
Interest receivable 26,831
Prepaid expenses 10,725
----------
Total assets 3,774,918
LIABILITIES
Payable for investments purchased $70,136
Payable to Investment Advisor (Note 2) 13,030
Liability for securities on loan (Note 7) 46,360
Accrued accounting, custody and
transfer agent fees (Note 2) 7,605
Accrued trustees' fees and expenses (Note 2) 922
Accrued expenses and other liabilities 18,366
-------
Total liabilities 156,419
----------
NET ASSETS $3,618,499
----------
NET ASSETS CONSIST OF:
Paid-in capital $3,591,416
Accumulated net realized gain 17,192
Net investment income 1,477
Net unrealized appreciation 8,414
----------
TOTAL NET ASSETS $3,618,499
==========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 225,566
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 16.04
==========
The accompanying notes are an integral part of the financial statements.
2
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income (including securities
lending income of $487 (Note 7)) $ 51,611
EXPENSES
Investment advisory fee (Note 2) $ 5,099
Accounting, custody, and transfer agent fees (Note 2) 18,214
Legal and audit services 16,326
Registration fees 8,451
Trustees' fees and expenses (Note 2) 1,581
Insurance expense 1,944
Miscellaneous 3,850
--------
Total expenses 55,465
DEDUCT:
Waiver of investment advisory fee (Note 2) (5,099)
Reimbursement of Fund operating expenses (Note 2) (45,273)
--------
Total expense deductions (50,372)
--------
Net expenses 5,093
--------
Net investment income 46,518
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment security transactions 17,080
--------
Net realized gain 17,080
Change in unrealized appreciation (depreciation)
Investment securities $(58,739)
--------
Change in net unrealized appreciation (depreciation) (58,739)
--------
Net realized and unrealized loss on investments (41,659)
--------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 4,859
========
The accompanying notes are an integral part of the financial statements.
3
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
STATEMENTS OF CHANGES IN NETS ASSETS
- --------------------------------------------------------------------------------
PERIOD ENDED
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
------------- -----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM INVESTMENT OPERATIONS
Net investment income $ 46,518 $ 398,500
Net realized gains 17,080 650,911
Change in net unrealized appreciation (depreciation) (58,739) (544,868)
----------- ------------
Net increase in net assets from investment operations 4,859 504,543
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (42,691) (408,533)
From net realized gains on investments -- (915,753)
----------- ------------
Total distributions to shareholders (42,691) (1,324,286)
----------- ------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 2,799,235 4,896,201
Value of shares issued to shareholders in payment of distributions declared 39,335 1,049,509
Cost of shares redeemed (3,189,988) (23,384,843)
----------- ------------
Net decrease in net assets from Fund share transactions (351,418) (17,439,133)
----------- ------------
TOTAL DECREASE IN NET ASSETS (389,250) (17,439.133)
NET ASSETS
At beginning of period 4,007,749 22,266,625
----------- ------------
At end of period (including undistributed net investment income
of $1,477 and distributions in excess of net investment income of $2,350) $ 3,618,499 $ 4,007,749
=========== ============
The accompanying notes are an integral part of the financial statements.
4
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2004 ----------------------------------------------------------
(UNAUDITED) 2003 2002 2001 2000 1999
----------- ------ ------- ------- ------- -------
Net Asset Value, Beginning of the period $16.25 $20.03 $ 19.86 $ 19.57 $ 19.36 $ 19.87
------ ------ ------- ------- ------- -------
From Investment Operations:
Net investment income* (1) 0.21 0.61 0.85 1.13 1.28 1.24
Net realized and unrealized
gain (loss) on investments (0.22) (0.10)(2) 0.38 0.34 0.21 (0.53)
------ ------ ------- ------- ------- -------
Total from investment operations (0.01) 0.51 1.23 1.47 1.49 0.71
------ ------ ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.20) (1.16) (0.96) (1.18) (1.28) (1.22)
From net realized gain on investments -- (3.13) (0.10) -- -- --
------ ------ ------- ------- ------- -------
Total distributions to shareholders (0.20) (4.29) (1.06) (1.18) (1.28) (1.22)
------ ------ ------- ------- ------- -------
Net Asset Value, End of Year $16.04 $16.25 $ 20.03 $ 19.86 $ 19.57 $ 19.36
====== ====== ======= ======= ======= =======
Total Return+ (0.19%)++ 2.62% 6.31% 7.66% 7.93% 3.67%
Ratios/Supplemental Data:
Expenses (to average daily net assets)* 0.30%+++ 0.30% 0.30% 0.30% 0.30% 0.30%
Net Investment Income
(to average daily net assets)* 2.75%+++ 3.06% 4.24% 5.64% 6.66% 6.27%
Portfolio Turnover 90%++ 2 186% 251% 149% 170% 147%
Net Assets, End of Year (000's omitted) $3,618 $4,008 $22,267 $41,169 $45,232 $38,109
- --------------
* For the periods indicated, the investment adviser voluntarily agreed not to
impose all or a portion of its investment advisory fee and/ or reimbursed
the Fund for a portion of its operating expenses. If this voluntary action
had not been taken, the investment income per share and the ratios would
have been:
Net investment income per share (1) $(0.02) $ 0.40 $ 0.75 $ 1.07 $ 1.21 $ 1.12
Ratios (to average daily net assets):
Expenses 3.28%+++ 1.36% 0.78% 0.60% 0.69% 0.89%
Net investment income (0.23%)+++ 2.00% 3.76% 5.34% 6.27% 5.68%
(a) The Fund has adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies effective January 1, 2001 and
began amortizing premium and discount on all debt securities on an
effective yield basis. The effect of this change for the year ended
December 31, 2001 was to increase net investment income per share by less
than $0.001, decrease net realized and unrealized gains and losses per
share by less than $0.001 and increase the ratio of net investment income
to average net assets by less than 0.01%. Per share data and
ratios/supplemental data for the periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
(1) Calculated based on average shares outstanding,
(2) The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain/loss for the period due to the
timing of purchases and redemptions of Fund shares in relation to the
fluctuating market values of the Fund.
+ Total return would have been lower in the absence of expense waivers.
++ Not annualized.
+++ Computed on an annualized basis using a 366 day calendar year.
The accompanying notes are an integral part of the financial statements.
5
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS AND NOTES--85.1%
ASSET BACKED--16.1%
Bank One Issuance Trust 2002-A4 A4 2.940% 6/16/2008 $100,000 $ 100,380
BMW Vehicle Owner Trust 2004-A A3 2.670 3/25/2008 50,000 49,625
Capital Auto Receivables Asset Trust 2003-1 A3A 2.750 4/16/2007 100,000 99,818
Capital One Master Trust 2001-7 A 3.850 8/15/2007 100,000 100,642
Chase Manhattan Auto Owner Trust 2003-B A3 1.820 7/16/2007 75,000 74,424
Citibank Credit Card Issuance Trust 2003-A2 A2 2.700 1/15/2008 100,000 99,790
Nissan Auto Receivables Owner Trust 2002-C A3 2.600 8/15/2006 56,768 56,955
----------
Total Asset Backed (Cost $581,393) 581,634
----------
CORPORATE--39.4%
COMMUNICATIONS--3.6%
Deutsche Telekom International Finance 7.750 6/15/2005 25,000 26,286
France Telecom 8.450 3/1/2006 50,000 53,607
Verizon Wireless Capital 5.375 12/15/2006 50,000 52,127
----------
132,020
----------
CONSUMER NONCYCLICAL--2.8%
Coca-Cola Enterprises 2.500 9/15/2006 50,000 49,261
PepsiAmericas, Inc. 5.950 2/15/2006 50,000 52,301
----------
101,562
----------
FINANCIAL--26.1%
American International Group, Inc. 2.850 12/1/2005 100,000 99,983
Associates Corp. Senior Notes 6.000 7/15/2005 100,000 103,420
Bank of America Corp. 7.875 5/16/2005 100,000 104,646
Boeing Capital Corp. 5.750 2/15/2007 50,000 52,691
FleetBoston Financial Corp. 7.250 9/15/2005 100,000 105,379
Ford Motor Credit Co. 6.500 1/25/2007 50,000 52,536
General Motors Acceptance Corp. 4.500 7/15/2006 50,000 50,533
Goldman Sachs Group, Inc. 7.625 8/17/2005 100,000 105,098
HBOS Treasury Services PLC 144A 2.250 5/1/2006 70,000 69,528
John Deere Capital Corp. 3.625 5/25/2007 50,000 49,889
SLM Corp. 3.500 9/30/2006 50,000 50,257
Sun Trust Bank 2.125 1/30/2006 50,000 49,674
Washington Mutual, Inc. 2.400 11/3/2005 50,000 49,653
----------
943,287
----------
INDUSTRIAL--1.3%
Fedex Corp. 144A 2.650 4/1/2007 50,000 48,555
----------
TECHNOLOGY--1.4%
IBM Corp. 2.375 11/1/2006 50,000 49,220
----------
UTILITIES--4.2%
Alabama Power Co. Senior Notes 5.490 11/1/2005 100,000 103,711
Virginia Electric and Power Co. 5.750 3/31/2006 45,000 46,958
----------
150,669
----------
Total Corporate (Cost $1,424,169) 1,425,313
----------
The accompanying notes are an integral part of the financial statements.
6
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
SCHEDULE OF INVESTMENTS--JUNE 30, 2004 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE NOTE (1A)
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY--15.0%
PASS THRU SECURITIES--15.0%
FHLMC Gold 5.000% 8/1/2007 $ 63,826 $ 65,008
FHLMC Gold 6.000 7/1/2011 178,155 186,376
FNMA 2.125 4/15/2006 100,000 98,697
FNMA 2.375 2/15/2007 125,000 121,674
FNMA 3.125 7/15/2006 70,000 70,090
----------
Total U.S. Government Agency (Cost $530,609) 541,845
----------
U.S. TREASURY OBLIGATIONS--14.6%
TREASURY NOTES--14.6%
U.S. Treasury Note 2.250 2/15/2007 225,000 220,615
U.S. Treasury Note* 2.000 5/15/2006 75,000 74,112
U.S. Treasury Note 1.625 10/31/2005 40,000 39,644
U.S. Treasury Note 3.125 5/15/2007 95,000 95,000
U.S. Treasury Note 2.500 5/31/2006 100,000 99,664
Total U.S. Treasury Obligations (Cost $533,482) 529,035
----------
TOTAL BONDS AND NOTES (COST $3,069,653) 3,077,827
----------
SHORT TERM INVESTMENTS--11.4%
INVESTMENT COMPANIES--11.4%
Dreyfus Institutional Preferred Plus+ 1.000 412,975 412,975
----------
TOTAL SHORT TERM INVESTMENTS--(Cost $412,975)
INVESTMENT OF CASH COLLATERAL
FOR SECURITIES LOANED--1.3%
INVESTMENT COMPANIES--1.3%
Dreyfus Cash Management Plus Fund+ (Cost $46,360) 1.000 46,360 46,360
----------
TOTAL INVESTMENTS--97.8% (Cost $3,528,988) 3,537,162
OTHER ASSETS, LESS LIABILITIES--2.2% 81,337
----------
NET ASSETS--100.0% $3,618,499
==========
- ----------------
NOTES TO SCHEDULE OF INVESTMENTS:
FHLMC - Federal Home Loan Mortgage Company
FNMA - Federal National Mortgage Association
+ Affiliated institutional money market fund. The effective yield is 1.00%. A
complete listing of the fund's holdings as of its most recent fiscal year
end is available.
* Security, or a portion of thereof, was on loan at June 30, 2004.
The accompanying notes are an integral part of the financial statements.
7
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company.
Standish Mellon Short-Term Fixed Income Fund (the "Fund") is a separate
diversified investment series of the Trust.
The objective of the Fund is to maximize total return, consistent with
preserving principal and liquidity, while seeking a relatively high level
of current income. The Fund seeks to achieve its objective by investing,
under normal circumstances, at least 80% of net assets in fixed income
securities of U.S. companies and the U.S. government.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. INVESTMENT SECURITY VALUATIONS
Securities for which quotations are readily available are valued at the
last sale price, or if no sale price, at the closing bid price in the
principal market in which such securities are primarily traded. Market
quotations are not considered to be readily available for certain debt
obligations; such investments are stated at fair value on the basis of
valuations furnished by a pricing service or dealers, approved by the
Trustees, which determine valuations for normal institutional-size trading
units of such securities using methods based on market transactions for
comparable securities and variable relationships between securities that
are generally recognized by institutional traders. Securities (including
illiquid securities) for which quotations are not readily available are
valued at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
when acquired by the Fund are valued at amortized cost, which approximates
market value. If the Fund acquires a short-term instrument with more than
sixty days remaining to its maturity, it is valued at current market value
until the sixtieth day prior to maturity and will then be valued at
amortized value based upon the value on such date unless the Trustees
determine during such sixty-day period that amortized value does not
represent fair value.
B. SECURITIES TRANSACTIONS AND INCOME
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
debt securities. Realized gains and losses from securities sold are
recorded on the identified cost basis.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions to shareholders are recorded on the ex-dividend date.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless a
shareholder elects to receive them in cash. Income and capital gain
distributions are determined in accordance with income tax regulations
which may differ from accounting principles generally accepted in the
United States of America. These differences, which may result in
distribution reclassifications, are primarily due to differing treatments
of amortization and/or accretion of premiums and discounts on certain
securities and paydown gains and losses.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated net realized
gain (loss) on investments may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income
or gain remaining at fiscal year end is distributed in the following year.
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 expenses and the relative size of the funds.
E. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
8
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
F. AFFILIATED ISSUERS
Issuers in which the fund held investments in other investment companies
advised by Standish Mellon Asset Management Company LLC ("Standish Mellon")
or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon, a wholly-owned
subsidiary of Mellon Financial Corporation, for overall investment
advisory, administrative services, and general office facilities, is paid
monthly at the annual rate of 0.30% of the Fund's average daily net assets.
Standish Mellon voluntarily agreed to limit total Fund operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.30% of the Fund's average daily net assets for the period ended June 30,
2004. Pursuant to this agreement, for the period ended June 30, 2004,
Standish Mellon voluntarily did not impose $5,099 of its investment
advisory fee and reimbursed the Fund for $45,273 of its operating expenses.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time.
As of February 23, 2004, the The Fund compensates Dreyfus Transfer, Inc., a
wholly owned subsidiary of Dreyfus which is an affiliate of Standish
Mellon, 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 $2,472 during the period ended June 30,
2004 and $2,472 was owed at June 30, 2004.
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 $14,831 during the period ended June 30, 2004 and $5,133
was owed at June 30, 2004.
No director, officer or employee of Standish Mellon or its affiliates
receives any compensation from the Trust or the Fund for serving as an
officer or Trustee of the Trust. The Trust pays each Trustee who is not a
director, officer or employee of Standish Mellon or its affiliates an
annual fee and a per meeting fee as well as reimbursement for travel and
out of pocket expenses. In addition, the Trust pays the legal fees for the
independent counsel of the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended June 30, 2004 were as follows:
PURCHASES SALES
---------- ----------
U.S. Government Securities $2,285,355 $3,118,419
========== ==========
Investments (non-U.S.Government Securities) $ 736,965 $ 804,703
========== ==========
(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
JUNE 30, 2004 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2003
----------- ------------------
Shares sold 172,946 246,481
Shares issued to shareholders in payment
of distributions declared 2,437 59,783
Shares redeemed (196,522) (1,171,136)
-------- ----------
Net increase (decrease) (21,139) (864,872)
======== ==========
At June 30, 2004, two shareholders of record held approximately 57% and 24%
of the total outstanding shares of the Fund.
A significant portion of the Fund's shares are beneficially owned by
fiduciary accounts over which Standish Mellon and its affiliates have
either sole or joint investment discretion. Investment activity of these
shareholders could have a material impact on the Fund.
9
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME 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 all of its taxable income for its fiscal year.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $3,482,639
==========
Unrealized appreciation $ 23,614
Unrealized depreciation (15,212)
-----------
Net unrealized appreciation/depreciation $ 8,402
==========
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved. The
nature, risks and objectives of these instruments are set forth more fully
in the Fund's Prospectus and Statement of Additional Information.
The Fund may trade the following instruments with off-balance sheet risk:
OPTIONS
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Fund may use options to seek to hedge against risks of
market exposure and changes in securities prices and foreign currencies, as
well as to seek to enhance returns. Writing puts and buying calls tend to
increase the Fund's exposure to the underlying instrument. Buying puts and
writing calls tend to decrease the Fund's exposure to the underlying
instrument, or hedge other Fund investments. Options, both held and written
by the Fund, are reflected in the accompanying Statement of Assets and
Liabilities at market value. The underlying face amount at value of any
open purchased options is shown in the Schedule of Investments. This amount
reflects each contract's exposure to the underlying instrument at period
end. Losses may arise from changes in the value of the underlying
instruments, if there is an illiquid secondary market for the contract or
if the counterparty does not perform under the contract's terms
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Fund is exercised, the premium reduces the
cost basis of the securities purchased by the Fund. The Fund, as writer of
an option, has no control over whether the underlying securities may be
sold (call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Fund entered into no such transactions during the period ended June 30,
2004.
FUTURES CONTRACTS
The Fund may enter into financial futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to the margin requirements, the Fund
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Fund each day, depending on the daily fluctuations in the value of
the underlying security, and are recorded for financial statement purposes
as unrealized gains or losses by the Fund. There are several risks in
connection with the use of futures contracts as a hedging device. The
change in value of futures contracts primarily corresponds with the value
of their underlying instruments or indices, which may not correlate with
changes in the value of hedged investments. Buying futures tends to
increase the Fund's exposure to the underlying instrument, while selling
futures tends to decrease the Fund's exposure to the underlying instrument
or hedge other Fund investments. In addition, there is the risk that the
Fund may not be able to enter into a closing transaction because of an
illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparties do not perform under the
contract's terms. The Fund enters into financial futures transactions
10
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON SHORT-TERM FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
primarily to manage its exposure to certain markets and to changes in
securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
The Fund entered into no such transactions during the period ended June 30,
2004.
(7) SECURITY LENDING:
The Fund may lend its securities to financial institutions which the Fund
deems to be creditworthy. The loans are collateralized at all times with
cash or securities with a market value at least equal to the market value
of the securities on loan. The market value of securities loaned is
determined daily and any additional required collateral is allocated to the
Fund on the next business day. For the duration of a loan, the Fund
receives the equivalent of the interest or dividends paid by the issuer on
the securities loaned and also receives compensation from the investment of
the collateral. As with other extensions of credit, the Fund bears the risk
of delay in recovery or even loss of rights in its securities on loan
should the borrower of the securities fail financially or default on its
obligations to the Fund. In the event of borrower default, the Fund
generally has the right to use the collateral to offset losses incurred.
The Fund may incur a loss in the event it was delayed or prevented from
exercising its rights to dispose of the collateral. The Fund also bears the
risk in the event that the interest and/or dividends received on invested
collateral is not sufficient to meet the Fund's obligations due on the
loans.
The Fund loaned securities during the period ended June 30, 2004 resulting
in $487 of security lending income. At June 30, 2004, the Fund had $45,362
worth of securities on loan.
See the Statement of Investments for further detail on the security
positions on loan.
(8) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis. The Fund segregates securities having a value
at least equal to the amount of the purchase commitment.
The Fund may enter into to be announced ("TBA") purchase commitments to
purchase securities for a fixed unit price at a future date beyond
customary settlement time. Although the unit price has been established,
the principal value has not been finalized. However, the amount of the
commitments will not fluctuate more than 0.01% from the principal amount.
The Fund holds, and maintains until settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price, or the
Fund may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition
to the risk of the decline in the value of the Fund's other assets.
Unsettled TBA purchase commitments are valued at the current market value
of the underlying securities, according to the procedures described under
"Investment security valuations" above.
The Fund may enter into TBA sale commitments to hedge its portfolio
positions. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, an offsetting TBA purchase commitment deliverable is held as
"cover" for the transaction.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described
under "Investment security valuations" above. The contract is
'marked-to-market' daily and the change in market value is recorded by the
Fund as an unrealized gain or loss. If the TBA sale commitment is closed
through the acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
At June 30, 2004, the Fund did not have any delayed delivery transactions.
(9) LINE OF CREDIT:
The Fund, and other subtrusts in the Portfolio Trust and funds in the Trust
are parties to a committed line of credit facility, which enables each
portfolio/fund to borrow, in the aggregate, up to $35 million. Interest is
charged to each participating portfolio/fund based on its borrowings at a
rate equal to the Federal Funds effective rate plus 1/2 of 1%. In addition,
a commitment fee, computed at an annual rate of .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 June 30, 2004, the expense related to the commitment
fee was $10 for the Fund.
During the period ended June 30, 2004, the Fund had not borrowed under the
credit facility.
11
TRUSTEES AND OFFICERS
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.
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
P.O. Box 181 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 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
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
Mellon Institutional and Chief and Chief Operating
Asset Management 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
12
Principal Officers who are Not Trustees
NUMBER OF
PRINCIPAL PORTFOLIOS IN OTHER
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS OFFICER OFFICER
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President 29 None
Mellon Institutional and Secretary and Head of Operations
Asset 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
Mellon Institutional and Treasurer since 1999; Funds Controller, Mellon
Asset Management Treasurer since Institutional Asset
One Boston Place 2002 Management
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and 29 None
Mellon Institutional President Manager, Mutual Funds
Asset Management Operations, Mellon
One Boston Place Institutional Asset
Boston, MA 02108 Management
8/19/51
Cara E. Hultgren, Assistant Vice Since 2001 Assistant Manager, Mutual 29 None
Mellon Institutional President Fund Operations since
Asset Management 1999; Shareholder
One Boston Place Representative, Mellon
Boston, MA 02108 Institutional Asset
1/19/71 Management
13
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[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0936SA0604
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 Investment Trust
By (Signature and Title): /s/ Barbara A. McCann
-----------------------------------------------------
Barbara A. McCann, Vice President and Secretary
Date September 7, 2004
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities, and on the
dates indicated.
By (Signature and Title): /s/ Patrick J. Sheppard
-----------------------------------------------------
Patrick J. Sheppard, President and Chief Executive
Officer
Date September 7, 2004
-----------------
By (Signature and Title): /s/ Steven M. Anderson
-----------------------------------------------------
Steven M. Anderson, Vice President and Treasurer
Date September 7, 2004
-----------------