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: 811-4813
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MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
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(Exact name of registrant as specified in charter)
Mellon Financial Center, One Boston Place, Boston, Massachusetts 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:
Christopher P. Harvey, Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Registrant's telephone number, including area code: (617) 248-6000
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Date of fiscal year end: September 30
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Date of reporting period: March 31, 2005
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Item 1. Reports to Stockholders.
Semiannual Report STANDISH MELLON
INTERMEDIATE TAX EXEMPT BOND FUND
MARCH 31, 2005 (UNAUDITED)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund' s historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund' s Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund' s proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC' s web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD((+))
ACCOUNT VALUE ACCOUNT VALUE OCTOBER 1, 2004
OCTOBER 1, 2004 MARCH 31, 2005 TO MARCH 31, 2005
- ----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,000.00 $2.24
Hypothetical (5% return
per year before expenses) $1,000.00 $1,022.69 $2.27
- -------
((+)) EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.45%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365
(TO REFLECT THE ONE-HALF YEAR PERIOD).
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
PORTFOLIO INFORMATION AS OF MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE OF
TOP TEN HOLDINGS(*) RATE MATURITY NET ASSETS
- ----------------------------------------------------------------------------------------------------------
New York Dormitory Authority Revenue 5.250% 11/15/2023 2.9
Northeast TX Independent School District NCL 6.780 8/1/2010 2.9
Puerto Rico Commonwealth Fuel Sales Tax Revenue 5.000 7/1/2018 2.9
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 2.2
New York Dormitory Authority State
University Educational Facilities MBIA IBC 5.250 5/15/2015 2.0
Commonwealth of Massachusetts NCL 5.250 8/1/2014 2.0
Texas United Independent School District NCL 5.000 8/15/2012 2.0
Colorado HFA Single Family Project AMT 6.800 2/1/2031 1.9
Lubbock TX Health Facilities Development
St. Joseph Healthcare System 5.000 7/1/2008 1.9
Cook County IL School District FSA NCL 6.750 5/1/2010 1.8
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22.5
* Excluding short-term investments.
PERCENTAGE OF
ECONOMIC SECTOR ALLOCATION NET ASSETS
- --------------------------------------------
General Obligations 26.2
Government Backed 1.2
Insured Bond 31.9
Revenue 37.7
Short-term and Net Other Assets 3.0
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100.0
SUMMARY OF COMBINED RATINGS
- --------------------------------------------
Quality Breakdown Value (%)
- --------------------------------------------
AAA 47.4
AA 28.3
A 15.7
BBB 8.6
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TOTAL 100.0
Based on ratings from Standard & Poor's and/or Moody's Investors Services. If a
security receives split (different) ratings from multiple rating organizations,
the Fund treats the security as being rated in the higer rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
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BONDS--97.0%
GENERAL OBLIGATIONS--26.2%
ABAG CA Odd Fellows Homes 5.700% 8/15/2014 $1,000,000 $ 1,065,420
California State 5.000 10/1/2011 300,000 319,824
California State NCL 5.000 2/1/2009 1,000,000 1,062,010
California State NCL 6.600 2/1/2009 1,000,000 1,115,250
California State NCL 5.750 11/1/2011 300,000 336,324
College Station Texas Independant School District NCL 5.000 2/15/2013 1,000,000 1,078,730
Commonwealth of Massachusetts NCL 6.000 11/1/2010 1,350,000 1,517,292
Commonwealth of Massachusetts NCL 5.250 8/1/2014 2,000,000 2,197,740
Goose Creek TX Independent School District 7.000 8/15/2009 600,000 689,190
Harris County Texas Health Facility Development Corp. MBIA 6.000 6/1/2013 1,000,000 1,142,440
Lake County IL First Preserve District (a) 0.000 12/1/2007 1,250,000 1,145,338
New York NY NCL 5.250 11/1/2009 1,000,000 1,072,880
New York NY NCL 5.500 8/1/2010 1,000,000 1,085,680
New York NY NCL 5.000 8/1/2011 1,700,000 1,812,625
Northeast TX Independent School District NCL 7.000 2/1/2009 1,000,000 1,133,320
Northeast TX Independent School District NCL 6.780 8/1/2010 3,000,000 3,222,690
Puerto Rico Commonwealth Fuel Sales Tax Revenue (b) 5.000 7/1/2018 3,000,000 3,146,820
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 1,000,000 1,057,100
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 2,250,000 2,467,440
Texas United Independent School District NCL 5.000 8/15/2012 2,000,000 2,158,080
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28,826,193
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GOVERNMENT BACKED--1.2%
Alpine UT School District 5.000 3/15/2011 25,000 26,624
District of Columbia Prerefunded MBIA NCL 5.750 6/1/2010 10,000 11,162
Long Beach CA Aquarium of the Pacific Revenue 5.750 7/1/2005 70,000 70,551
Met Govt Nashville & Davidson TN
Industrial Development Board Revenue Prerefunded 7.500 11/15/2010 1,000,000 1,189,270
Palm Beach County FL Solid Waste AMBAC 6.000 10/1/2009 60,000 66,840
Texas Municipal Power Agency MBIA (a) 0.000 9/1/2016 5,000 3,050
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1,367,497
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HOUSING REVENUE--6.0%
California Housing SFM 5.050 2/1/2017 105,000 104,536
Colorado HFA Single Family Project AMT (b) 6.800 2/1/2031 2,055,000 2,142,111
Colorado HFA Single Family Project AMT (b) 6.600 8/1/2032 1,695,000 1,734,104
Florida Housing Finance Corp. FSA 5.750 1/1/2017 70,000 70,176
Hawaii Housing Finance and Development SFM FNMA 7.000 7/1/2031 460,000 460,639
Nebraska Investment Finance Authority SFM FHA VA AMT 6.700 9/1/2026 90,000 91,105
Ohio HFA Mortgage Revenue AMT GNMA 5.350 9/1/2018 600,000 613,998
Pennsylvania HFA SFM 5.350 10/1/2008 95,000 95,445
Rhode Island Housing & Mortgage Finance Corp. 4.950 10/1/2016 150,000 151,386
Tennessee Housing Development Agency
Homeownership Project AMT NCL 5.750 7/1/2007 840,000 878,203
Utah HFA SFM AMT 5.400 7/1/2020 310,000 314,628
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6,656,331
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The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
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INDUSTRIAL DEVELOPMENT--5.2%
Connecticut Gaming Authority Mohegan Tribe 5.375% 1/1/2011 1,000,000 $ 1,061,520
Gloucester NJ Resource Recovery 6.850 12/1/2029 500,000 556,005
Golden State Tobacco Securitization Corp. 5.000 6/1/2021 1,815,000 1,827,560
Hendersonville TN Kroger 5.950 12/15/2008 220,000 226,578
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 557,055
Michigan State Strategic Funding AMT NCL (b) 3.750 8/1/2027 500,000 499,100
San Manuel Entertainment Series 2004-C 4.500 12/1/2016 1,000,000 980,388
--------------
5,708,206
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INSURED BONDS--31.9%
California State 6.000 4/1/2016 $1,000,000 1,171,570
Charleston SC COP MBIA 6.000 12/1/2008 1,000,000 1,099,450
Cook County IL High School FGIC NCL 7.875 12/1/2014 750,000 986,483
Cook County IL School District FSA NCL 6.750 5/1/2010 1,750,000 2,018,328
Corpus Christi TX Business & Job Development
Corp. Sales Tax Revenue AMBAC NCL 5.000 9/1/2011 1,215,000 1,310,778
District of Columbia FSA NCL 5.500 6/1/2011 1,500,000 1,652,550
District of Columbia MBIA NCL 5.750 6/1/2010 15,000 16,608
Douglas County CO School District MBIA 7.000 12/15/2012 625,000 761,031
Farmington New Mexico Pollution Control Revenue FGIC 3.550 4/1/2029 2,000,000 1,993,660
Georgia Municipal Electric Authority (b) 5.000 1/1/2026 1,000,000 1,052,450
Georgia Municipal Electric Authority Power FGIC NCL 6.250 1/1/2012 1,150,000 1,326,376
Harris County TX Toll Revenue FGIC NCL 6.000 8/1/2012 1,000,000 1,142,150
Intermountain Power Agency UT NCL 6.500 7/1/2010 1,000,000 1,138,800
Jefferson County OH Asset Guaranty 6.625 12/1/2005 50,000 51,328
King County Washington School District
No. 414 Lake Washington FSA 5.000 6/1/2011 1,000,000 1,078,930
Massachusetts State NCL 5.500 12/1/2017 1,000,000 1,130,760
Mesa AZ Utility System Revenue NCL 6.000 7/1/2020 1,250,000 1,496,563
Metropolitan Washington DC Apartment Authority System AMT MBIA 5.000 10/1/2012 1,000,000 1,056,730
Miami-Dade County Florida Special Obligation
Capital Asset Acquisition MBIA NCL 5.000 4/1/2014 1,755,000 1,904,351
Nassau County NY FGIC 6.000 7/1/2010 25,000 28,043
New Jersey Health Care Facilities Financing
Authority Revenue AMBAC 4.800 8/1/2021 810,000 833,798
New Jersey Transportation Corp. COP AMBAC NCL 5.500 9/15/2007 1,000,000 1,056,540
New York Dormitory Authority Presbyterian Hospital AMBAC 4.400 8/1/2013 75,000 76,379
New York Dormitory Authority Revenues
Mental Health Services Facility FGIC NCL 5.000 2/15/2012 1,000,000 1,074,960
New York Dormitory Authority State University
Educational Facilities MBIA 6.000 5/15/2015 1,000,000 1,123,410
New York Dormitory Authority State University
Educational Facilities MBIA IBC 5.250 5/15/2015 2,000,000 2,218,440
Orange County CA COP MBIA 5.800 7/1/2016 400,000 422,980
Pasco County FL Solid Waste AMBAC AMT NCL 6.000 4/1/2010 1,000,000 1,101,980
Seattle WA Water System Revenue MBIA NCL 5.000 9/1/2014 1,670,000 1,814,789
South Carolina Transit Infrastructure Bank Revenue AMBAC NCL 5.250 10/1/2015 1,000,000 1,116,210
Stafford TX Economic Development FGIC 6.000 9/1/2015 525,000 611,688
Texas Municipal Power Agency MBIA (a) 0.000 9/1/2016 1,995,000 1,186,267
Wisconsin State Transportation 5.500 7/1/2010 15,000 16,386
--------------
35,070,766
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The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
LEASE REVENUE--8.0%
Golden State Tobacco Securitization Corp. 5.250% 6/1/2016 1,000,000 $ 1,004,370
New Jersey Economic Development Authority
Revenue School Facilities Construction NCL 5.000 9/1/2012 1,000,000 1,068,800
New York Dormitory Authority Revenue 5.250 11/15/2023 3,000,000 3,233,820
New York Dormitory Authority Roswell Park 6.000 7/1/2006 400,000 415,060
New York Urban Development Corp.
Correctional and Youth Facilities Service 5.250 1/1/2021 500,000 530,030
Tobacco Settlement Funding Corp. 5.500 6/1/2009 1,500,000 1,506,810
Tobacco Settlement Funding Corp. NY 5.250 6/1/2013 1,000,000 1,056,400
--------------
8,815,290
--------------
REVENUE BONDS--14.6%
Arizona State Transit Highway Revenue NCL 5.000 7/1/2014 $1,500,000 1,629,315
Broward County FL Resource Recovery 5.000 12/1/2007 1,000,000 1,042,060
California State Department of Water Resources Power Supply NCL 5.500 5/1/2010 250,000 272,683
Camden NJ Cooper Hospitals NCL 5.600 2/15/2007 175,000 177,795
Illinois HEFA Condell Medical Center 6.000 5/15/2010 500,000 530,600
Illinois HEFA Northwestern University 5.050 11/1/2032 725,000 773,481
Illinois DFA Depaul University NCL 5.500 10/1/2011 1,000,000 1,087,360
Illinois Financial Authority Student Housing Revenue NCL 5.000 6/1/2012 1,160,000 1,202,978
Indiana Health Facility Financing Authority Revenue 5.000 11/1/2011 500,000 532,200
Lubbock TX Health Facilities Development St. Joseph Healthcare System 5.000 7/1/2008 2,000,000 2,102,900
Mass DFA Williston School 6.000 10/1/2013 225,000 237,614
Mass HEFA Partners NCL 5.000 7/1/2012 1,250,000 1,339,175
Michigan State Hospital Finance Authority 5.250 11/15/2010 1,000,000 1,062,230
New Hampshire HEFA Monadnock Hospital 5.250 10/1/2007 280,000 279,675
New Jersey State Transportation 5.250 12/15/2014 500,000 548,945
New Mexico State Hospital Equipment Loan
Revenue Presbyterian Healthcare Services 5.750 8/1/2012 1,000,000 1,103,450
New York Medical Center St. Luke's FHA 5.600 8/15/2013 215,000 221,697
Oregon State Department Transit Highway User Tax Revenue NCL 5.000 11/15/2013 1,000,000 1,085,090
Puerto Rico Electric Power Authority Revenue (c) 5.500 7/1/2016 500,000 566,840
Scranton PA Allied Rehabilitation 7.125 7/15/2005 245,000 245,512
--------------
16,041,600
--------------
SPECIAL REVENUES--3.9%
California State Economic Recovery 5.250 7/1/2012 1,500,000 1,647,375
California State Economic Recovery 3.500 7/1/2023 1,000,000 1,008,820
California State Economic Recovery NCL 5.250 7/1/2014 1,000,000 1,098,940
Jicarilla NM Apache Nation Revenue 5.000 9/1/2013 500,000 524,810
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4,279,945
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TOTAL BONDS (Cost $106,057,038) 106,765,828
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The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--1.7%
SHORT-TERM BONDS--1.6%
Idaho HFA St. Luke's Medical Center FSA (b) 2.270% 7/1/2030 $ 150,000 $ 150,000
Indiana Health Facility Financing Authority (b) 2.330 3/1/2030 400,000 400,000
University of North Carolina Hospital Chapel Hill Revenue (b) 2.270 2/15/2031 1,200,000 1,200,000
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1,750,000
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INVESTMENT COMPANIES--0.1% SHARES
--------
Wells Fargo National Tax-Free Money Market Fund 90,430 90,430
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TOTAL SHORT-TERM INVESTMENTS (Cost $ 1,840,430) 1,840,430
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TOTAL INVESTMENTS 98.7%--(COST $107,897,468) 108,606,258
OTHER ASSETS, LESS LIABILITIES--1.3% 1,418,117
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NET ASSETS--100% $ 110,024,375
==============
NOTES TO SCHEDULE OF INVESTMENTS:
AMBAC--American Municipal Bond Assurance Corp.
AMT--Income from bond subject to Alternative Minimum Tax
COP--Certification of Participation
DFA--Development Finance Agency
FGIC--Financial Guaranty Insurance Co.
FHA--Federal Housing Authority
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GNMA--Government National Mortgage Association
HEFA--Health & Educational Facilities Authority
HFA--Housing Finance Authority
IBC--Insured Bond Certificate
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
NCL--Non-callable
SFM--Single Family Mortgage
VA--Veterans Administration
(a) Zero coupon security.
(b) Variable Rate Security; rate indicated is as of 3/31/05. Variable rate
securities that reset monthly or more frequently are considered short-term
securities for reporting purposes.
(c) Delayed delivery security.
At March 31,2005 , the Fund held the following open swap agreements:
NOTIONAL AMOUNT EXPIRATION DATE DESCRIPTION VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
1,500,000 USD 5/22/2015 Agreement With JPMorganChase dated 2/17/05 to pay the $24,470
notional amount multiplied by a fixed rate of 3.632% and
receive the notional amount multiplied by the quarterly average
of the weekly floating TBMA-Muni Swap Index.
1,140,000 USD 5/18/2015 Agreement With JPMorganChase dated 3/18/05 to pay the (147)
notional amount multiplied by a fixed rate of 3.837% and
receive the notional amount multiplied by the quarterly average
of the weekly floating TBMA-Muni Swap Index.
-------
$24,323
=======
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (cost $107,897,468) $108,606,258
Receivable for Fund shares sold 307,980
Interest receivable 1,327,208
Receivable for investments sold 1,601,565
Swap contracts, at value (Note 6) 24,323
Prepaid expenses 15,053
------------
Total assets 111,882,387
LIABILITIES
Payable for investments purchased $ 1,613,985
Payable for Fund shares redeemed 117,399
Distributions payable 78,506
Accrued accounting, custody, administration and transfer agent fees (Note 2) 23,191
Accrued Trustees' fees and expenses (Note 2) 7,938
Other accrued expenses and liabilities 16,993
--------------
Total liabilities 1,858,012
------------
NET ASSETS $110,024,375
============
NET ASSETS CONSIST OF:
Paid-in capital $109,398,678
Accumulated net realized loss (125,946)
Undistributed net investment income 18,530
Net unrealized appreciation 733,113
------------
TOTAL NET ASSETS $110,024,375
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 5,087,328
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding)
$ 21.63
============
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income $2,137,100
EXPENSES
Investment advisory fee (Note 2) $ 219,469
Accounting, custody, administration, and transfer agent fees (Note 2) 74,015
Professional fees 21,232
Registration fees 10,747
Trustees' fees and expenses (Note 2) 15,747
Insurance expense 5,343
Miscellaneous expenses 8,090
-----------
Total expenses 354,643
DEDUCT:
Waiver of investment advisory fee (Note 2) (107,740)
-----------
Net expenses 246,903
----------
Net investment income 1,890,197
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities (113,456)
Swap contracts (12,500)
-----------
Net realized loss (125,956)
Change in unrealized appreciation (depreciation) on:
Investment securities (1,808,209)
Swap contracts 44,007
-----------
Net change in unrealized appreciation (depreciation) (1,764,202)
----------
Net realized and unrealized loss on investments (1,890,158)
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 39
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
MARCH 31, 2005 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2004
------------------ ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income $ 1,890,197 $ 3,099,510
Net realized gain (loss) (125,956) 340,187
Net change in unrealized appreciation (depreciation) (1,764,202) (1,182,126)
-------------- --------------
Net increase in net assets from operations 39 2,257,571
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (1,889,774) (3,101,811)
From net realized gains on investments (224,030) (1,895,222)
-------------- --------------
Total distributions to shareholders (2,113,804) (4,997,033)
-------------- --------------
FUND SHARE TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 12,192,495 69,591,991
Value of shares issued to shareholders in reinvestment of distributions 1,623,792 3,848,008
Cost of shares redeemed (13,564,731) (29,319,017)
-------------- --------------
Net increase (decrease) in net assets from Fund share transactions 251,556 44,120,982
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (1,862,209) 41,381,520
NET ASSETS
At beginning of period 111,886,584 70,505,064
-------------- --------------
At end of period (including undistributed
net investment income of $18,530 and $18,107) $110,024,375 $111,886,584
============ ============
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2005 ---------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- --------- ---------- --------- ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 22.05 $ 22.78 $ 22.78 $ 22.04 $ 21.11 $ 21.11
----------- --------- ---------- ---------- ---------- ----------
FROM OPERATIONS:
Net investment income (loss)(*(1)) 0.38 0.69 0.81 0.90 0.93 0.95
Net realized and unrealized gains
(loss) on investments (0.37) (0.08) 0.07 0.74 0.93 0.06
----------- --------- ---------- ---------- ---------- ----------
Total from operations 0.01 0.61 0.88 1.64 1.86 1.01
----------- --------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.38) (0.71) (0.81) (0.90) (0.93) (0.95)
From net realized gains on investments (0.05) (0.63) (0.07) -- -- (0.06)
----------- --------- ---------- ---------- ---------- ----------
Total distributions to shareholders (0.43) (1.34) (0.88) (0.90) (0.93) (1.01)
----------- --------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 21.63 $ 22.05 $ 22.78 $ 22.78 $ 22.04 $ 21.11
=========== ========= ========== ========== ========== ==========
TOTAL RETURN ((+)) 0.00% 2.76% 3.88% 7.65% 9.00% 4.91%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily
net assets)(*) 0.45%((+)(+)) 0.50% 0.65% 0.65% 0.62% 0.64%
Net Investment Income (to average
daily net assets)(*) 3.45%((+)(+)) 3.16% 3.58% 4.09% 4.30% 4.54%
Portfolio Turnover 18%((+)(+)(+)) 72% 42% 17% 43% 28%
Net Assets, End of Period
(000's omitted) $ 110,024 $ 111,887 $ 70,505 $ 82,162 $ 82,358 $ 79,329
- -------
* For the periods indicated, the investment advisor 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 ratios would have been:
Net investment income per share( (1)) $ 0.36 $ 0.65 $ 0.80 $ 0.90 N/A N/A
Ratios (to average daily net assets):
Expenses 0.65%((+)(+)) 0.68% 0.68% 0.66% N/A N/A
Net investment income 3.25%((+)(+)) 2.97% 3.55% 4.08% N/A N/A
(1) Calculated based on average shares outstanding.
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods of less that one year have not been annualized.
(+)(+) Calculated on an annualized basis.
(+)(+)(+) Not annualized.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT 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 Intermediate Tax Exempt Bond Fund (the "Fund") is a
separate non-diversified investment series of the Trust.
The objective of the Fund is to provide a high level of interest income
exempt from federal income taxes, while seeking preservation of capital.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in tax exempt municipal
securities issued by states, territories, and possessions of the United
States, the District of Columbia and their political subdivisions, agencies
and instrumentalities.
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
Tax-exempt bonds and notes are priced at fair value on the basis of
valuations furnished by an independent pricing service or dealers, approved
by the Trustees. Such services or dealers determine valuations for normal
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships,
generally recognized by institutional traders, between securities.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost. 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.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions on shares of the Fund are declared daily from net investment
income and distributed monthly. Distributions from capital gains, if any,
will be distributed annually by the Fund. Distributions from net investment
income and capital gains, if any, are automatically reinvested in
additional shares of the applicable Fund unless the shareholder elects to
receive them in cash. Distributions are recorded on the ex-dividend date.
Income and capital gains 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 reclassifications, are primarily due to differing
treatments for adjustments under the AICPA audit guide and distributions
payable.
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income (loss), 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.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT 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.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory, administrative
services, and general office facilities, is paid at an 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 litigation,
indemnification and other extraordinary expenses) to 0.45% of the Fund's
average daily net assets for the period ended March 31, 2005. Pursuant to
this agreement, for the period ended March 31, 2005, Standish Mellon
voluntarily waived a portion of its advisory fee in the amount of $107,740.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time.
The Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of
Dreyfus, 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 paid $12,900 during the
period ended March 31, 2005.
The Fund compensates Mellon Bank, N.A., an affiliate of Standish Mellon
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 paid $39,295 during the period
ended March 31, 2005.
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 March 31, 2005 were $22,063,917 and
$19,109,332, respectively. For the period ended March 31, 2005, the Fund
did not purchase or sell any long-term U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest. Transactions in Fund
shares were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
-------------- ------------------
Shares sold 556,186 3,137,202
Shares issued to shareholders in reinvestment of distributions 74,060 174,989
Shares redeemed (617,258) (1,332,957)
-------- ----------
Net increase (decrease) 12,988 1,979,234
======== ==========
At March 31, 2005, the Fund had one shareholder of record owning approximately
46% of the Fund's outstanding shares. Investment activity of this shareholder
could have a material impact on the Fund.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND 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.
Dividends paid by the Fund from net interest earned on tax-exempt municipal
bonds are not includable by shareholders as gross income for federal income
tax purposes because the Fund intends to meet certain requirements of the
Internal Revenue Code applicable to regulated investment companies which
will enable the Fund to pay exempt-interest dividends.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2004, as computed on a federal
income tax basis, were as follows:
Aggregate cost $107,897,468
============
Gross unrealized appreciation $ 1,813,897
Gross unrealized depreciation (1,105,107)
------------
Net unrealized appreciation $ 708,790
============
(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 Fund may trade the following financial instruments with off-balance
sheet risk:
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 March 31, 2005, the Fund did not hold any outstanding futures contracts
SWAP AGREEMENTS
The Fund may invest in swap agreements. A swap is an agreement to exchange
the return generated by one instrument for the return generated by another
instrument. The Fund may enter into interest rate and credit default swap
agreements to manage its exposure to interest rates and credit risk.
Interest rate swap agreements involve the exchange by the Fund with another
party of their respective commitments to pay or receive interest, e.g., an
exchange of floating rate payments for fixed rate payments with respect to
a notional amount of principal. In a credit default swap, one party makes a
stream of payments to another party in exchange for the right to receive a
specified return in the event of a default by a third party on its
obligation. The Fund may use credit default swaps to provide a measure of
protection against defaults of issuers (i.e., to reduce risk where the Fund
owns or has exposure to the corporate or sovereign issuer) or to take an
active long or short position with respect to the likelihood of a
particular corporate or
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 realized gain in the Statement of Operations. 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 March 31, 2005, the Fund had swap agreements outstanding. See Schedule
of Investments for futher detail.
(7) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase securities on a "when-issued," "delayed delivery" or
"forward commitment" basis. Delivery and payment for such securities
typically take longer than the customary settlement periods. The payment
obligation and interest rates on the securities are fixed at the time the
fund enters into such commitments, but interest will not accrue to the fund
until delivery of and payment for the securities. Although the Fund will
only make commitments to purchase when-issued, delayed delivery or forward
commitment securities with the intention of actually acquiring the
securities, the fund may sell the securities before the settlement date if
deemed advisable by the investment adviser. The Fund offsets in its
Statement of Assets and Liabilities the payables and receivables associated
with the purchases and sales of when-issued, delayed delivery or forward
commitment securities that have the same coupon, settlement date and
broker. When-issued, delayed delivery or forward commitment securities that
are purchased from or sold to different brokers are reflected as both
payables and receivables in the Fund's Statement of Assets and Liabilities
Unless the Fund has entered into an offsetting agreement to sell the
securities, cash or liquid obligations with a market value at least equal
to the amount of the Fund's commitment will be segregated with the Fund's
custodian bank. If the market value of these securities declines,
additional cash or securities will be segregated daily so that the
aggregate market value of the segregated securities equals the amount of
the Fund's commitment.
Securities purchased on a when-issued, delayed delivery or forward
commitment basis may have a market value on delivery that is less than the
amount paid by the fund. The Fund may also sell portfolio securities on a
delayed delivery basis. The market value of the securities when they are
delivered may be more than the amount to be received by the Fund.
At March 31, 2005 the Fund held delayed delivery securities. See Schedule
of Investments for further detail.
(8) LINE OF CREDIT:
The Fund, other funds in the Trust and subtrusts in the Mellon
Institutional Funds Master Portfolio (the "Portfolio 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 facility fee,
computed at an annual rate of .060 of 1% on the committed amount, is
allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, the expense related to
the facility fee was $1,804 for the Fund.
During the period ended March 31, 2005, the Fund had average borrowings
outstanding of $200,923 on a total of thirteen days and incurred $200 of
interest expense.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that the Fund's Board of
Trustees, including a majority of its Trustees who are not affiliated with
the Fund's investment adviser or underwriter (the "Independent Trustees")
voting separately, approve the Fund's advisory agreement and the related
fees on an annual basis. In their most recent deliberations concerning
their decision to approve the continuation of the Fund's investment
advisory agreement, the Fund's Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from
the Fund's investment adviser, Standish Mellon Asset Management Company LLC
("Standish Mellon"), a broad range of information in response to a written
request prepared on their behalf by their own legal counsel. The
Independent Trustees met alone in a private session with their legal
counsel on September 15, 2004 to review these materials and to discuss the
proposed continuation of the Fund's advisory agreement. The entire Board
then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: Standish Mellon's audited balance sheets
and income statements, as well as a profitability analysis of Standish
Mellon, including a separate presentation of Standish Mellon's
profitability relative to that of several publicly traded investment
advisers;
(ii) Management Teams and Operations: Standish Mellon's Form ADV, as well
as information concerning Standish Mellon's executive management, portfolio
management, and client service personnel and overall organizational
structure, insurance coverage, brokerage and soft dollar policies and
practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and Standish
Mellon's separate account advisory fee schedules;
(iv) Specific Facts Relating to the Fund: Standish Mellon's commentary on
the Fund's performance, as well as a Fund's "fact sheets" prepared by
Standish Mellon providing salient data about the Fund, including Fund
holdings, strategies, recent market conditions and outlook, as well as
Standish Mellon's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to Standish Mellon provided therein are fair
and reasonable, and they approved the continuation of the agreement for a
one year period. Some of the factors that figured prominently in the
Trustees' determination are described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered the nature, scope and quality of the overall services
provided to the Fund by Standish Mellon. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust Standish Mellon, under the supervision
of the Trustees, to manage the portion of their assets invested in the
Fund.
Among the specific factors the Trustees reviewed were the portfolio
management, administrative, compliance and related services provided by
Standish Mellon. The Trustees determined that the services provided were of
high quality and at least commensurate with industry standards.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
The Trustees observed that Standish Mellon had recently implemented a team
approach to portfolio management of its mutual funds, requiring that each
fund have at least two portfolio managers, and expressed their support for
this change. The Trustees reviewed the background and experience of the
Fund's two portfolio managers and also met with senior management of
Standish Mellon to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of Standish Mellon's investment staff,
technological infrastructure and overall responsiveness to changes in
market conditions.
The Board determined that Standish Mellon had the expertise and resources
to manage the Fund effectively.
INVESTMENT PERFORMANCE
The Board compared the relative investment performance of the Fund against
a peer group of investment companies selected by Standish Mellon with input
from the Trustees. The Board also compared the Fund's investment
performance against the average performance of a larger universe of funds
regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
Based on the Lipper materials provided at the September 15, 2004 meeting,
the Fund's performance for the 1-, 3- and 5-year periods ended July 31,
2004 was 4.00%, 4.53% and 5.18%. The Trustees found these to be slightly
below the average results of the Fund's peer group of similar funds, which
were 4.54%, 4.63% and 5.34% for the same periods.
ADVISORY FEE AND OTHER EXPENSES
The Board considered the advisory fee rate paid by the Fund to Standish
Mellon. The Fund's contractual advisory fee was 0.40%, in the 1st (best)
quintile of its peer group of funds, the median fee of which was 0.535%.
The Fund's net advisory fee, after giving effect to fee waivers, was 0.375%
and below the peer group median net advisory fee of 0.45%. Based on the
factors discussed herein, the Board determined that the Fund's advisory fee
is reasonable relative to its peer group averages, both with and without
giving effect to fee waivers.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of Standish Mellon. Based on the
additional scope and complexity of the services provided and
responsibilities assumed by these advisers with respect to the Fund
relative to these other types of clients, the Board concluded that the fees
payable under the advisory agreement were reasonable.
The Board considered the Fund's expense ratio and compared the expense
ratio to its peer group of similar funds. They found that the Fund's actual
net expense ratio of 0.65% (after giving effect to expense limitations) was
comparable to the median net expense ratio of the peer group of 0.638%,
notwithstanding the fact that most of the other funds in the peer group
were significantly larger than the Fund.
STANDISH MELLON'S PROFITABILITY
The Board considered Standish Mellon's profitability in managing the Fund
and the Mellon Institutional Funds as a group, as well as the methodology
used to compute such profitability, and the various direct and indirect
expenses incurred by Standish Mellon or its affiliated investment adviser,
The Boston Company Asset Management ("TBCAM") in managing the Fund and
other Funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability
information submitted to them by Standish Mellon, Standish Mellon incurred
losses in 2003 in operating many of the investment companies in the Mellon
family of funds, including the Fund, and achieved only marginal
profitability as to several other funds. The Trustees noted that Standish
Mellon's profitability in operating the Fund had declined from a very
slight profit in 2002 to a modest loss in 2003.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
ECONOMIES OF SCALE
While the Board recognized that economies of scale might be realized as the
Fund grows, the Trustees noted that although the Fund's asset size
fluctuated in recent years, the Fund nevertheless remained small
(approximately $69 million - $109 million) relative to its peers. The Board
concluded that, considering current asset growth prospects, the
implementation of fee breakpoints or other fee reductions was not necessary
at this time. The Trustees intend to review the need for breakpoints in
connection with future investment advisory agreement approval
deliberations.
OTHER BENEFITS
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Funds. Mellon affiliates provide
custodial, administrative, transfer agency and securities lending services
to the Funds. In each case, such affiliates were selected on the basis of a
comparative analysis of their capabilities and fees relative to those of
unaffiliated competitors. In addition, the Trustees, including a majority
of the Independent Trustees, conduct an examination annually of each such
arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Fund; (iii) the nature and quality of the services
provided by the affiliate pursuant to the agreement are at least equal to
those provided by other, unaffiliated firms offering the same or similar
services for similar compensation; and (iv) the fees payable by the Fund to
the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for
services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Fund and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to Standish Mellon provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for a
one year period.
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 TRUSTEE
PRINCIPAL PORTFOLIOS IN OTHER REMUNERATION
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS (PERIOD ENDED
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY MARCH 31,
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None $1,757
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 31 None $1,899
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, 31 None $1,757
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 31 None $1,757
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
INTERESTED TRUSTEES
Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 31 None $0
Mellon Institutional and Chief and Chief Operating Officer,
Asset Management Executive 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
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME TERM OF OFFICE
ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mello
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0933SA0305
Semiannual Report STANDISH MELLON MASSACHUSETTS
INTERMEDIATE TAX EXEMPT BOND FUND
MARCH 31, 2005 (UNAUDITED)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund' s historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund' s Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund' s proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC' s web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD((+))
ACCOUNT VALUE ACCOUNT VALUE OCTOBER 1, 2004
OCTOBER 1, 2004 MARCH 31, 2005 TO MARCH 31, 2005
- ----------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $ 998.40 $3.24
Hypothetical (5% return
per year before expenses) $1,000.00 $1,021.69 $3.28
- -------
((+)) EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.65%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365
(TO REFLECT THE ONE-HALF YEAR PERIOD).
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
PORTFOLIO INFORMATION AS OF MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE OF
TOP TEN HOLDINGS(*) RATE MATURITY NET ASSETS
- ----------------------------------------------------------------------------------------------------------
Commonwealth of Massachusetts NCL 5.500 12/1/2011 6.3
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 3.2
Mass HEFA Tufts University NCL 5.500 8/15/2015 3.0
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 3.0
Foxborough MA Stadium 5.750 6/1/2011 3.0
Mass Water Resource Authority NCL 6.500 7/15/2009 2.9
Mass Port Authority MBIA NCL 5.750 7/1/2012 2.8
Mass Special Obligation NCL 5.500 6/1/2013 2.8
Mass Port Authority 5.750 7/1/2012 2.8
Commonwealth of Massachusetts AMBAC NCL AMT 5.750 8/1/2010 2.8
----
32.6
* Excluding short-term investments.
PERCENTAGE OF
ECONOMIC SECTOR ALLOCATION NET ASSETS
- --------------------------------------------
General Obligations 25.6
Government Backed 10.3
Insured Bonds 21.9
Letter of Credit 1.5
Revenue 39.7
Short-term and Net Other Assets 1.0
-----
100.0
SUMMARY OF COMBINED RATINGS
- --------------------------------------------
Quality Breakdown Value (%)
- --------------------------------------------
AAA 33.4
AA 41.3
A 9.1
BBB 16.2
-----
TOTAL 100.0
Based on ratings from Standard & Poor's and/or Moody's Investors Services. If a
security receives split (different) ratings from multiple rating organizations,
the Fund treats the security as being rated in the higer rating category.
The Fund is actively managed. Current holdings may be different than those
presented above.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
BONDS--99.0%
GENERAL OBLIGATONS--25.6%
Commonwealth of Massachusetts NCL 6.000% 11/1/2011 $ 850,000 $ 964,699
Commonwealth of Massachusetts NCL 5.500 12/1/2011 2,250,000 2,489,670
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 1,000,000 1,177,640
Mass Bay Transportation Authority FGIC 7.000 3/1/2011 1,055,000 1,247,327
Mass College Building Authority 7.500 5/1/2007 450,000 491,328
Mass College Building Authority 7.500 5/1/2008 250,000 282,775
Massachusetts State NCL 5.500 10/1/2016 500,000 560,700
Puerto Rico Commonwealth Fuel Sales Tax Revenue (a) 5.000 7/1/2018 750,000 786,705
Puerto Rico Commonwealth NCL 6.500 7/1/2013 500,000 585,435
Puerto Rico Public Building Authority Revenue 5.000 7/1/2028 250,000 264,275
Puerto Rico Public Financial Corp. LOC:
Government Development Bank for Puerto Rico 5.750 8/1/2027 250,000 274,160
University of Mass Building Authority State Guarantee 6.625 5/1/2007 1,000,000 1,074,990
-------------
10,199,704
-------------
GOVERNMENT BACKED--10.3%
Commonwealth of Massachusetts--Series C 5.250 8/1/2009 835,000 901,516
Commonwealth of Massachusetts NCL--Series B 6.500 8/1/2008 550,000 606,469
Commonwealth of Massachusetts Prerefunded 6.000 6/1/2014 565,000 631,636
Commonwealth of Massachusetts Prerefunded 5.625 6/1/2018 500,000 553,925
Mass DFA Massachusetts College of Pharmacy 5.750 7/1/2006 280,000 286,905
Mass HEFA Dana Farber Cancer Institute 6.500 12/1/2006 650,000 680,004
Mass Revenue Rail Connections, Inc. (b) 0.000 7/1/2022 500,000 190,945
Massachusetts State Water Pollution Abatement Trust Prerefunded 5.250 8/1/2013 245,000 267,672
-------------
4,119,072
-------------
HOUSING REVENUE--0.0%
Mass HFA Multi-Family Unit FNMA 6.300 10/1/2013 15,000 15,040
-------------
INDUSTRIAL DEVELOPMENT--3.3%
Boston MA Industrial Development Financing Authority AMT 7.375 5/15/2015 750,000 754,170
Mass DFA Waste Management Resource Recovery AMT 6.900 12/1/2029 500,000 557,055
-------------
1,311,225
-------------
INSURED BONDS--21.9%
Commonwealth of Massachusetts AMBAC NCL AMT 5.750 8/1/2010 1,000,000 1,113,480
Commonwealth of Massachusetts MBIA NCL 5.500 11/1/2012 685,000 764,803
Mass Bay Transportation Authority FGIC 7.000 3/1/2014 900,000 1,088,118
Mass DFA May Institute Asset Guaranty 5.500 9/1/2005 175,000 176,985
Mass HEFA Mass Eye and Ear ACA 5.000 7/1/2005 660,000 663,260
Mass HEFA Partners FSA 5.500 7/1/2007 635,000 670,370
Mass Port Authority MBIA NCL AMT 5.750 7/1/2007 500,000 525,650
Mass Port Authority MBIA NCL 5.750 7/1/2012 1,000,000 1,122,330
Mass Special Obligation NCL 5.000 12/15/2013 500,000 537,525
Mass Special Obligation Revenue Refunding Notes NCL 5.000 12/15/2011 500,000 535,755
Puerto Rico Commonwealth Highway & Transportation Authority MBIA 5.500 7/1/2013 640,000 723,558
Puerto Rico Electric Power Authority Revenue (c) 5.500 7/1/2016 250,000 283,420
State of Massachusetts 5.250 8/1/2020 500,000 554,060
-------------
8,759,314
-------------
LEASE REVENUE--1.9%
Puerto Rico Housing Bank Appropriation 5.125 12/1/2005 750,000 760,335
-------------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY RATE MATURITY VALUE (NOTE 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
LOC--1.5%
Boston MA Industrial Development Financing Authority LOC:
Bank of New York AMT 5.875% 4/1/2030 $ 435,000 $ 442,943
Mass IFA Amesbury LOC: Citizens Bank AMT 5.910 9/1/2005 140,000 141,242
-------------
584,185
-------------
REVENUE BONDS--23.3%
Mass DFA Biomedical Research 6.000 8/1/2011 550,000 600,050
Mass DFA Deerfield Academy 5.000 10/1/2013 400,000 432,232
Mass DFA Hampshire College 5.150 10/1/2014 450,000 459,140
Mass DFA Massachusetts College of Pharmacy and Allied Health Sciences NCL 5.000 7/1/2009 425,000 440,219
Mass DFA Williston School 6.000 10/1/2013 380,000 401,303
Mass HEFA Baystate Medical Center NCL 5.000 7/1/2010 250,000 261,815
Mass HEFA Caritas Christi NCL 5.500 7/1/2005 500,000 502,575
Mass HEFA Milford Hospital NCL 5.250 7/15/2007 600,000 612,594
Mass HEFA No. Adams Regional Hospital 6.750 7/1/2009 100,000 103,997
Mass HEFA Tufts University NCL 5.500 8/15/2015 1,050,000 1,183,424
Mass IFA Wentworth Institute 5.050 10/1/2005 290,000 292,636
Mass Port Authority 6.000 7/1/2011 1,000,000 1,101,510
Mass Port Authority 5.750 7/1/2012 1,010,000 1,120,070
Mass Water Resource Authority NCL 6.500 7/15/2009 1,000,000 1,127,910
Massachusetts State Water Pollution Abatement Trust 5.250 8/1/2013 5,000 5,453
Puerto Rico Industrial Tour Ed Anamendez University 5.000 2/1/2006 650,000 658,489
-------------
9,303,417
-------------
SPECIAL REVENUES--11.2%
Foxborough MA Stadium 5.750 6/1/2011 1,050,000 1,170,341
Mass Bay Transportation Authority Sales Tax Revenue 5.250 7/1/2010 250,000 272,888
Mass Bay Transportation Authority Sales Tax Revenue 5.250 7/1/2021 750,000 837,278
Mass Special Obligation NCL 5.500 6/1/2013 1,000,000 1,120,440
Virgin Islands Public Finance Authority 5.625 10/1/2010 1,000,000 1,052,676
-------------
4,453,623
-------------
TOTAL BONDS (Cost $38,309,560) 39,505,915
-------------
SHORT-TERM INVESTMENTS--0.5%
SHORT-TERM BONDS--0.3%
Mass DFA Boston University (a) 2.270 10/1/2042 100,000 100,000
INVESTMENT COMPANIES--0.2% SHARES
- -------------------------- ------
Federated Massachusetts Municipal Cash Trust Fund 81,133 81,133
-----------
TOTAL SHORT-TERM INVESTMENTS (Cost $181,133) 181,133
-----------
TOTAL INVESTMENTS--99.5% (COST $38,490,693) 39,687,048
OTHER ASSETS, LESS LIABILITIES--0.5% 221,136
-----------
NET ASSETS--100% $39,908,184
===========
NOTES TO SCHEDULE OF INVESTMENTS:
ACA--American Capital Access Holdings, Inc.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
AMBAC--American Municipal Bond Assurance Corp.
AMT--Income from bond subject to Alternative Minimum Tax
DFA--Development Finance Agency
FGIC--Financial Guaranty Insurance Co.
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
HEFA--Health & Educational Facilities Authority
HFA--Housing Finance Authority
IFA--Industrial Finance Authority
LOC--Letter of Credit
MBIA--Municipal Bond Insurance Association
NCL--Non-callable
(a) Variable Rate Security; rate indicated is as of 3/31/05. Variable rate
securities that reset monthly or more frequently are considered short-term
securities for reporting purposes.
(b) Zero coupon security.
(c) Delayed delivery security.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (Note 1A) (cost $38,490,693) $39,687,048
Cash 2,138
Receivable for Fund shares sold 215
Interest receivable 572,373
Prepaid expenses 7,286
-----------
Total assets 40,269,060
LIABILITIES
Payable for investments purchased $ 278,628
Distributions payable 42,263
Payable for Fund shares redeemed 5,000
Accrued accounting, custody, administration and transfer agent fees (Note 2) 16,875
Accrued Trustees' fees and expenses (Note 2) 2,565
Other accrued expenses and liabilities 15,545
-------------
Total liabilities 360,876
-----------
NET ASSETS $39,908,184
===========
NET ASSETS CONSIST OF:
Paid-in capital $38,678,579
Accumulated net realized gain 10,996
Undistributed net investment income 22,254
Net unrealized appreciation 1,196,355
-----------
TOTAL NET ASSETS $39,908,184
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,897,868
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 21.03
===========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Interest income $ 925,814
EXPENSES
Investment advisory fee (Note 2) $ 85,075
Accounting, custody, administration and transfer agent fees (Note 2) 51,243
Professional fees 18,647
Registration fees 3,141
Trustees' fees and expenses (Note 2) 5,078
Insurance expense 5,062
Miscellaneous expenses 8,237
- ---------
Total expenses 176,483
DEDUCT:
Waiver of investment advisory fee (Note 2) (38,237)
- ---------
Net expenses 138,246
----------
Net investment income 787,568
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss)
Investment securities 26,397
- ---------
Net realized gain 26,397
Change in unrealized appreciation (depreciation)
Investment securities (861,119)
- ---------
Net change in unrealized appreciation (depreciation) (861,119)
----------
Net realized and unrealized gain (loss) on investments (834,722)
----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (47,154)
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
MARCH 31, 2005 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2004
----------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income $ 787,568 $ 1,677,542
Net realized gains 26,397 270,520
Net change in unrealized appreciation (depreciation) (861,119) (706,976)
------------ ------------
Net increase (decrease) in net assets from operations (47,154) 1,241,086
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 1C)
From net investment income (785,078) (1,670,668)
From net realized gains on investments (248,671) (1,266,678)
------------ ------------
Total distributions to shareholders (1,033,749) (2,937,346)
------------ ------------
FUND SHARE TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 440,818 2,234,159
Value of shares issued to shareholders in reinvestment of distributions 749,210 2,294,786
Cost of shares redeemed (4,280,502) (10,485,190)
------------ ------------
Net decrease in net assets from Fund share transactions (3,090,474) (5,956,245)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (4,171,377) (7,652,505)
NET ASSETS
At beginning of period 44,079,561 51,732,066
------------ ------------
At end of period (including undistributed
net investment income of $22,254 and $19,764) $ 39,908,184 $ 44,079,561
============ ============
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2005 ---------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- --------- ---------- --------- ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $ 21.58 $ 22.36 $ 22.52 $ 21.89 $ 20.89 $ 20.85
--------- --------- --------- --------- --------- ---------
FROM OPERATIONS:
Net investment income(* (1)) 0.40 0.79 0.82 0.88 0.91 0.92
Net realized and unrealized gains
(loss) on investments (0.43) (0.21) (0.12) 0.63 1.00 0.04
--------- --------- --------- --------- --------- ---------
Total from operations (0.03) 0.58 0.70 1.51 1.91 0.96
--------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.40) (0.79) (0.82) (0.88) (0.91) (0.92)
From net realized gains on investments (0.12) (0.57) (0.04) -- -- --
--------- --------- --------- --------- --------- ---------
Total distributions to shareholders (0.52) (1.36) (0.86) (0.88) (0.91) (0.92)
--------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 21.03 $ 21.58 $ 22.36 $ 22.52 $ 21.89 $ 20.89
========= ========= ========= ========= ========= =========
TOTAL RETURN((+)) (0.16)% 2.64% 3.20% 7.09% 9.32% 4.72%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)(*) 0.65%((+)(+)) 0.65% 0.65% 0.65% 0.65% 0.65%
Net Investment Income (to average
daily net assets)(*) 3.71%((+)(+)) 3.62% 3.68% 4.01% 4.23% 4.43%
Portfolio Turnover 4%((+)(+)(+)) 16% 25% 13% 22% 23%
Net Assets, End of Period (000's omitted) $ 39,908 $ 44,080 $ 51,732 $ 65,726 $ 64,246 $ 64,340
- -------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the Fund
for all or a portion of its operating expenses. If this voluntary action had not
been taken, the investment income per share and the ratios would have been:
Net investment income per share (1) $ 0.38 $ 0.77 $ 0.81 $ 0.87 $ 0.91 N/A
Ratios (to average daily net assets):
Expenses 0.83%((+)(+)) 0.75% 0.70% 0.68% 0.65% N/A
Net investment income 3.53%((+)(+)) 3.52% 3.63% 3.98% 4.23% N/A
(1) Calculated based on average shares outstanding.
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods less than one year have not been annualized.
(+)(+) Calculated on an annualized basis.
(+)(+)(+) Not annualized.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT 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 Massachusetts Intermediate Tax Exempt Bond Fund (the
"Fund") is a separate non-diversified investment series of the Trust.
The objective of the Fund is to provide a high level of interest income
exempt from Massachusetts and federal income taxes, while seeking
preservation of capital. The Fund seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in tax
exempt municipal securities of Massachusetts issuers and other qualifying
issuers (such as Puerto Rico, the U.S. Virgin Islands, and Guam).
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
Tax-exempt bonds and notes are priced at fair value on the basis of
valuations furnished by an independent pricing service or dealers, approved
by the Trustees. Such services or dealers determine valuations for normal
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships,
generally recognized by institutional traders, between securities.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost. 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.
C. DISTRIBUTIONS TO SHAREHOLDERS
Distributions on shares of the Fund are declared daily from net investment
income and distributed monthly. Distributions from capital gains, if any,
will be distributed annually by the Fund. Distributions from net investment
income and capital gains, if any, are automatically reinvested in
additional shares of the applicable Fund unless the shareholder elects to
receive them in cash. Distributions are recorded on the ex-dividend date.
Income and capital gains 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 reclassifications, are primarily due to differing
treatments for adjustments under the AICPA audit guide and distributions
payable.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income (loss), 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.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT 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.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to Standish Mellon Asset Management
Company LLC ("Standish Mellon"), a wholly-owned subsidiary of Mellon
Financial Corporation, for overall investment advisory, administrative
services, and general office facilities, is paid at an 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 litigation,
indemnification and other extraordinary expenses) to 0.65% of the Fund's
average daily net assets for the period ended March 31, 2005. Pursuant to
this agreement, for the period ended March 31, 2005, Standish Mellon
voluntarily waived a portion of its advisory fee in the amount of $38,237.
This agreement is voluntary and temporary and may be discontinued or
revised by Standish Mellon at any time.
The Fund compensates Dreyfus Transfer, Inc., a wholly owned subsidiary of
The Dreyfus Corporation, 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 paid
$9,258 during the period ended March 31, 2005.
The Fund compensates Mellon Bank, N.A., an affiliate of Standish Mellon,
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 paid $39,295 during the period
ended March 31, 2005.
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 March 31, 2005 were $1,763,119 and
$4,708,779, respectively. For the period ended March 31, 2005, the Fund did
not purchase or sell any long-term U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
-------------- ------------------
Shares sold 20,505 103,349
Shares issued to shareholders in reinvestment of distributions 35,050 106,046
Shares redeemed (200,279) (480,604)
-------- --------
Net decrease (144,724) (271,209)
======== ========
At March 31, 2005, the Fund had two shareholders of record owning approximately
31% and 11% of the Fund's outstanding shares. Investment activity of these
shareholders could have a material impact on the Fund.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND 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.
Dividends paid by the Fund from net interest earned on tax-exempt municipal
bonds are not includable by shareholders as gross income for federal income
tax purposes because the Fund intends to meet certain requirements of the
Internal Revenue Code applicable to regulated investment companies which
will enable the Fund to pay exempt-interest dividends.
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $ 38,490,693
============
Gross unrealized appreciation $ 1,339,333
Gross unrealized depreciation (142,978)
------------
Net unrealized appreciation $ 1,196,355
============
(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.
Since the Fund invests a substantial portion of its assets in issuers
located in one state, it will be more susceptible to factors adversely
affecting issuers of that state than would be a comparable general
tax-exempt mutual fund.
The Fund may trade the following financial instruments with off-balance
sheet risk:
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 March 31, 2005, the Fund did not hold any outstanding futures contracts
(7) DELAYED DELIVERY TRANSACTIONS:
The Fund may purchase securities on a "when-issued," "delayed delivery" or
"forward commitment" basis. Delivery and payment for such securities
typically take longer than the customary settlement periods. The payment
obligation and interest rates on the securities are fixed at the time the
Fund enters into such commitments, but interest will not accrue to the Fund
until delivery of and payment for the securities. The Fund may receive
compensation for such forgone interest. Although the Fund will only make
commitments to purchase when-issued, delayed delivery or forward commitment
securities with the intention of actually acquiring the securities, the
Fund may sell the securities before the settlement date if deemed advisable
by the investment adviser. The Fund offsets in its Statement of Assets and
Liabilities the payables and receivables associated with the purchases and
sales of when-issued, delayed delivery or forward commitment securities
that have the same coupon, settlement date and broker. When-issued, delayed
delivery or forward commitment securities that are purchased from or sold
to different brokers are reflected as both payables and receivables in the
Fund's Statement of Assets and Liabilities.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Unless the Fund has entered into an offsetting agreement to sell the
securities, cash or liquid obligations with a market value at least equal
to the amount of the Fund's commitment will be segregated with the Fund's
custodian bank. If the market value of these securities declines,
additional cash or securities will be segregated daily so that the
aggregate market value of the segregated securities equals the amount of
the Fund's commitment.
Securities purchased on a when-issued, delayed delivery or forward
commitment basis may have a market value on delivery that is less than the
amount paid by the Fund. The Fund may also sell portfolio securities on a
delayed delivery basis. The market value of the securities when they are
delivered may be more than the amount to be received by the Fund.
At March 31, 2005 the Fund held a delayed delivery security. See Schedule
of Investments for further detail.
(8) LINE OF CREDIT:
The Fund, other funds in the Trust and subtrusts in the Mellon
Institutional Funds Master Portfolio (the "Portfolio 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 facility fee,
computed at an annual rate of .060 of 1% on the committed amount, is
allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, the expense related to
the facility fee was $1,171 for the Fund.
During the period ended March 31, 2005, the Fund had average borrowings
outstanding of $108,682 on a total of seventeen days and incurred $137 of
interest expense.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that the Fund's Board of
Trustees, including a majority of its Trustees who are not affiliated with
the Fund's investment adviser or underwriter (the "Independent Trustees")
voting separately, approve the Fund's advisory agreement and the related
fees on an annual basis. In their most recent deliberations concerning
their decision to approve the continuation of the Fund's investment
advisory agreement, the Fund's Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from
the Fund's investment adviser, Standish Mellon Asset Management Company LLC
("Standish Mellon"), a broad range of information in response to a written
request prepared on their behalf by their own legal counsel. The
Independent Trustees met alone in a private session with their legal
counsel on September 15, 2004 to review these materials and to discuss the
proposed continuation of the Fund's advisory agreement. The entire Board
then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: Standish Mellon's audited balance sheets
and income statements, as well as a profitability analysis of Standish
Mellon, including a separate presentation of Standish Mellon's
profitability relative to that of several publicly traded investment
advisers;
(ii) Management Teams and Operations: Standish Mellon's Form ADV, as well
as information concerning Standish Mellon's executive management, portfolio
management, and client service personnel and overall organizational
structure, insurance coverage, brokerage and soft dollar policies and
practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and Standish
Mellon's separate account advisory fee schedules;
(iv) Specific Facts Relating to the Fund: Standish Mellon's commentary on
the Fund's performance, as well as a Fund's "fact sheets" prepared by
Standish Mellon providing salient data about the Fund, including Fund
holdings, strategies, recent market conditions and outlook, as well as
Standish Mellon's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to Standish Mellon provided therein are fair
and reasonable, and they approved the continuation of the agreement for a
one year period. Some of the factors that figured prominently in the
Trustees' determination are described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered the nature, scope and quality of the overall services
provided to the Fund by Standish Mellon. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust Standish Mellon, under the supervision
of the Trustees, to manage the portion of their assets invested in the
Fund.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio
management, administrative, compliance and related services provided by
Standish Mellon. The Trustees determined that the services provided were of
high quality and at least commensurate with industry standards.
The Trustees observed that Standish Mellon had recently implemented a team
approach to portfolio management of its mutual funds, requiring that each
fund have at least two portfolio managers, and expressed their support for
this change. The Trustees reviewed the background and experience of the
Fund's two portfolio managers and also met with senior management of
Standish Mellon to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of Standish Mellon's investment staff,
technological infrastructure and overall responsiveness to changes in
market conditions.
The Board determined that Standish Mellon had the expertise and resources
to manage the Fund effectively.
INVESTMENT PERFORMANCE
The Board compared the relative investment performance of the Fund against
a peer group of investment companies selected by Standish Mellon with input
from the Trustees. The Board also compared the Fund's investment
performance against the average performance of a larger universe of funds
regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
Based on the Lipper materials provided at the September 15, 2004 meeting,
the Fund's performance for the 1-, 3- and 5-year periods ended July 31,
2004 was 3.77%, 4.18% and 4.90%. This compared with the peer group similar
funds, the average performance of which was 4.07%, 4.01% and 4.67% for the
same periods. Although the Board noted that the Fund's 1-year results were
below the peer group average, the Trustees found that the long-term
performance of the Fund was above the average.
ADVISORY FEE AND OTHER EXPENSES
The Board considered the advisory fee rate paid by the Fund to Standish
Mellon. The Fund's contractual advisory fee was 0.40%, in the 1st (best)
quintile of its peer group of funds, the median fee of which was 0.60%. The
Fund's net advisory fee, after giving effect to fee waivers, was 0.345%,
well below the peer group median net advisory fee of 0.512%. Based on the
factors discussed herein, the Board determined that the Fund's advisory fee
is reasonable relative to its peer group averages, both with and without
giving effect to fee waivers.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of Standish Mellon. Based on the
additional scope and complexity of the services provided and
responsibilities assumed by these advisers with respect to the Fund
relative to these other types of clients, the Board concluded that the fees
payable under the advisory agreement were reasonable.
The Board considered the Fund's expense ratio and compared these expenses
to its peer group of similar funds. They found that the actual net expense
ratio of 0.65% (after giving effect to expense limitations) was lower than
the median net expense ratio of the peer group of 0.755% notwithstanding
the fact that all of the other funds in the peer group were larger than the
Fund.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
STANDISH MELLON MASSACHUSETTS INTERMEDIATE TAX EXEMPT BOND FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
STANDISH MELLON'S PROFITABILITY
The Board considered Standish Mellon's profitability in managing the Fund
and the Mellon Institutional Funds as a group, as well as the methodology
used to compute such profitability, and the various direct and indirect
expenses incurred by Standish Mellon or its affiliated investment adviser,
The Boston Company Asset Management ("TBCAM") in managing the Fund and
other Funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability
information submitted to them by Standish Mellon, Standish Mellon incurred
losses in 2003 in operating many of the investment companies in the Mellon
family of funds, including the Fund, and achieved only marginal
profitability as to several other funds. The Trustees observed that
Standish Mellon had incurred losses in operating the Fund for both 2002 and
2003.
ECONOMIES OF SCALE
While the Board recognized that economies of scale might be realized as the
Fund grows, the Trustees noted that the Fund had decreased in size in
recent years. The Board concluded that, considering current asset growth
prospects, the implementation of fee breakpoints or other fee reductions
was not necessary at this time. The Trustees intend to review the need for
breakpoints in connection with future investment advisory agreement
approval deliberations.
OTHER BENEFITS
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Funds. Mellon affiliates provide
custodial, administrative, transfer agency and securities lending services
to the Funds. In each case, such affiliates were selected on the basis of a
comparative analysis of their capabilities and fees relative to those of
unaffiliated competitors. In addition, the Trustees, including a majority
of the Independent Trustees, conduct an examination annually of each such
arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Fund; (iii) the nature and quality of the services
provided by the affiliate pursuant to the agreement are at least equal to
those provided by other, unaffiliated firms offering the same or similar
services for similar compensation; and (iv) the fees payable by the Fund to
the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for
services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Fund and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to Standish Mellon provided therein are fair and
reasonable and, thus, in approving the continuation of the agreement for a
one year period.
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 TRUSTEE
PRINCIPAL PORTFOLIOS IN OTHER REMUNERATION
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS (PERIOD ENDED
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY MARCH 31,
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None $449
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 31 None $505
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, 31 None $449
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 31 None $449
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
INTERESTED TRUSTEES
Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 31 None $0
Mellon Institutional and Chief and Chief Operating Officer,
Asset Management Executive 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
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME TERM OF OFFICE
ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mello
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
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One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0932SA0305
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
International Core Equity Fund
- --------------------------------------------------------------------------------
March 31, 2005 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC's web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds. The Example is
based on an investment of $1,000 invested at the beginning of the period and
held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
October 1, 2004 March 31, 2005 to March 31, 2005
- --------------------------------------------------------------------------------------
Actual $1,000.00 $1,166.00 $5.35
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.00 $4.99
_________
+ Expenses are equal to the Fund's annualized expense ratio of 0.99%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
1
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- ---------------------------------------------------------------------------------------------
Vodafone Group PLC UNITED KINGDOM Communications 2.4
Societe Generale FRANCE Financial 1.9
Credit Suisse Group SWITZERLAND Financial 1.7
Royal Bank of Scotland Group PLC UNITED KINGDOM Financial 1.7
BP PLC UNITED KINGDOM Energy 1.7
Continental AG GERMANY Consumer, Cyclical 1.6
Barclays PLC UNITED KINGDOM Financial 1.5
Ing Groep NV CVA NETHERLANDS Financial 1.4
OMV AG AUSTRIA Energy 1.4
Total SA FRANCE Energy 1.4
----
16.7
Percentage of
Economic Sector Allocation Net Assets
- ----------------------------------------------------------
Financial 25.0
Consumer, Non-cyclical 15.5
Consumer, Cyclical 12.4
Communications 10.8
Industrial 9.4
Energy 8.4
Basic Materials 5.8
Utilities 4.4
Technology 2.8
Diversified 0.5
Short-term and Net Other Assets 5.0
-----
100.0
Percentage of
Geographic Region Allocation* Investments
- ----------------------------------------------------------
Europe ex U.K. 46.0
U.K. 24.1
Asia ex Japan 9.3
Japan 20.6
-----
100.0
* Excluding short-term securities and investment of cash collateral.
The Boston Company International Core Equity Fund invests all of its investable
assets in an interest of the Boston Company International Core Equity Portfolio
(See Note 1 of the Fund's Notes to Financial Statements). The Portfolio is
actively managed. Current holdings may be different than those presented above.
2
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International
Core Equity Portfolio ("Portfolio"), at value (Note 1A) $168,204,243
Receivable for Fund shares sold 264,213
Prepaid expenses 28,753
------------
Total assets 168,497,209
Liabilities
Professional fees $8,278
Accrued Trustees' fees (Note 2) 497
Other liabilities and expenses 2,493
------
Total liabilities 11,268
------------
Net Assets $168,485,941
============
Net Assets consist of:
Paid-in capital $129,869,493
Accumulated net realized gain 7,842,317
Undistributed net investment income 374,102
Net unrealized appreciation 30,400,029
------------
Total Net Assets $168,485,941
Shares of beneficial interest outstanding 5,471,212
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 30.79
============
The accompanying notes are an integral part of the financial statements.
3
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of
foreign withholding taxes of $151,857) $ 1,361,859
Interest income allocated from Portfolio 34,848
Security lending income allocated from Portfolio 33,524
Expenses allocated from Portfolio (722,489)
-----------
Net investment income allocated from Portfolio 707,742
Expenses
Transfer agent fees (Note 2) $ 4,104
Professional fees 15,784
Registration fees 10,471
Trustees' fees (Note 2) 497
Insurance expense 561
Miscellaneous expenses 3,245
-------
Total expenses 34,662
-----------
Net investment income 673,080
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 8,335,198
Net change in unrealized appreciation (depreciation) allocated
from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 12,485,208
-----------
Net realized and unrealized gain on investments 20,820,406
-----------
Net Increase in Net Assets from Operations $21,493,486
===========
The accompanying notes are an integral part of the financial statements.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $673,080 $1,172,116
Net realized gain (loss) 8,335,198 15,537,985
Net change in net unrealized appreciation 12,485,208 5,250,294
------------ ------------
Net increase (decrease) in net assets from operations 21,493,486 21,960,395
------------ ------------
Distributions to Shareholders (Note 1D)
From net investment income (665,181) (1,441,503)
From net realized gains on investments (2,586,841) --
------------ ------------
Total distributions to shareholders (3,252,022) (1,441,503)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 25,985,510 47,227,583
Value of shares issued in reinvestment of distributions 2,905,030 939,636
Cost of shares redeemed (3,320,755) (21,738,718)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 25,569,785 26,428,501
------------ ------------
Total Increase (Decrease) in Net Assets 43,811,249 46,947,393
Net Assets
At beginning of period 124,674,692 77,727,299
------------ ------------
At end of period (including undistributed net
investment income of $374,101 and $366,203) $168,485,941 $124,674,692
------------ ------------
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2005 -----------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
----------- --------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 27.03 $ 21.62 $ 17.10 $ 18.53 $ 23.45 $ 23.77
----------- --------- ------- ------- ------- -------
From Operations:
Net investment income* (1) 0.13 0.31 0.23 0.25 0.24 0.24
Net realized and unrealized gains (loss) on
investments 4.30 5.49 4.55 (1.48) (3.63) 1.42
----------- --------- ------- ------- ------- -------
Total from operations 4.43 5.80 4.78 (1.23) (3.39) 1.66
----------- --------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.14) (0.39) (0.26) (0.20) (0.20) (0.43)
From net realized gains on investments (0.53) -- -- -- (1.33) (1.55)
----------- --------- ------- ------- ------- -------
Total distributions to shareholders (0.67) (0.39) (0.26) (0.20) (1.53) (1.98)
----------- --------- ------- ------- ------- -------
Net Asset Value, End of Period $ 30.79 $ 27.03 $ 21.62 $ 17.10 $ 18.53 $ 23.45
=========== ========= ======= ======= ======= =======
Total Return 16.60%+++ 27.04% 28.23%+ (6.77)%+ (15.40)%+ 7.07%+
Ratios/Supplemental data:
Expenses (to average daily net assets)* (2) 0.99%++ 1.12% 1.16% 1.00% 1.00% 1.00%
Net Investment Income (to average daily net 0.90%++ 1.22% 1.21% 1.29% 1.13% 0.98%
assets)*
Portfolio Turnover (3) N/A N/A 17% 87% 74% 112%
Net Assets, End of Period (000's omitted) $168,486 $124,675 $77,727 $51,087 $48,227 $39,230
_________
* For the periods indicated, the investment advisor voluntarily agreed not to impose a portion of its its investment
advisory fee and/or reimbursed the Fund for all or a portion of its operating expenses. If this voluntary action had
not been taken, the investment income per share and the ratios would have been:
Net investment income per share (1) N/A N/A $0.19 $0.18 $0.16 $0.15
Ratios (to average daily net assets):
Expenses (2) N/A N/A 1.34% 1.33% 1.37% 1.36%
Net investment income N/A N/A 1.03% 0.96% 0.76% 0.62%
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) Portfolio turnover represents activity while the Fund was investing
directly in securities until January 27, 2003. The portfolio turnover for
the period since the Fund transferred substantially all of its assets to
the Portfolio is shown in the Portfolio's financial statements which are
included elsewhere in this report.
+ Total return would have been lower in the absence of expense waivers.
++ Calculated on an annualized basis.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies: Mellon Institutional Funds Investment
Trust (the "Trust") is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company. The Boston Company International
Core Equity Fund (the "Fund") is a separate diversified investment series
of the Trust. The Fund invests all of its investable assets in an interest
of The Boston Company International Core Equity Portfolio (the
"Portfolio"), a subtrust of Mellon Institutional Funds Master Portfolio
(the "Portfolio Trust"), which is organized as a New York trust, and has
the same investment objective as the Fund. The Portfolio seeks to achieve
its objective by investing, under normal circumstances, at least 80% of net
assets in equity securities of companies located in the foreign countries
represented in the MSCI Europe, Australia, Far East Index and Canada. The
value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (approximately
95% at March 31, 2005). 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 in the Portfolio 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 Fund represent pro rata shares of
gains and losses of the Portfolio.
C. Investment risk
The Fund's investment in the Portfolio involves certain additional risks
due to the fact that the Portfolio may invest in foreign securities that
were not inherent in investments in domestic securities. These risks may
involve adverse political and economic developments, including the possible
imposition of capital controls or other foreign governmental laws or
restrictions. In addition, the securities of some foreign companies and
securities markets are less liquid and at times may have been more volatile
than securities of comparable U.S. companies and U.S. securities markets.
The risks described above apply to an even greater extent to investments in
emerging markets. The securities markets of emerging countries are
generally smaller, less developed, less liquid, and more volatile than the
securities markets of the U.S. and developed foreign markets.
D. Distributions to shareholders
Distributions to shareholders are recorded on ex-dividend date. The Fund's
dividends from short-term and long-term capital gains, if any, after
reduction of capital losses will be declared and distributed at least
annually. In determining the amounts of its dividends, the Fund will take
into account its share of the income, gains or losses, expenses, and any
other tax items of the Portfolio. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless a shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles
generally accepted in the United States of America. These differences are
primarily due to differing treatments for foreign currency transactions,
passive foreign investment companies (PFICs), post-October loss deferrals,
wash sales and capital loss carryovers.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income and
accumulated net realized gain (loss) on investments may include temporary
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year.
E. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated taking
into consideration, among other things, the nature and type of expense and
the relative size of the funds or portfolios.
F. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) Investment Advisory Fee and Transactions With Affiliates: The Fund does not
directly pay any investment advisory fees, but indirectly bears its pro
rata share of the compensation paid by the Portfolio to The Boston Company
Asset Management, LLC ("TBCAM"), 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.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $13,160
during the period ended March 31, 2005. No director, officer or employee of
TBCAM or its affiliates receives any compensation from the Trust or the
Portfolio for serving as an officer or Trustee of the Trust. The Trust pays
each Trustee who is not a director, officer or employee of TBCAM or its
affiliates an annual fee and a per meeting fee as well as reimbursement for
travel and out of pocket expenses. In addition, the Portfolio Trust pays
the legal fees for the independent counsel of the Trustees.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2005, aggregated $28,916,682 and $6,637,276,
respectively.
8
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Shares of Beneficial Interest: The Declaration of Trust permits the
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest having a par value of one cent per share. Transactions
in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 869,094 1,806,181
Shares issued to shareholders in
reinvestment of distributions 101,044 38,181
Shares redeemed (111,792) (826,070)
Net increasev 858,346 (1,018,292)
At March 31, 2005, one shareholder of record held approximately 33% of the
total outstanding shares of the Fund, respectively. Investment activities
of this shareholder could have a material impact on the Fund
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 March 31, 2005, the Fund did not
collect any redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the
extent that it distributes substantially all of its taxable income for its
fiscal year.
See the Portfolio's financial statements included elsewhere in this report
for tax basis unrealized appreciation/(depreciation) information.
9
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--118.3%
EQUITY--94.1%
Australia--5.3%
Caltex Australia Ltd. 98,900 $ 1,183,744
CSL Ltd. 20,300 535,794
Insurance Australia Group Ltd. 205,600 1,006,566
Macquarie Bank Ltd. 32,400 1,201,676
Oil Search Ltd. 597,100 1,115,815
Qantas Airways Ltd. 304,100 833,632
QBE Insurance Group Ltd. 130,300 1,498,197
Rinker Group Ltd. 176,800 1,474,470
West Australian Newspaper Holdings (a) 98,700 602,108
----------
9,452,002
----------
Austria--2.1%
Boehler-Uddeholm (a) 9,500 1,295,961
OMV AG (a) 7,500 2,382,372
----------
3,678,333
----------
Belgium--1.7%
Colruyt SA 4,100 636,569
KBC Groupe 20,800 1,753,540
Mobistar SA 6,000 526,824
----------
2,916,933
----------
Denmark--0.6%
Novo Nordisk A/S, Class B 19,400 1,080,667
----------
Finland--2.8%
Fortum Oyj 68,900 1,341,202
Kesko Oyj 41,400 1,063,430
Nokia Oyj 120,000 1,860,019
Rautaruukki Oyj (a) 46,600 626,886
----------
4,891,537
----------
France--10.2%
Banca Intesa Spa 351,833 1,787,425
Banque Nationale De Paris (a) 29,000 2,053,966
Bouygues SA 25,700 1,018,534
Elior 55,400 704,342
France Telecom SA 40,700 1,218,460
Renault SA (a) 18,800 1,678,735
Sanofi-Synthelabo SA 17,000 1,433,182
Societe Generale (a) 30,300 3,147,394
Suez SA 30,700 825,982
Total SA 10,155 2,375,539
Vinci SA (a) 6,000 864,691
Vivendi Universal SA 28,300 866,673
----------
17,974,923
----------
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ----------------------------------------------------------------------
Germany--4.9%
Continental AG 34,300 $2,659,611
Deutsche Telekom AG 52,700 1,051,808
E.ON AG 23,100 1,981,570
Merck KGaA (a) 14,100 1,005,048
SAP AG 4,900 789,418
Thyssenkrupp AG (a) 53,300 1,097,630
----------
8,585,085
----------
Greece--0.8%
Alpha Bank A.E 42,600 1,438,762
----------
Hong Kong--2.5%
China Mobile Hong Kong Ltd. 382,000 1,248,958
China Resources Power Holdings Co., Ltd. 1,245,403 586,829
Esprit Holdings Ltd. 98,000 669,099
Kerry Properties Ltd. 404,000 883,182
Orient Overseas International Ltd. 134,000 646,007
The Wharf(Holdings) Ltd. 136,000 429,833
----------
4,463,908
----------
Ireland--1.2%
Anglo Irish Bank Corp. PLC 42,300 1,058,041
CRH PLC 11,800 309,985
CRH PLC 27,400 718,020
----------
2,086,046
----------
Italy--1.8%
Eni Spa 54,600 1,417,355
Mediaset Spa 124,700 1,793,884
----------
3,211,239
----------
Japan--19.3%
Asahi Breweries Ltd. 87,000 1,127,372
Asahi Glass Company Ltd. 56,000 590,354
Bridgestone Corp. 47,000 864,232
Canon, Inc. 41,000 2,199,366
Diamond Lease Co., Ltd. 11,600 451,273
Eisai Co., Ltd. (a) 29,200 991,585
Fuji Television Network, Inc. 215 507,463
Hisamitsu Pharamaceutical 31,700 702,374
Honda Motor Co., Ltd. (a) 22,900 1,147,243
Hoya Corp. 14,500 1,596,231
Kawasaki Kisen Kaisha Ltd. (a) 136,000 938,894
Kikkoman Corp. (a) 130,000 1,303,760
Kirin Beverage Corp. 39,100 992,182
Kobe Steel Ltd. (a) 598,000 1,054,408
Komatsu Ltd. (a) 134,000 1,007,594
Kubota Corp. (a) 217,000 1,157,981
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------
Japan (continued)
Kyushu Electric Power Co., Inc. (a) 23,500 $ 499,860
Mitsubishi Corp. (a) 98,000 1,269,913
Mitsui O.S.K. Lines Ltd. (a) 183,000 1,176,294
Nippon Steel Corp. 377,000 953,139
Nisshin Seifun Group, Inc. (a) 65,000 691,296
NTT Corp. 205 896,959
Ono Pharmaceutical Co., Ltd. 20,000 1,043,008
Promise Co., Ltd. (a) 8,700 594,934
Sankyo Co., Ltd. 15,600 755,332
Sanyo Shinpan Finance Co., Ltd. 19,400 1,317,586
Shizuoka Bank Ltd. (a) 128,000 1,293,255
Sumitomo Rubber Industries, Inc. (a) 105,000 1,011,895
Takeda Pharmaceutical Co., Ltd. (a) 26,600 1,268,085
Terumo Corp. (a) 17,400 524,321
Tosoh Corp. (a) 199,000 983,954
Toyota Motor Corp. (a) 63,600 2,367,422
Trend Micro, Inc. 19,000 817,147
----------
34,096,712
----------
Luxembourg--0.6%
Arcelor 44,000 1,005,333
----------
Netherlands--2.8%
ABN Amro Holding NV 33,000 818,580
Hunter Douglas NV 8,900 448,457
Ing Groep NV CVA 80,100 2,418,764
Royal Dutch Petroleum Co. 10,400 621,624
Royal KPN NV 78,400 701,084
----------
5,008,509
----------
New Zealand--0.3%
Fletcher Building Ltd. 117,400 554,328
----------
Norway--2.1%
DNB NOR ASA (a) 148,400 1,517,131
Norsk Hydro ASA (a) 9,400 776,209
Orkla Asa (a) 21,900 802,198
Yara International ASA 43,400 659,538
----------
3,755,076
----------
Singapore--1.0%
Fraser and Neave Ltd. 76,630 705,797
Keppel Co., Ltd. 75,900 501,309
Singapore Airlines Ltd. 87,000 627,340
----------
1,834,446
----------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------
Spain--2.5%
ACS Actividades 51,700 $1,279,761
Corp. Mapfre SA (a) 65,600 1,010,009
Repsol YPF SA 60,600 1,603,738
Union Fenosa, SA (a) 19,100 567,105
----------
4,460,613
----------
Sweden--3.0%
Ericsson LM (a) 424,500 1,195,216
Lindex AB 15,400 729,930
Skandinaviska Enskilda Banken AB (a) 86,300 1,636,181
Volvo AB, Class B (a) 37,800 1,671,312
----------
5,232,639
----------
Switzerland--5.0%
Baloise Holdings (a) 8,600 413,531
Credit Suisse Group (a) 67,200 2,885,700
Logitech International SA* 8,900 541,458
Novartis AG (a) 21,340 995,795
Saurer AG* 11,800 774,628
Serono SA B (a) 790 573,440
Sulzer AG (a) 3,010 1,296,329
UBS AG Registered Shares (a) 8,200 692,591
Zurich Financial Services AG* 3,800 667,018
----------
8,840,490
----------
United Kingdom--23.6%
02 PLC* 498,300 1,123,140
Alliance Unichem PLC 67,300 983,921
ARM Holdings PLC 290,700 578,298
AstraZeneca PLC 17,500 689,981
Aviva PLC 119,300 1,431,855
BAA PLC 63,600 701,427
BAE Systems PLC 121,800 597,406
Barclays PLC 237,900 2,432,632
Barratt Developments PLC 78,900 983,505
BHP Billition PLC 87,300 1,173,191
BP PLC 266,700 2,764,932
BPB PLC 77,500 727,287
Enterprise Inns PLC 66,100 963,254
Friends Provident PLC 474,400 1,589,336
Greene King PLC 22,800 559,795
HBOS PLC 137,600 2,145,642
Inchcape PLC 40,000 1,498,471
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -----------------------------------------------------------------------------------------------------
United Kingdom (continued)
ITV PLC 298,900 $ 720,312
Kelda Group PLC 97,100 1,097,502
Old Mutual PLC 638,600 1,623,439
Reckitt Benckiser PLC 18,700 594,501
Royal Bank of Scotland Group PLC 89,785 2,857,792
SABMiller PLC 141,100 2,209,552
Sage Group PLC 213,200 810,976
Scottish Power PLC 117,600 909,108
Shire Pharmaceuticals Group PLC 68,500 782,657
Tesco PLC 234,200 1,401,023
Travis Perkins PLC 24,400 772,484
Tullow Oil PLC 168,100 552,049
Vodafone Group PLC 1,507,300 4,002,772
Wolseley PLC 49,400 1,034,550
Xstrata PLC 70,100 1,338,212
------------
41,651,002
------------
TOTAL EQUITIES (Cost $135,784,986) 166,218,583
------------
PREFERRED STOCKS--0.9%
Fresenius AG-PFD 5,300 609,949
Henkel KGaA 5,700 515,257
Unipol Spa 145,400 512,552
------------
TOTAL PREFERRED STOCKS (Cost $1,306,470) 1,637,758
------------
SHORT-TERM INVESTMENTS--0.4% Rate Maturity Par Value
U.S. Government--0.2%
U.S. Treasury Bill+ (Cost $313,185) 2.730% 6/16/2005 315,000 313,206
INVESTMENT OF CASH COLLATERAL--23.1% Shares
BlackRock Cash Strategies L.L.C
(Cost $40,842,760) 40,842,760 40,842,760
TOTAL UNAFFILIATED INVESTMENTS
(Cost $178,247,401) 209,012,307
AFFILIATED INVESTMENTS--0.1%
Dreyfus Institutional Preferred Plus ++ (Cost $277,058) 277,058 277,058
------------
TOTAL INVESTMENTS--118.4% (Cost $178,524,459) 209,289,365
LIABILITIES IN EXCESS OF OTHER ASSETS--(18.4%) (32,561,461)
------------
NET ASSETS-100% $176,727,904
------------
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security.
+ Denotes all or part of security segregated as collateral for futures
transactions.
++ Affiliated institutional money market fund.
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
At March 31, 2005, the Portfolio held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Maturity Date March 31, 2005 to Deliver Gain/(Loss)
- -----------------------------------------------------------------------------------------------------------
British Pound 30,000 4/4/2005 $ 56,703 $ 56,664 $39
Hong Kong Dollar 1,355,000 4/1/2005 173,734 173,738 (4)
-------- -------- ---
$230,437 $230,402 $35
======== ======== ===
At March 31, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value (Loss)
- ----------------------------------------------------------------------------------------------------
MSCI Pan-Euro (268 Contracts) Long 6/14/2005 $6,189,385 $(25,998)
Topix Futures (19 Contracts) Long 6/30/2005 2,092,499 (14,347)
$(40,345)
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Assets and Liabilities March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $37,836,531 (Note 6))
Unaffiliated investments (cost $178,247,401) $209,012,307
Affiliated investment (Note 1H) (cost $277,058) 277,058
Foreign currency, at value (cost $7,581,562) 7,493,147
Receivable for investments sold 1,077,528
Interest and dividends receivable 785,096
Receivable for variation margin on open futures contracts (Note 5) 38,523
Unrealized appreciation on forward foreign currency exchange contracts (Note 5) 35
Prepaid expenses 2,427
------------
Total assets 218,686,121
Liabilities
Liability for securities on loan (Note 6) $40,842,760
Payable for investments purchased 1,061,236
Accrued accounting, administration and custody fees (Note 2) 31,591
Accrued Trustees' fees and expenses (Note 2) 6,425
Other accrued expenses and liabilities 16,205
-----------
Total liabilities 41,958,217
------------
Net Assets (applicable to investors' beneficial interest) $176,727,904
============
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $158,114) $ 1,414,730
Interest income 36,076
Security lending income (Note 6) 34,706
-----------
Total investment income 1,485,512
Expenses
Investment advisory fee (Note 2) $ 617,617
Accounting, administration and custody fees (Note 2) 86,386
Professional fees 15,472
Trustees' fees and expenses (Note 2) 16,115
Insurance expense 4,843
Miscellaneous expenses 6,596
----------
Total expenses 747,029
-----------
Net investment income 738,483
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 8,199,112
Futures contracts 555,844
Foreign currency transactions and forward foreign currency exchange contracts (103,231)
----------
Net realized gain 8,651,725
Change in unrealized appreciation (depreciation) on:
Investment securities 12,846,650
Futures contracts 2,144
Foreign currency transactions and forward foreign currency exchange contracts (157,353)
----------
Net change in net unrealized appreciation (depreciation) 12,691,441
-----------
Net realized and unrealized gain (loss) 21,343,166
-----------
Net Increase (Decrease) in Net Assets from Operations $22,081,649
===========
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Statements in Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 738,483 $1,265,862
Net realized gain 8,651,725 15,649,120
Net change in net unrealized appreciation (depreciation) 12,691,441 5,266,928
Net increase in net assets from operations 22,081,649 22,181,910
Capital Transactions
Contributions 36,006,604 50,826,021
Withdrawals (7,656,599) (24,372,009)
Net increase (decrease) in net assets from capital transactions 28,350,005 26,454,012
Total Increase (Decrease) in Net Assets 50,431,654 48,635,922
Net Assets
At beginning of period 126,296,250 77,660,328
At end of period $176,727,904 $126,296,250
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
For the January 28, 2003
Six Months Ended For the (commencement of
March 31, 2005 Year Ended operations) to
(Unaudited) September 30 2004 September 30, 2003
---------------- ----------------- ------------------
Total Return + 16.62%(1) 27.12% 22.46%(1)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.97%(2) 1.04% 1.17%(2)
Net Investment Income (to average daily net assets)* 0.96%(2)) 1.30% 1.81%(2)
Portfolio Turnover 32%(1) 80% 63%(1)
Net Assets, End of Period (000's omitted) $176,728 $126,296 $77,660
____________
* 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 ratios would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 1.20%(2)
Net investment income N/A N/A 1.78%(2)
+ Total return for the Portfolio has been calculated based on the total
return for the investor Fund, assuming all distributions were reinvested,
and adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(1) Not annualized
(2) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Boston
Company International Core Equity Portfolio (the "Portfolio"), a separate
diversified investment series of the Portfolio Trust, commenced operations
on January 28, 2003. The objective of the Portfolio is to achieve long-term
growth of capital. The Portfolio seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in equity
securities of companies that are located in the foreign countries
represented in the MSCI Europe, Australia, Far East Index and Canada. At
March 31, 2005, there were two funds, The Boston Company International Core
Equity Fund and Dreyfus Premier International Equity Fund invested in the
Portfolio (the "Funds"). The value of the Funds' investment in the Portfolio
reflects the Funds' proportionate interests in the net assets of the
Portfolio. At March 31, 2005, The Boston Company International Core Equity
Fund and the Dreyfus Premier International Equity Fund held approximately
95.3% and 4.7% interests in the Portfolio, respectively. The following is a
summary of significant accounting policies followed by the Portfolio in the
preparation of its financial statements. The preparation of financial
statements in accordance with accounting principles generally accepted in
the United States of America requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price, or the NASDAQ
official close if applicable, in the principal market in which such
securities are normally traded. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
Portfolio's shares may change on days when shareholders are not able to buy
or sell them. Many securities markets and exchanges outside the U.S. close
prior to the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect the events that occur after such close but before the close of the
New York Stock Exchange. If market quotations are not readily available or
do not accurately reflect fair value, or the value of a security has been
materially affected by events occurring after the close of the exchange or
market on which the security is principally traded (for example, a foreign
exchange or market). The Trustees have adopted fair value pricing
procedures, which, among other things, require the Portfolio to fair value
such securities if there has been a movement in the U.S. market that exceeds
a specified threshold. Although the threshold may be revised from time to
time and the number of days on which fair value prices will be used will
depend on market activity, it is possible that fair value prices for foreign
securities will be used by the Portfolio to a significant extent. Short-term
instruments with less than sixty-one days remaining to maturity 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 coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities with greater than sixty days to maturity. Realized
gains and losses from securities sold are recorded on the identified cost
basis. The Portfolio does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. Net realized gains and losses on foreign
currency transactions represent gains and losses on disposition of foreign
currencies and forward foreign currency exchange contracts, currency gains
and losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income and
foreign withholding taxes recorded on the Portfolio's books and the U.S.
dollar equivalent amounts actually 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 income 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.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D. Foreign currency transactions
The Portfolio maintains its records in U.S. dollars. Investment security
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted into U.S. dollars based upon current currency
exchange rates. Purchases and sales of foreign investment securities and
income and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
E. Investment risk
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may be
more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
F. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Portfolio
under these arrangements is unknown, as this would involve future claims
that may be made against the Portfolio that have not yet occurred. However,
based on experience, the Portfolio expects the risks of loss to be remote.
G. Expenses
The majority of expenses of the Trust or Portfolio are directly identifiable
to an individual fund or Portfolio. Expenses which are not readily
identifiable to a specific fund or Portfolio are allocated taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
H. Affiliated issuers
Affiliated issuers represent investments in other investment companies
advised by The Boston Company Asset Management Company LLC ("TBCAM"), a
wholly-owned subsidiary of Mellon Financial Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions with Affiliates: The
investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Portfolio's average daily net assets. For
the period ended March 31, 2005, the Portfolio paid $617,617 in investment
advisory fees to TBCAM The Portfolio compensates Mellon Bank, N.A., a
wholly-owned subsidiary of Mellon Financial Corporation, 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 paid $77,389 during the period ended March 31,
2005. The Portfolio entered into an agreement with Mellon Bank, a
wholly-owned subsidiary of Mellon Financial Corporation, to perform certain
securities lending activities and to act as the Portfolio's lending agent.
Pursuant to this agreement Mellon Bank receives an agreed upon percentage of
the net lending revenues. This compensation is a standard form of
compensation received by securities lending agents with respect to
non-affiliated entities. See Note 6 for further details. No director,
officer or employee of TBCAM or its affiliates receives any compensation
from the Trust or the Portfolio for serving as an officer or Trustee of the
Trust. The Trust pays each Trustee who is not a director, officer or
employee of TBCAM or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out of pocket expenses. In addition,
the Portfolio Trust pays the legal fees for the independent counsel of the
Trustees.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(3) Purchases and Sales of Investments: Purchases and proceeds from sales of
investments, other than short-term obligations, for the period ended March
31, 2005 were $74,789,400 and $47,291,945, respectively. For the period
ended March 31, 2005 the Portfolio did not purchase or sell any long-term
U.S. Government securities.
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $137,681,699
============
Unrealized appreciation $ 31,677,057
Unrealized depreciation (912,154)
------------
Net unrealized appreciation/depreciation $ 30,764,903
============
(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
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 option is shown in the
Schedule of Investments. This amount reflects each contract's exposure to
the underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms. Premiums received from writing options which expire are
treated as realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds or
amount paid on the transaction to determine the realized gain or loss.
Realized gains and losses on purchased options are included in realized
gains and losses on investment securities, except purchased options on
foreign currency which are included in realized gains and losses on foreign
currency transactions. If a put option written by the Portfolio is
exercised, the premium reduces the cost basis of the securities purchased by
the Portfolio. The Portfolio, as a writer of an option, has no control over
whether the underlying securities may be sold (call) or purchased (put) and
as a result bears the market risk of an unfavorable change in the price of
the security underlying the written option. Exchange traded options are
valued at the last sale price, or if no sales are reported, the last bid
price for purchased options and the last ask price for written options.
Options traded over-the-counter are valued using prices supplied by the
dealers. The Portfolio did not hold options at March 31, 2005.
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.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
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. The Portfolio held open foreign
currency exchange contracts at March 31, 2005. See Schedule of Investments
for further details.
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. The Portfolio held open financial futures contracts at
March 31, 2005. At March 31, 2005, the Portfolio had segregated sufficient
cash and/or securities to cover margin requirements on open futures
contracts. See Schedule of Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans. The Portfolio loaned
securities during the period ended March 31, 2005 resulting in security
lending income of $34,706. At March 31, 2005, the Portfolio had securities
valued at $37,836,531 on loan. See Schedule of Investments for further
detail on the security positions on loan and collateral held.
(7) 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 facility fee, computed at an annual rate of 0.060 of 1% on the daily
unused portion of the facility, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the period ended March 31,
2005, the expense allocated to the Portfolio was $1,993. During the period
ended March 31, 2005, the Portfolio did not use the line of credit.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that a fund's Board of Trustees,
including a majority of its Trustees who are not affiliated with the fund's
investment adviser or underwriter (the "Independent Trustees") voting
separately, approve the fund's advisory agreement and the related fees on an
annual basis. The Fund is not a party to an investment advisory agreement
directly with any investment adviser and does not invest directly in portfolio
securities. Instead, the Fund invests all of its investable assets in The Boston
Company International Core Equity Portfolio (the "Portfolio"), which is managed
by The Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the Portfolio.
The members of the Fund's Board of Trustees also serve as the Board of Trustees
of the Portfolio. In that capacity, they consider annually whether to continue
the investment advisory agreement between the Portfolio and TBCAM. In their most
recent deliberations concerning their decision to approve the continuation of
the investment advisory agreement, the Board of Trustees conducted the review
and made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from TBCAM
a broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 15, 2004 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. The entire Board then met on October 14, 2004. The information
requested by the Independent Trustees and reviewed by the entire Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a separate
presentation of TBCAM's profitability relative to that of several publicly
traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as information
concerning TBCAM's executive management, portfolio management, and client
service personnel and overall organizational structure, insurance coverage,
brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and TBCAM's separate account advisory
fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance (rather than the Portfolio alone), as well as "fact sheets" prepared
by TBCAM providing salient data about the Fund and Portfolio, including
Portfolio's holdings, strategies, recent market conditions and outlook, as well
as TBCAM's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable, and they
approved the continuation of the agreement for a one-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by TBCAM. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust TBCAM, under the supervision of the Trustees, to manage the
portion of their assets invested in the Fund.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio management,
administrative, compliance and related services provided by TBCAM. The Trustees
determined that the services provided were of high quality and at least
commensurate with industry standards. The Trustees observed that TBCAM had
recently announced that it intended to implement a team approach to the
portfolio management of its mutual funds, requiring that each fund have at least
two portfolio managers, and expressed their support for this change. The
Trustees reviewed the background and experience of the Portfolio's two portfolio
managers and also met with senior management of TBCAM to receive an overview of
its organization, personnel, resources and strategic plans. Among other things,
the Trustees considered the size, education and experience of TBCAM's investment
staff, technological infrastructure and overall responsiveness to changes in
market conditions. The Board determined that TBCAM had the expertise and
resources to manage the Portfolio effectively.
Investment Performance
The Board compared the relative investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected by
TBCAM with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year. The Lipper materials provided to the Board at the September 15, 2004
meeting indicated that the Fund's performance for the 1-, 3- and 5-year periods
ended July 31, 2004 was 29.73%, 9.10% and 5.74%. The Trustees found that these
results compared favorably with the Fund's peer group of similar funds, the
average performance of which was 20.59%, 2.93% and 0.55% for the same periods.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to TBCAM. The
Portfolio's contractual advisory fee was 0.80%, in the 3rd quintile of its peer
group of funds, the median fee of which was 0.81%. The Portfolio's net advisory
fee, after giving effect to fee waivers, was 0.62%, below the peer group median
net advisory fee of 0.717%. Based on the Lipper data, as well as other factors
discussed herein, the Board determined that the Portfolio's advisory fee is
reasonable relative to its peer group averages, both with and without giving
effect to fee waivers. The Board also compared the fees payable by the Portfolio
relative to those payable by separate account clients of TBCAM. Based on the
additional scope and complexity of the services provided and responsibilities
assumed by these advisers with respect to the Portfolio relative to these other
types of clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board considered the Fund's (rather than solely the Portfolio's) expense
ratio and compared it to that of its peer group of similar funds. The Board
found that the actual net expense ratio of 1.162% (after giving effect to
expense limitations) was comparable to the median net expense ratio of the peer
group of 1.168% notwithstanding the fact that most of the other funds in the
peer group were larger than the Fund.
TBCAM's Profitability
The Board considered TBCAM's profitability in managing the Portfolio and Fund
and the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon Asset
Management Company LLC ("Standish
25
Mellon Institutional Funds Investment Trust
The Boston Company International Core Equity Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Mellon") in managing the Portfolio and Fund and other funds in the Mellon
Institutional Funds family of funds. The Independent Trustees had observed that,
based on the profitability information submitted to them by TBCAM, TBCAM
incurred losses in recent years in operating many of the investment companies in
the Mellon family of funds, including the Portfolio and Fund, and achieved only
marginal profitability as to several other funds. The Trustees observed that
TBCAM had incurred losses in operating the Portfolio and the Fund in both 2002
and 2003.
Economies of Scale
While the Board recognized that economies of scale might be realized as the Fund
grows and noted that the Fund had increased in size in recent years, they also
observed that, at approximately $103 million, it remained small relative to most
of its peers. The Board concluded that, considering current asset growth
prospects, the implementation of fee breakpoints or other fee reductions was not
necessary at this time. The Trustees intend to review the need for breakpoints
in connection with future investment advisory agreement approval deliberations.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Funds. Mellon affiliates provide custodial,
administrative, transfer agency and securities lending services to the Funds. In
each case, such affiliates were selected on the basis of a comparative analysis
of their capabilities and fees relative to those of unaffiliated competitors. In
addition, the Trustees, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i) the
terms of the relevant service agreement are in the best interests of Fund
shareholders; (ii) the services to be performed by the affiliate pursuant to the
agreement are required by and appropriate for the Fund; (iii) the nature and
quality of the services provided by the affiliate pursuant to the agreement are
at least equal to those provided by other, unaffiliated firms offering the same
or similar services for similar compensation; and (iv) the fees payable by the
Fund to the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for services of
the same nature and quality. The Board considered the fact that Mellon operates
businesses other than the Mellon Institutional Funds, some of which businesses
share personnel, office space and other resources and that these were a
component of the profitability analysis provided. The Board also considered the
intangible benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Fund and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable and, thus, in
approving the continuation of the agreement for a one year period.
26
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None Fund: $250
c/o Decision Resources, 11/3/1986 and Chief Executive Portfolio: $1,401
Inc.
260 Charles Street Officer, Decision
Waltham, MA 02453 Resources, Inc.
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 31 None Fund: $250
c/o Essex Street Associates 11/3/1986 Associates (family Portfolio: $1,543
P.O. Box 181 investment trust office)
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 31 None Fund: $250
c/o Harvard University 9/13/1986 Professor of Political Portfolio: $1,401
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, Mertens 31 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $1,401
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 Senior Vice President 31 None Fund: $0
President
Mellon Institutional and Chief and Chief Operating
Officer,
Asset Management Executive Mellon Institutional
Officer
One Boston Place Asset Management;
Boston, MA 02108 formerly Vice President
7/24/65 and Chief Financial
Officer,
Mellon Institutional
Asset Management
27
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- -----------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations,
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mellon
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
28
THIS PAGE INTENTIONALLY LEFT BLANK
29
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0924SA0305
Semiannual Report THE BOSTON COMPANY
WORLD EX-U.S. VALUE FUND
FOR THE PERIOD NOVEMBER 15, 2004 (COMMENCEMENT
OF OPERATIONS) TO MARCH 31, 2005 (UNAUDITED)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund' s historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund' s Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund' s proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC' s web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (November 15, 2004* to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD((+)*)
ACCOUNT VALUE ACCOUNT VALUE NOVEMBER 15, 2004
NOVEMBER 15, 2004(*) MARCH 31, 2005 TO MARCH 31, 2005
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,046.00 $3.46
Hypothetical (5% return
per year before expenses) $1,000.00 $1,015.39 $3.40
- -------
* THE FUND COMMENCED OPERATIONS ON NOVEMBER 15, 2004.
((+)) EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 0.90%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 137/365
(TO REFLECT THE PERIOD FROM NOVEMBER 15, 2004 (COMMENCEMENT OF OPERATIONS) TO
MARCH 31, 2005).
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
PORTFOLIO INFORMATION AS OF MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
(sum) PERCENTAGE OF
TOP TEN HOLDINGS(*) COUNTRY SECTOR INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
GlaxoSmithKline PLC United Kingdom Consumer, Non-cyclical 1.6
Total SA France Energy 1.4
Bank of Ireland Ireland Financial 1.4
Nestle SA Switzerland Consumer, Non-cyclical 1.3
Shell Transport & Trading Company PLC United Kingdom Energy 1.3
Quebecor World Inc. Canada Consumer, Non-cyclical 1.3
Novartis AG Switzerland Consumer, Non-cyclical 1.3
UniCredito Italiano SpA Italy Financial 1.2
Nippon Express Co., Ltd. Japan Industrial 1.2
Unilever PLC United Kingdom Consumer, Non-cyclical 1.2
------
13.2
PERCENTAGE OF
ECONOMIC SECTOR ALLOCATION NET ASSETS
- --------------------------------------------
Basic Materials 9.0
Communications 10.4
Consumer, Cyclical 12.2
Consumer, Non-cyclical 15.9
Diversified 0.7
Energy 6.1
Financial 23.4
Industrial 13.6
Technology 3.7
Utilities 3.9
Short-term and Net Other Assets 1.1
-----
100.0
PERCENTAGE OF
GEOGRAPHIC REGION ALLOCATION(*) INVESTMENTS
- --------------------------------------------
Europe ex U.K. 38.1
U.K. 17.5
Asia ex Japan 12.7
Japan 22.7
Americas ex U.S. 7.0
Middle East/Africa 2.0
-----
100.0
* Excludes short-term securities and investment of cash collateral.
The Fund is actively managed. Current holdings may be different than those
presented above.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--117.0%
EQUITIES--98.9%
AUSTRALIA--1.5%
Amcor Ltd. 10,630 $ 58,690
National Australia Bank Ltd. (a) 4,000 87,537
-----------
146,227
-----------
BELGIUM--0.9%
Fortis 3,050 86,962
-----------
BRAZIL--1.1%
Embratel Participacoes ADR Rights* 403 0
Petroleo Brasileiro S.A.--ADR* 1,410 62,294
Telecommunicacoes Brasileiras S.A.--ADR 1,640 47,478
-----------
109,772
-----------
CANADA--4.1%
Canadian Imperial Bank of Commerce 570 34,581
Canadian Pacific Railway Ltd. 1,360 49,206
Quebecor World Inc. 5,190 121,681
Royal Bank of Canada 950 57,792
Sobeys Inc. 3,050 97,110
Torstar Corp. 1,890 38,528
-----------
398,898
-----------
CHINA--0.3%
China Telecom Corp. Ltd. 71,000 24,579
-----------
DENMARK--0.3%
Danske Bank A/S* 1,050 30,479
-----------
FINLAND--1.7%
M-real Oyj 10,480 61,255
Nokia Oyj 3,290 50,996
UPM-Kymmene Oyj 2,540 56,192
-----------
168,443
-----------
FRANCE--7.4%
Banque Nationale De Paris 1,380 97,740
Carrefour SA 2,000 106,116
Credit Agricole SA 2,530 68,725
France Telecom SA 3,008 90,052
Sanofi-Synthelabo SA 1,230 103,695
Schneider Electric SA 470 36,821
Total SA 575 134,509
Valeo SA 1,870 83,127
-----------
720,785
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
GERMANY--6.5%
Allianz AG 310 $ 39,344
Deutsche Bank AG 779 67,319
Deutsche Lufthansa AG (a) 3,650 52,555
Deutsche Post AG (a) 4,130 100,841
Deutsche Postbank AG 1,080 49,549
E.ON AG 860 73,884
Heidelberger Druckmaschinen* 1,090 34,807
Infineon Technologies AG* 5,550 53,083
KarstadtQuelle AG (a) 4,705 47,196
Medion AG 870 13,993
Volkswagen AG (a) 2,060 97,953
-----------
630,524
-----------
HONG KONG--1.8%
Bank of East Asia Ltd. 21,000 60,313
China Mobile Hong Kong Ltd. 19,000 61,999
Citic Pacific Ltd. 7,000 20,463
Huadian Power International Co. 130,000 35,003
-----------
177,778
-----------
HUNGARY--0.5%
Matav Magyar Tavkozlesi Rt 10,340 48,603
-----------
INDIA--1.2%
Hindalco Industries Ltd. 144A/Reg S--GDR 1,200 35,552
Mahanagar Telephone Nigam Ltd.--ADR 4,570 28,974
Reliance Industries Ltd. 144A--GDR 2,170 54,264
-----------
118,790
-----------
INDONESIA--0.5%
PT Gudang Garam Tbk 30,080 51,013
-----------
IRELAND--1.4%
Bank of Ireland 8,450 133,386
-----------
ITALY--3.7%
Benche Popolari Unite Scri 1,660 34,809
Benetton Group SpA 4,570 44,095
Eni SpA 3,950 102,742
Finmeccanica SpA 64,120 64,942
UniCredito Italiano SpA 19,580 115,142
-----------
361,730
-----------
JAPAN--22.5%
Aeon Co. Ltd. 1,800 30,411
Alps Electric Co., Ltd(. (a)) 2,800 44,485
Canon, Inc. 1,600 85,680
Credit Saison Co., Ltd.( (a)) 1,600 57,617
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
JAPAN (CONTINUED)
Dentsu, Inc. (a) 17 $ 46,310
Fuji Heavy Industries Ltd. 12,800 62,454
Fuji Photo Film Co., Ltd. (a) 1,900 68,952
Funao Electric Co., Ltd. 500 61,666
JS Group Corp. (a) 1,800 32,964
Kao Corp. (a) 3,100 70,711
KDDI Corp. (a) 14 68,831
Kuraray Co., Ltd. (a) 4,900 43,565
Lawsom, Inc. 1,500 55,136
Mabuchi Motor Co., Ltd. 1,200 71,984
Matsumotokiyoshi Co Ltd. 1,200 35,153
Minebea Co., Ltd. (a) 12,800 54,811
Mitsubishi Tokyo Financial Group, Inc. (a) 6 51,889
Murata Manufacturing Co., Ltd. (a) 1,000 53,643
Nippon Express Co., Ltd. (a) 21,700 113,571
NTT Corp. 13 56,516
Rinnai Corp. 2,500 62,972
Rohm Company Ltd. 900 86,902
Sekisui House Ltd. 6,000 63,924
Shin-Etsu Chemical Co., Ltd. (a) 2,200 82,918
Shiseido Co., Ltd. 200 2,633
Skylark Co., Ltd. 3,300 55,600
Sohgo Security Services Co., Ltd. 1,900 27,244
Sumitomo Bakelite Co., Ltd. 9,600 59,647
Sumitomo Chemical Co., Ltd. (a) 9,900 48,766
Sumitomo Mitsui Financial Group (a) 16 108,219
Takeda Pharmaceutical Co., Ltd. (a) 1,700 80,726
Takefuji Corp. 1,090 73,114
TDK Corp. (a) 400 27,353
The 77 Bank Ltd. 9,200 66,432
Toyoda Gosei Co., Ltd. 2,400 43,235
Toyota Motor Corp. (a) 1,700 63,122
Yamaha Motor Co., Ltd. 3,800 65,053
-----------
2,184,20
-----------
MALAYSIA--0.5%
Sime Darby Berhad 29,300 45,498
-----------
MEXICO--1.7%
Cemex S.A. de C.V.--ADR 1,420 51,475
Coca-Cola Femsa, S.A. de C.V.--ADR 2,550 61,634
Telefonos de Mexico SA de CV--ADR 1,620 55,939
-----------
169,048
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
NETHERLANDS--5.0%
ABN Amro Holding NV 2,500 $ 61,981
Aegon NV 5,440 73,323
Heineken NV 2,650 91,767
Koninklijke Philips Electronics NV 3,760 103,502
Royal Dutch Petroleum Co. 1,300 77,703
Wolters Kluwer NV 4,500 82,115
-----------
490,391
-----------
NEW ZEALAND--0.2%
Carter Holt Harvey Ltd. 16,900 23,675
-----------
PORTUGAL--0.5%
EDP-Energias de Portugal, S.A. (a) 18,500 51,548
-----------
SINGAPORE--1.5%
DBS Group Holdings, Ltd. 8,710 78,640
United Overseas Bank, Ltd. 7,750 67,624
-----------
146,264
-----------
SOUTH AFRICA--1.6%
Nampak Ltd. 19,370 49,021
Nedcor Ltd. 4,240 51,072
Sappi Ltd. 4,340 52,937
-----------
153,030
-----------
SOUTH KOREA--3.3%
Hyundai Motor Co. 820 44,265
Kookmin Bank--ADR 1,090 48,669
Korea Electric Power Corp. 1,900 48,761
Korea Electric Power Corp. --ADR 720 9,677
KT Corp.--ADR 2,730 58,176
Samsung Electronics Co., Ltd. 131 64,534
SK Telecom Co., Ltd.--ADR 2,580 50,878
-----------
324,960
-----------
SPAIN--2.8%
Banco Sabadell SA (a) 2,720 68,035
Endesa SA (a) 4,660 104,783
Repsol YPF SA 3,610 95,536
-----------
268,354
-----------
SWEDEN--1.0%
Electrolux AB (a) 2,500 58,186
Svenska Cellulosa AB (SCA), Class B 1,110 41,775
-----------
99,961
-----------
SWITZERLAND--6.0%
CIBA Specialty Chemicals AG * 1,438 93,077
Julius Bear Holding Ltd. (a) 20 6,933
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
SWITZERLAND (CONTINUED)
Lonza Group AG 815 $ 49,617
Nestle SA 460 125,790
Novartis AG (a) 2,600 121,216
Swiss Re 1,330 95,095
UBS AG (a) 1,140 96,192
-----------
587,920
-----------
TAIWAN--1.7%
Compal Electronics, Inc. 57,000 51,904
SinoPac Financial Holdings Co., Ltd. 89,000 48,795
United Microelectronics Corp. 99,000 59,785
-----------
160,484
-----------
UNITED KINGDOM--17.7%
Anglo American PLC 3,380 80,112
BAA PLC 4,540 50,070
BAE Systems PLC 11,010 53,950
Barclays PLC 6,170 63,091
Boc Group PLC 2,700 51,951
Boots Group PLC 7,699 90,658
BT Group PLC 24,521 95,128
Bunzl PLC 6,557 64,074
Centrica PLC 13,740 59,796
Diageo PLC 7,280 102,580
GKN PLC 18,830 90,222
GlaxoSmithKline PLC 6,680 153,152
Lloyds Tsb Group PLC 6,880 62,029
Marks & Spencer Group PLC 7,390 48,294
Old Mutual PLC 13,170 33,418
Rexam PLC 4,340 38,882
Rio Tinto PLC 2,589 83,580
Royal Bank of Scotland Group PLC 3,260 103,763
Sainsbury (J) PLC 10,050 54,945
Shell Transport & Trading Company PLC 13,900 124,794
Unilever PLC 11,380 112,494
Vodafone Group PLC 38,300 101,709
-----------
1,718,69
-----------
TOTAL EQUITIES (COST $9,361,909) 9,632,00
===========
INVESTMENT OF CASH COLLATERAL--18.1%
BlackRock Cash Strategies L.L.C (Cost $1,751,610) 1,751,610 1,751,61
-----------
TOTAL UNAFFILIATED INVESTMENTS (COST $11,113,519)
11,383,613
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PAR VALUE
SECURITY DESCRIPTION VALUE (NOTE 1A)
- --------------------------------------------------------------------------------
AFFILIATED INVESTMENTS--2.0%
Dreyfus Institutional Preferred Plus((+))
(Cost $192,966) $192,966 $ 192,966
------------
TOTAL INVESTMENTS--119.0% (COST $11,306,485)
11,576,579
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(19.0%)
(1,850,262)
------------
NET ASSETS--100%
$ 9,726,317
============
NOTES TO SCHEDULE OF INVESTMENTS:
ADR--American Depository Receipt
GDR--Global Depository Receipt
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security
(+) Affiliated institutional money market fund.
The fund held the following forward foreign currency exchange contracts at
March 31, 2005:
LOCAL
PRINCIPAL CONTRACT VALUE AT USD AMOUNT UNREALIZED
CONTRACTS TO RECEIVE AMOUNT MATURITY DATE MARCH 31, 2005 TO DELIVER GAIN/(LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Swiss Franc 19,119 4/1/2005 $ 15,988 $ 16,013 $ (25)
Danish Krone 86,099 4/1/2005 14,988 14,991 (3)
British Pound 19,055 4/1/2005 36,016 35,867 149
Japanese Yen 2,063,373 4/1/2005 19,250 19,235 15
Swedish Krona 49,600 4/1/2005 7,018 7,043 (25)
-------- -------- --------
$ 93,260 $ 93,149 $ 111
======== ======== ========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Note 1A) (including securities on loan,
valued at $1,675,918 (Note 7))
Unaffiliated investments (cost $11,113,519) $11,383,613
Affiliated investment (Note 1H) (cost $192,966) 192,966
Cash 495
Foreign currency, at value (cost $221,064) 222,857
Receivable for securities sold 25,015
Unrealized appreciation on forward foreign currency exchange contracts (Note 6) 164
Interest and dividends receivable 33,744
Prepaid expenses 610
----------
Total assets 11,859,464
LIABILITIES
Collateral for securities on loan (Note 7) $1,751,610
Payable for investments purchased 353,032
Unrealized depreciation on forward foreign currency exchange contracts (Note 6)
53
Accrued accounting, custody, administration and transfer agent fees (Note 2) 7,775
Accrued Trustees' fees and expenses (Note 2) 856
Other accrued expenses and liabilities 19,821
----------
Total liabilities 2,133,147
----------
NET ASSETS $9,726,317
==========
NET ASSETS CONSIST OF:
Paid-in capital $9,321,636
Accumulated net realized gain 105,852
Undistributed net investment income 28,592
Net unrealized appreciation 270,237
----------
TOTAL NET ASSETS $9,726,317
==========
Shares of beneficial interest outstanding 464,862
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $20.92
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
STATEMENT OF OPERATIONS FOR THE PERIOD NOVEMBER 15, 2004
(COMMENCEMENT OF OPERATIONS) TO MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income (net of foreign withholding taxes of $5,306) $ 55,764
Interest income 2,703
Securities lending income (Note 7) 1,042
----------
Total investment income 59,509
EXPENSES
Investment advisory fee (Note 2) $ 25,931
Accounting, custody, administration and transfer agent fees (Note 2) 32,538
Professional fees 13,786
Registration fees 7,750
Trustees' fees and expenses (Note 2) 1,118
Miscellaneous expenses 5,459
----------
Total expenses 86,582
DEDUCT:
Waiver of investment advisory fee (Note 2) (25,931)
Reimbursement of Fund operating expenses (Note 2) (29,734)
----------
Total expense deductions (55,665)
Net expenses 30,917
----------
Net investment income (loss) 28,592
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 125,203
Foreign currency (24,865)
----------
Net realized gain 100,338
Change in unrealized appreciation (depreciation) on:
Investment securities 270,094
Foreign currency 143
----------
Change in net unrealized appreciation (depreciation) 270,237
Net increase from payments by affiliates 5,514
----------
Net realized and unrealized gain (loss) 376,089
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 404,681
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 15, 2004
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 2005
(UNAUDITED)
-----------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income $ 28,592
Net realized gains 100,338
Change in net unrealized appreciation (depreciation) 270,237
Net increase from payments by affiliates 5,514
----------
Net increase in net assets from operations 404,681
----------
FUND SHARE TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 9,411,585
Cost of shares redeemed (89,949)
----------
Net increase in net assets from Fund share transactions 9,321,636
----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 9,726,317
NET ASSETS
At beginning of period --
----------
At end of period (including undistributed net
investment income of $28,592) $9,321,636
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE PERIOD
NOVEMBER 15, 2004
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 2005
(UNAUDITED)
-----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.00
---------
FROM OPERATIONS:
Net investment income (loss)(*(1)) 0.06
Net realized and unrealized gains (loss) on investments 0.85
Net increase from payments by affiliates (2) 0.01
---------
Total from operations 0.92
---------
NET ASSET VALUE, END OF PERIOD $ 20.92
=========
TOTAL RETURN((+)) 4.60%(2)
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 0.90%((+)(+))
Net Investment Income (to average daily net assets)* 0.83%((+)(+))
Portfolio Turnover 15%((+)(+)(+))
Net Assets, End of Period (000's omitted) $ 9,726
- -------
* The investment advisor 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
loss per share and the ratios would have been:
Net investment income per share(1) $ (0.06)
Ratios (to average daily net assets):
Expenses 2.52%((+)(+))
Net investment loss (0.79)%((+)(+))
(1) Calculated using the average shares outstanding.
(2) For the period from November 15, 2004 (commencement of operations) to March
31, 2005, 0.05% of the Fund's total return consists of a voluntary payment by
the advisor to compensate the Fund for a trading error. Excluding this payment,
total return would have been 4.55%.
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(+)(+) Computed on an annualized basis.
(+)(+)(+) Not annualized.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company World ex-U.S. Fund (the "Fund"), which commenced operation
on November 15, 2004, is a separate diversified investment series of the
Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of companies
that are located in foreign countries represented in the Morgan Stanley
Capital International All Country World Index ex-United States Free Index.
The Funds may invest up to 35% of its assets in emerging market countries.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
Portfolio's shares may change on days when shareholders are not able to buy
or sell them. Many securities markets and exchanges outside the U.S. close
prior to the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect the events that occur after such close but before the close of the
New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market),
the Fund may value its assets by a method the Trustees believe accurately
reflects the fair value. The Trustees have adopted fair value pricing
procedures, which, among other things, require the Fund to fair value such
securities if there has been a movement in the U.S. market that exceeds a
specified threshold. Although the threshold may be revised by the trustees
from time to time and the number of days on which fair value prices will be
used will depend on market activity, it is possible that fair value prices
for foreign securities will be used by the fund to a significant extent.
Short-term instruments with less than sixty-one days remaining to maturity
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 coupon interest accrued, adjusted for accretion
of discount or amortization of premium using the yield - to - maturity
method on debt securities and with greater than sixty days to maturity.
Realized gains and losses from securities sold are recorded on the
identified cost basis. The Portfolio does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Net realized gains and losses on
foreign currency transactions represent gains and losses on disposition of
foreign currencies and forward foreign currency exchange contracts,
currency gains and losses realized between the trade and settlement dates
on securities transactions, and the difference between the amount of
investment income and foreign withholding taxes recorded on the Portfolio's
books and the U.S. dollar equivalent amounts actually received or paid.
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. 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
reclassifications, are primarily due to differing treatments for wash sales
and realized and unrealized gains or losses on futures.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Permanent book and tax basis differences relating to shareholder
distributions will result in reclassifications among undistributed net
investment income, accumulated net realized gain (loss) and paid in
capital. Undistributed net investment income and accumulated undistributed
net realized gain (loss) on investments may include temporary book and tax
basis differences which will reverse in a subsequent period. Any taxable
income or gain remaining at fiscal year end is distributed in the following
year.
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. FOREIGN CURRENCY TRANSACTIONS
The Fund maintains its books and records in U.S. dollars. Investment
security valuations and other assets and liabilities initially expressed in
foreign currencies are converted into U.S. dollars based upon current
currency exchange rates. Purchases and sales of foreign investment
securities and income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Section 988 of the Internal Revenue Code provides that gains or losses on
certain transactions attributable to fluctuations in foreign currency
exchange rates must be treated as ordinary income or loss. For financial
statement purposes, such amounts are included in net realized gains or
losses.
F. INVESTMENT RISK
There are certain additional risks involved in investing in foreign
securities that are not inherent in investments in domestic securities.
These risks may involve adverse political and economic developments,
including the possible imposition of capital controls or other foreign
governmental laws or restrictions. In addition, the securities of some
foreign companies and securities markets are less liquid and at times may
be more volatile than securities of comparable U.S. companies and U.S.
securities markets. The risks described above apply to an even greater
extent to investments in emerging markets. The securities markets of
emerging countries are generally smaller, less developed, less liquid, and
more volatile than the securities markets of the U.S. and developed foreign
markets.
G. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the 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
Affiliated issuers represent investments in other investment companies
advised by The Boston Company Asset Management, LLC (TBCAM), a wholly-owned
subsidiary of Mellon Financial Corporation, or its affiliates.
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.75% of the Fund's average daily net assets. TBCAM
voluntarily agreed to limit the Fund's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
0.90% of the Fund's average daily net assets for the period ended March 31,
2005. Pursuant to this agreement, for the period November 15, 2004
(commencement of operations) to March 31, 2005, TBCAM voluntarily waived
its investment advisory fee in the amount of $25,931 and reimbursed the
Fund for $29,734 of its operating expenses. This agreement is voluntary and
temporary and may be discontinued or revised by TBCAM at any time.
During the period from November 15, 2004 (commencement of operations) to
March 31, 2005, the Fund received $5,514 from TBCAM as reimbursement due to
a trading error.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $525 for
the period November 15, 2004 (commencement of operations) to March 31,
2005.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
The Fund has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide custody, fund administration and fund accounting services for the
Fund. For these services, the Fund pays Mellon Bank a fixed fee plus asset
and transaction based fees, as well as, out-of-pocket expenses. Pursuant to
this agreement the Fund paid $12,556 during the period November 15, 2004
(commencement of operations) to March 31, 2005.
The Fund entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Fund's lending agent.
Pursuant to this agreement Mellon Bank receives an agreed upon percentage
of the net lending revenues. This compensation is a standard form of
compensation received by securities lending agents with respect to
non-affiliated entities. See Note 7 for further details.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket expenses.
In addition, the Trust pays the legal fees for the independent counsel of
the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations for the period November 15, 2004 (commencement of operations)
to March 31, 2005, were $10,571,941 and $1,335,235, respectively. For the
period November 15, 2004 (commencement of operations) to March 31, 2005,
the Fund did not purchase or sell any long-term U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
FOR THE PERIOD
NOVEMBER 15, 2004
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 2005
-----------------
Shares sold 469,273
Shares redeemed (4,411)
----------
Net increase 464,862
==========
At March 31, 2005,one shareholder of record held approximately 94% of the
total outstanding shares of the Fund. Investment activity of this
shareholder could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading. The fee does
not apply to shares that were acquired through reinvestment of
distributions. For the period November 15, 2004 (commencement of
operations) to March 31, 2005, the Fund did not collect any redemption
fees.
(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 tax basis components of distributable earnings and the federal tax cost
as of March 31, 2005, was as follows:
Aggregate Cost $9,554,875
==========
Unrealized appreciation $ 433,085
Unrealized depreciation (162,991)
----------
Net unrealized appreciation/depreciation $ 270,094
==========
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY WORLD EX-U.S. VALUE FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS:
In general, the following instruments are used for hedging purposes as
described below. However, these instruments may also be used to seek to
enhance potential gain in circumstances where hedging is not involved.
The Fund may trade the following instruments with off-balance sheet risk:
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.
The Fund held open foreign currency exchange contracts at March 31, 2005.
See Schedule of Investments for further details.
FUTURES CONTRACTS
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the
underlying instrument or hedge other investments. In addition, there is the
risk that the Portfolio may not be able to enter into a closing transaction
because of an illiquid secondary market. Losses may arise if there is an
illiquid secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the
exchange on which they trade.
At March 31, 2005, the Fund did not hold any 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 November 15, 2004
(commencement of operations) to March 31, 2005 resulting in security
lending income of $1,042. At March 31, 2005, the Fund had securities valued
at $1,675,918 on loan. See Schedule of Investments for further detail on
the security positions on loan and collateral held.
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 TRUSTEE
PRINCIPAL PORTFOLIOS IN OTHER REMUNERATION
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS (PERIOD ENDED
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY MARCH 31,
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None $0
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 31 None $0
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, 31 None $0
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 31 None $0
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
INTERESTED TRUSTEES
Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 31 None $0
Mellon Institutional and Chief and Chief Operating Officer,
Asset Management Executive 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
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME TERM OF OFFICE
ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mello
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
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One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0612SA0305
Semiannual Report THE BOSTON COMPANY
SMALL CAPITALIZATION EQUITY FUND
MARCH 31, 2005 (UNAUDITED)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund' s historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund' s Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund' s proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC' s web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD((+))
ACCOUNT VALUE ACCOUNT VALUE OCTOBER 1, 2004
OCTOBER 1, 2004 MARCH 31, 2005 TO MARCH 31, 2005
- ------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,099.50 $5.23
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.95 $5.04
- -------
((+)) EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.00%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365
(TO REFLECT THE ONE-HALF YEAR PERIOD).
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
PORTFOLIO INFORMATION AS OF MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE OF
TOP TEN EQUITY HOLDINGS(*) SECTOR INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
Respironics, Inc. Health Care 2.3
Lions Gate Entertainment Corp. Consumer Discretionary 1.9
Fisher Scientific International Health Care 1.9
Matria Healthcare, Inc. Health Care 1.8
Oil States International, Inc. Energy 1.7
Anteon International Corp. Technology 1.7
Covance, Inc. Health Care 1.6
FMC Technologies, Inc. Energy 1.6
Waste Connections Industrial 1.5
Peet's Coffee & Tea, Inc. Consumer Staples 1.4
----
17.4
* Excludes short-term investments and investments of cash collateral.
PERCENTAGE OF
ECONOMIC SECTOR ALLOCATION NET ASSETS
- --------------------------------------------
Basic Materials 1.9
Consumer Discretionary 18.2
Consumer Staples 4.2
Energy 8.3
Financial 6.7
Health Care 20.0
Industrial 15.7
Technology 19.1
Utilities 1.6
Short-term and Net Other Assets 4.3
-----
100.0
The Fund is actively managed. Current holdings may be different than those
presented above.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--103.3%
EQUITIES--95.7%
BASIC MATERIALS--1.9%
Consol Energy, Inc. (a) 5,350 $ 251,557
Olin Corp. 6,540 145,842
-----------
397,399
-----------
CONSUMER DISCRETIONARY--18.2%
Cache, Inc.(*) 14,960 202,708
California Pizza Kitchen, Inc.(*) 6,110 143,218
Casual Male Retail Group, Inc.(*) 14,800 96,052
Coinstar, Inc.(*) 11,200 237,440
Emmis Communications Corp. (a)(*) 12,300 236,406
Hot Topic, Inc.(*) 2,800 61,180
Hughes Supply, Inc. 3,700 110,075
Imax Corp.(*) 15,900 146,916
Jarden Corp.(*) 3,930 180,308
Jos A Bank Clothiers, Inc. (a)(*) 7,110 208,323
Lions Gate Entertainment Corp.(*) 34,400 380,120
Marvel Enterprises, Inc.(*) 5,900 118,000
Nu Skin Enterprises, Inc. 7,000 157,570
Pacific Sunware of California(*) 4,260 119,195
Petco Animal Supplies, Inc.(*) 5,680 209,081
Playboy Enterprises, Inc., Class B(*) 14,300 184,470
Provide Commerce, Inc.(*) 5,150 148,732
Rare Hospitality International, Inc.(*) 5,010 154,709
Rubio's Restaurants, Inc. (*) 9,620 96,200
Speedway Motorsports, Inc. (a) 2,720 97,104
The Sportsman's Guide, Inc. (*) 5,000 130,700
Tractor Supply Co.(*) 2,580 112,617
Wabtec Corp. 10,990 225,185
-----------
3,756,30
-----------
CONSUMER STAPLES--4.2%
Arden Group, Inc. 527 37,406
J & J Snack Food Corp. 2,350 110,051
Peet's Coffee & Tea, Inc.(*) 11,500 283,475
Performance Food Group Co.(*) 9,490 262,683
Playtex Products, Inc.(*) 19,600 176,400
-----------
870,015
-----------
ENERGY--8.3%
Brigham Exploration Co. (*) 23,900 220,597
Double Eagle Petroleum Co. (*) 6,000 123,960
Dril-Quip, Inc.(*) 2,970 91,298
FMC Technologies, Inc.(*) 9,600 318,528
Global Industries, Ltd.(*) 13,400 125,960
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
ENERGY (CONTINUED)
Newpark Resources, Inc.(*) 18,300 $ 107,787
Oil States International, Inc.(*) 16,600 341,130
Penn Virginia Corp. 4,450 204,255
Pioneer Drilling Co.(*) 13,400 184,518
-----------
1,718,03
-----------
FINANCIAL--6.7%
Affiliated Managers Group(*) 1,850 114,756
Cathay General Bancorp 4,400 138,600
Center Financial Corp. 5,119 90,248
Cullen/Frost Bankers, Inc. 2,800 126,420
First Community Bancorp, Inc., Class A 2,400 106,320
First Midwest Bancorp, Inc. 5,250 170,520
Investors Financial Services Corp. 2,150 105,157
Mercantile Bank Corp. 4,405 180,076
MetroCorp Bancshares, Inc. 3,300 74,316
Preferred Bank, Los Angeles 210 8,379
Southwest Bancorp of Texas, Inc. 6,000 110,100
Triad Guaranty, Inc.(*) 1,800 94,698
Vineyard National Bancorp Co. (a) 2,000 54,780
-----------
1,374,37
-----------
HEALTH CARE--20.0%
Able Laboratories, Inc.(*) 5,100 119,646
Align Technology, Inc.(*) 14,100 87,984
Animas Corp.(*) 9,100 183,911
Applera Corp.-Celera Genomics Group(*) 6,200 63,550
Bone Care International, Inc.(*) 2,600 67,444
Charles River Laboratories(*) 2,256 106,122
Conceptus, Inc.(*) 9,100 70,980
Connetics Corp.(*) 6,700 169,443
Cooper Cos, Inc. 3,250 236,925
Covance, Inc.(*) 6,700 318,987
Coventry Health Care, Inc.(*) 1,400 95,396
Fisher Scientific International( (a)) 6,600 375,672
Harvard Bioscience, Inc. (*) 25,600 99,584
ICOS Corp.( (a)*) 3,700 83,102
Immunogen, Inc.(*) 11,300 59,099
IRIS International, Inc.(*) 8,200 92,086
Lifepoint Hospitals, Inc.(*) 3,100 135,904
Matria Healthcare, Inc.(*) 11,850 363,914
Maxygen, Inc.(*) 6,200 53,196
Medicines Co. (a)* 3,900 88,374
Natus Medical, Inc.(*) 10,100 84,436
PSS World Medical, Inc.(*) 18,300 208,071
Resmed, Inc. (a)* 1,100 62,040
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
Respironics, Inc.(*) 7,700 $ 448,679
Sybron Dental Specialties, Inc.(*) 3,500 125,650
Triad Hospitals(*) 2,500 125,250
VCA Antech, Inc.(*) 9,100 184,093
Zoll Medical Corp.(*) 1,500 33,795
-----------
4,143,33
-----------
INDUSTRIAL--15.7%
Bucyrus International, Inc., Class A 3,600 140,616
Cuno, Inc.(*) 2,880 148,003
Chicago Bridge & Iron Co. N.V. 2,670 117,560
Educate, Inc.(*) 13,100 181,697
First Consulting Group, Inc. (*) 20,200 105,040
Forward Air Corp. 3,750 159,675
Healthcare Services Group 3,700 89,725
Jack Henry & Associates, Inc. 5,600 100,744
Huron Consulting Group, Inc.(*) 10,200 211,242
Interline Brands, Inc.(*) 8,120 155,173
Laureate Education, Inc.(*) 4,800 205,392
LECG Corp.(*) 11,100 217,560
MSC Industrial Direct Co., Inc. 7,290 222,782
Multi-Color Corp. 9,300 181,722
Navigant Consulting, Inc.(*) 8,300 226,009
Pacer International, Inc.(*) 6,300 150,507
Stericycle, Inc.(*) 3,000 132,600
Wabash National Corp. 4,150 101,260
Waste Connections (a)(*) 8,650 300,588
UTI Worldwide, Inc. 1,480 102,786
-----------
3,250,68
-----------
TECHNOLOGY--19.1%
Akamai Technologies, Inc. (a)(*) 15,100 192,223
Aladdin Knowledge Systems 4,900 111,377
Anteon International Corp.(*) 8,700 338,691
Borland Software Corp.(*) 22,600 183,512
Cypress Semiconductor Corp.(*) 8,300 104,580
Exar Corp. (a)(*) 9,800 131,320
Extreme Networks, Inc.(*) 28,100 165,509
Fastclick, Inc. 1,150 13,800
Foundry Networks, Inc.(*) 15,150 149,985
Infocrossing, Inc. (a)(*) 9,700 153,648
InfoSpace, Inc.(*) 5,700 232,731
Ingram Micro Inc., Class A(*) 11,600 193,372
Internet Security Systems(*) 9,400 172,020
Lam Research Corp.(*) 4,000 115,440
Macromedia, Inc.(*) 3,200 107,200
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
TECHNOLOGY (CONTINUED)
ManTech International Corp., Class A(*) 5,350 $ 123,425
Mcafee, Inc.(*) 6,300 142,128
Mentor Graphics Corp.(*) 15,500 212,350
Online Resources Corp. (*) 13,900 122,459
PortalPlayer, Inc. (a)(*) 4,520 103,192
Progress Software Corp.(*) 9,600 251,712
Silicon Laboratories, Inc.(*) 3,100 92,101
SS&C Technologies, Inc. 6,800 155,040
Varian Semiconductor Equipment Associates, Inc.(*) 4,400 167,244
Verisign, Inc.(*) 7,700 220,990
-----------
3,956,04
-----------
UTILITIES--1.6%
Black Hills Corp. 3,300 109,131
Otter Tail Corp. 8,700 217,846
-----------
326,977
-----------
TOTAL EQUITIES (Cost $17,121,984)
19,793,166
-----------
SHORT-TERM INVESTMENTS--0.4% RATE MATURITY PAR VALUE
---- -------- ---------
U.S. GOVERNMENT--0.4%
U.S. Treasury Bill((+)) (Cost $74,567) 2.730% 6/16/2005 75,000 74,573
------
INVESTMENT OF CASH COLLATERAL--7.2% SHARES
------
BlackRock Cash Strategies L.L.C (Cost $1,493,650) 1,493,650 1,493,650
----------
TOTAL UNAFFILIATED INVESTMENTS (COST $18,690,201) 21,361,389
----------
AFFILIATED INVESTMENTS--5.5%
Dreyfus Institutional Preferred Plus((+)(+)) (Cost $1,137,844) 1,137,844 1,137,844
----------
TOTAL INVESTMENTS--108.8% (COST $19,828,045)
22,499,233
LIABILITIES IN EXCESS OF OTHER ASSETS--(8.8%)
(1,825,269)
----------
NET ASSETS-100%
$20,673,964
===========
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security
(+) Denotes all or part of security segregated as collateral.
(+)(+) Affiliated institutional money market fund.
At March 31, 2005 the Fund held the following futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (2 Contracts) Long 6/16/2005 $638,950 $(21,059)
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Note 1A) (including securities on loan,
valued at $1,444,692 (Note 7))
Unaffiliated investments (cost $18,690,201) $21,361,389
Affiliated investment (Note 1F) (cost $1,137,844) 1,137,844
Cash 120
Receivable for investments sold 343,718
Interest and dividends receivable 7,550
Variation margin receivable (Note 6) 1,650
Prepaid expenses 13,833
-----------
Total assets 22,866,104
LIABILITIES
Collateral for securities on loan (Note 7) $ 1,493,650
Payable for investments purchased 665,504
Accrued accounting, custody, administration and transfer agent fees (Note 2) 12,548
Accrued Trustees' fees and expenses (Note 2) 1,407
Other accrued expenses and liabilities 19,031
------------
Total liabilities 2,192,140
-----------
NET ASSETS $20,673,964
===========
NET ASSETS CONSIST OF:
Paid-in capital $22,101,699
Accumulated net realized loss (4,036,594)
Accumulated net investment loss (41,270)
Net unrealized appreciation 2,650,129
-----------
TOTAL NET ASSETS $20,673,964
===========
SHARES OF BENEFICIAL INTEREST OUTSTANDING 1,670,505
===========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 12.38
===========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income (net of foreign withholding taxes of $101) $ 44,250
Interest income 12,329
Security lending income (Note 7) 5,957
----------
Total investment income 62,536
EXPENSES
Investment advisory fee (Note 2) $ 62,095
Accounting, custody, administration and transfer agent fees (Note 2) 36,882
Professional fees 21,045
Registration fees 7,978
Trustees' fees and expenses (Note 2) 2,879
Insurance expense 2,912
Miscellaneous expenses 3,869
-----------
Total expenses 137,660
DEDUCT:
Waiver of investment advisory fee (Note 2) (34,237)
-----------
Net expenses 103,423
----------
Net investment loss (40,887)
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 1,316,022
Futures contracts 120,140
-----------
Net realized gain 1,436,162
Change in unrealized appreciation (depreciation) on:
Investment securities 535,815
Futures contracts (28,425)
-----------
Net change in unrealized appreciation (depreciation) 507,390
----------
Net realized and unrealized gain (loss) on investments 1,943,552
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $1,902,665
==========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
MARCH 31, 2005 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2004
----------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment income (loss) $ (40,887) $ (145,163)
Net realized gains 1,436,162 4,785,352
Net change in unrealized appreciation (depreciation) 507,390 (515,620)
----------- -----------
Net increase (decrease) in net assets from operations 1,902,665 4,124,569
----------- -----------
FUND SHARE TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 54,264 302,435
Cost of shares redeemed (504,647) (7,057,508)
----------- -----------
Net decrease in net assets from Fund share transactions (450,383) (6,755,073)
----------- -----------
Total Increase (Decrease) in Net Assets 1,452,282 (2,630,504)
Net Assets
At beginning of period 19,221,682 21,852,186
----------- -----------
At end of period (including net investment losses of $41,270 and $383) $20,673,964 $19,221,682
=========== ===========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2005 -------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.26 $ 9.48 $ 7.10 $ 8.15 $ 230.48 $ 163.38
----------- --------- --------- --------- --------- ---------
FROM OPERATIONS:
Net investment income (loss)(*(1)) (0.02) (0.08) (0.01) (0.02) (0.07) (1.29)
Net realized and unrealized gains
(loss) on investments 1.14 1.86(6) 2.39(6) (1.03)(6) (54.83) 101.69
----------- --------- --------- --------- --------- ---------
Total from operations 1.12 1.78 2.38 (1.05) (54.90) 100.40
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income -- -- (0.00)(2) -- -- --
From net realized gains on investments -- -- -- -- (167.43) (33.30)
----------- --------- --------- --------- --------- ---------
Total distributions to shareholders -- -- 0.00 -- (167.43) (33.30)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 12.38 $ 11.26 $ 9.48 $ 7.10 $ 8.15 $ 230.48
=========== ========= ========= ========= ========= =========
Total Return(+) 9.95% 18.78% 33.54% (12.88)% (46.58)% 67.64%
Ratios/Supplemental data:
Expenses (to average daily net
assets)(*) 1.00%((+)(+)) 0.98% 0.74% 0.74% 0.74% 0.74%(3)
Net Investment Income (loss)
(to average daily net assets)(*) (0.40)%((+)(+)) (0.69)% (0.17)% (0.24)% (0.33)% (0.57)%
Portfolio Turnover 82%((+)(+)(+)) 157% 252%(4) 248%(4) 136%(4) 153%(4)
Net Assets, End of Period
(000's omitted) $ 20,674 $ 19,222 $ 21,852 $ 18,861 $ 17,073 $ 151,063
- -------
* For the periods indicated, the investment advisor 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 loss per share and the ratios would have been:
Net investment income per share(1) $ (0.04) $ (0.12) $ (0.07) $ (0.08) $ (0.14) $ (0.45)
Ratios (to average daily net assets):
Expenses 1.33%((+)(+)) 1.33% 1.40% 1.00% 1.08% 0.77%(3)
Net investment loss (0.73)%((+)(+)) (1.04)% (0.83)% (0.96)% (0.67)% (0.60)%
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(+)(+) Computed on an annualized basis.
(+)(+)(+) Not annualized.
(1) Calculated using the average shares outstanding.
(2) Calculates to less than $0.01 per share.
(3) Includes the Fund's share of The Boston Company Small Capitalization Equity
Portfolio's allocated expenses for the periods from May 3, 1996 to January 27,
2000.
(4) Represents portfolio turnover of The Boston Company Small Capitalization
Equity Fund while the Fund was investing directly in securities.
(5) Amounts were adjusted to reflect a 1:3 reverse share split effective
December 14, 2000.
(6) Amounts include litigation proceeds received by the Fund of $0.03 for the
year ended September 30, 2004, $0.01 for the year ended September 30, 2003
relating to securities litigation, $0.15 for the year ended September 30, 2002
relating to the settlement of multiple class action lawsuits and $0.14 for the
year ended September 30, 2001 relating to NASDAQ recovery.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Capitalization Equity Fund (the "Fund") is a separate
diversified investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of small cap
U.S. companies with total market capitalizations equal to or less than 75%
of the average total market capitalization of the largest companies
included in the Russell 2000 Growth Index measured at the end of each of
the previous twelve months.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
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. Dividends representing a return of capital are
reflected as a reduction of cost.
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. 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
reclassifications, are primarily due to differing treatments for losses
deferred due to wash sales, excise tax regulations and capital loss
carryovers.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
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.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY 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
Affiliated issuers represent investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM") a
wholly-owned subsidiary of Mellon Financial Corporation, or its affiliates
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.60% of the Fund's average daily net assets. TBCAM
voluntarily agreed to limit the Fund's total annual operating expenses
(excluding brokerage commissions, taxes and extraordinary expenses) to
1.00% of the Fund's average daily net assets for the period ended March 31,
2005. Pursuant to this agreement, for the period ended March 31, 2005,TBCAM
voluntarily waived a portion of its investment advisory fee in the amount
of $34,237. This agreement is voluntary and temporary and may be
discontinued or revised by TBCAM at any time.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $7,224
during the period ended March 31, 2005.
The Fund has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide custody, fund administration and fund accounting services for the
Fund. For these services the Fund pays Mellon Bank a fixed fee plus asset
and transaction based fees, as well as, out-of-pocket expenses. Pursuant to
this agreement the Fund paid $31,026 during the period ended March 31.
2005.
The Fund entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Fund's lending agent.
Pursuant to this agreement Mellon Bank receives an agreed upon percentage
of the net lending revenues. This compensation is a standard form of
compensation received by securities lending agents with respect to
non-affiliated entities. See Note 7 for further details.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket expenses.
In addition, the Trust pays the legal fees for the independent counsel of
the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations for the period ended March 31, 2005, were $16,085,406 and
$16,245,517, respectively. For the period ended March 31, 2005, the Fund
did not purchase or sell any long-term U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
-------------- ------------------
Shares sold 4,576 26,941
Shares redeemed (40,503) (624,714)
------- --------
Net increase (decrease) (35,927) (597,773)
======= ========
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At March 31, 2005, two shareholders of record held approximately 40% and
38% of the total outstanding shares of the Fund. Investment activity of
these shareholders could have a material impact on the Fund.
A significant portion of the Fund's shares represent investments by
fiduciary accounts over which Standish Mellon and its affiliates have
either sole or joint investment discretion.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading. The fee does
not apply to shares that were acquired through reinvestment of
distributions. For the period ended March 31, 2005, the Fund received no
redemption fees.
(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 tax basis components of distributable earnings and the federal tax cost
as of March 31, 2005, was as follows:
Aggregate Cost $ 18,334,396
============
Unrealized appreciation $ 3,039,439
Unrealized depreciation (368,251)
------------
Net unrealized appreciation/depreciation $ 2,671,188
(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 did not enter into option transactions during the period ended
March 31, 2005.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY 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 March 31, 2005, the Fund held futures contracts. See Schedule of
Investments for further details.
(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 March 31, 2005 resulting
in security lending income of $5,957. At March 31, 2005, the Fund had
securities valued at $1,444,692 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(8) LINE OF CREDIT:
The Fund, and other funds in the Trust and sub-trusts in the Mellon
Institutional Funds Master Portfolio Trust (the "Portfolio 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 facility fee, computed at an annual rate of .060 of 1% committed amount,
is allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, a facility fee of $389
was allocated to the Fund.
During the period ended March 31, 2005, the Fund did not use the line of
credit.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that the Fund's Board of
Trustees, including a majority of its Trustees who are not affiliated with
the Fund's investment adviser or underwriter (the "Independent Trustees")
voting separately, approve the Fund's advisory agreement and the related
fees on an annual basis. In their most recent deliberations concerning
their decision to approve the continuation of the Fund's investment
advisory agreement, the Fund's Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from
the Fund's investment adviser, The Boston Company Asset Management LLC
("TBCAM"), a broad range of information in response to a written request
prepared on their behalf by their own legal counsel. The Independent
Trustees met alone in a private session with their legal counsel on
September 15, 2004 to review these materials and to discuss the proposed
continuation of the Fund's advisory agreement. The entire Board then met on
October 14, 2004.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a
separate presentation of TBCAM's profitability relative to that of several
publicly traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as
information concerning TBCAM's executive management, portfolio management,
and client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and TBCAM's
separate account advisory fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance, the addition of a new portfolio manager, as well as a Fund's
"fact sheets" prepared by TBCAM providing salient data about the Fund,
including Fund holdings, strategies, recent market conditions and outlook,
as well as TBCAM's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to TBCAM provided therein are fair and
reasonable, and they approved the continuation of the agreement for a one
year period. Some of the factors that figured prominently in the Trustees'
determination are described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered the nature, scope and quality of the overall services
provided to the Fund by TBCAM. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust TBCAM, under the supervision of the
Trustees, to manage the portion of their assets invested in the Fund.
Among the specific factors the Trustees reviewed were the portfolio
management, administrative, compliance and related services provided by
TBCAM. The Trustees determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and
expressed their
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
support for this change. The Trustees reviewed the background and
experience of the Fund's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of TBCAM's investment staff,
technological infrastructure and overall responsiveness to changes in
market conditions.
The Board determined that TBCAM had the expertise and resources to manage
the Fund effectively.
INVESTMENT PERFORMANCE
The Board compared the relative investment performance of the Fund against
a peer group of investment companies selected by TBCAM with input from the
Trustees. The Board also compared the Fund's investment performance against
the average performance of a larger universe of funds regarded by Lipper as
having similar investment objectives and considered the Fund's performance
rankings with that universe. In addition to the comparative information
provided in connection with the September 15, 2004 meeting, the Trustees
received similar detailed comparative performance information for the Fund
at each regular quarterly Board meeting during the year.
The Lipper materials provided to the Board at the September 15, 2004
meeting indicated that the Fund's performance for the 1-, 3- and 5-year
periods ended July 31, 2004 was 21.10%, 2.58% and 3.81%. The Trustees found
that these results compared favorably with the Fund's peer group of similar
funds, the average performance of which was 11.56%, -1.70% and 1.82% for
the same periods.
ADVISORY FEE AND OTHER EXPENSES
The Board considered the advisory fee rate paid by the Fund to TBCAM. The
Fund's contractual advisory fee was 0.60%, in the 1st (best) quintile of
its peer group of funds, the median fee of which was 1.014%. The Fund's net
advisory fee, after giving effect to fee waivers, was 0.00%, while the peer
group median net advisory fee was 1.00%. Based on the Lipper data, as well
as other factors discussed herein, the Board determined that the Fund's
advisory fee is reasonable relative to its peer group averages, both with
and without giving effect to fee waivers.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of TBCAM. Based on the additional scope
and complexity of the services provided and responsibilities assumed by
these advisers with respect to the Fund relative to these other types of
clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board considered the Fund's expense ratio and compared it to that of
its peer group of similar funds. They found that the Fund's actual net
expense ratio of 0.74% (after giving effect to expense limitations) was
lower than the median net expense ratio of the peer group of 1.281%
notwithstanding the fact that all but one of the other funds in the peer
group were larger than the Fund.
TBCAM'S PROFITABILITY
The Board considered TBCAM's profitability in managing the Fund and the
Mellon Institutional Funds as a group, as well as the methodology used to
compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon
Asset Management Company LLC ("Standish Mellon") in managing the Fund and
other Funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability
information submitted to them by TBCAM, TBCAM incurred losses in recent
years in operating many of the investment companies in the Mellon family of
funds, including the Fund, and achieved only marginal profitability as to
several other funds. The Trustees observed that TBCAM incurred losses in
operating the Fund for both 2002 and 2003.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAPITALIZATION EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
ECONOMIES OF SCALE
While the Board recognized that economies of scale might be realized as the
Fund grows, the Trustees noted that the Fund's asset size fluctuated
somewhat in recent years (between approximately $18 million - $26 million),
the Fund nevertheless remained quite small relative to its peers, and the
Board concluded that, considering current asset growth prospects, the
implementation of fee breakpoints or other fee reductions was not necessary
at this time. The Trustees intend to review the need for breakpoints in
connection with future investment advisory agreement approval
deliberations.
OTHER BENEFITS
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Funds. Mellon affiliates provide
custodial, administrative, transfer agency and securities lending services
to the Funds. In each case, such affiliates were selected on the basis of a
comparative analysis of their capabilities and fees relative to those of
unaffiliated competitors. In addition, the Trustees, including a majority
of the Independent Trustees, conduct an examination annually of each such
arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Fund; (iii) the nature and quality of the services
provided by the affiliate pursuant to the agreement are at least equal to
those provided by other, unaffiliated firms offering the same or similar
services for similar compensation; and (iv) the fees payable by the Fund to
the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for
services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Fund and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to TBCAM provided therein are fair and reasonable and,
thus, in approving the continuation of the agreement for a one year period
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 TRUSTEE
PRINCIPAL PORTFOLIOS IN OTHER REMUNERATION
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS (PERIOD ENDED
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY MARCH 31,
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None $338
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 31 None $363
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, 31 None $338
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 31 None $338
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
INTERESTED TRUSTEES
Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 31 None $0
Mellon Institutional and Chief and Chief Operating Officer,
Asset Management Executive 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
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME TERM OF OFFICE
ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mello
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
THIS PAGE INTENTIONALLY LEFT BLANK
THIS PAGE INTENTIONALLY LEFT BLANK
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0928SA0305
Semiannual Report THE BOSTON COMPANY
SMALL CAP TAX-SENSITIVE EQUITY FUND
MARCH 31, 2005 (UNAUDITED)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund' s historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund' s Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund' s proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC' s web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
EXPENSES PAID
BEGINNING ENDING DURING PERIOD((+))
ACCOUNT VALUE ACCOUNT VALUE OCTOBER 1, 2004
OCTOBER 1, 2004 MARCH 31, 2005 TO MARCH 31, 2005
- ---------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,088.40 $5.26
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.90 $5.09
- -------
((+)) EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.01%,
MULTIPLIED BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 182/365
(TO REFLECT THE ONE-HALF YEAR PERIOD).
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
PORTFOLIO INFORMATION AS OF MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
PERCENTAGE OF
TOP TEN EQUITY HOLDINGS(*) SECTOR INVESTMENTS
- ----------------------------------------------------------------------------------------------------------
Respironics, Inc. Health Care 2.2
Covance, Inc. Health Care 2.1
Lions Gate Entertainment Corp. Consumer Discretionary 1.9
Fisher Scientific International Health Care 1.9
Matria Healthcare, Inc. Health Care 1.8
Oil States International, Inc. Energy 1.7
Consol Energy, Inc. Basic Materials 1.6
FMC Technologies, Inc. Energy 1.6
Waste Connections Industrial 1.5
AGL Resources, Inc. Utilities 1.4
----
17.7
* Excluding short-term investments and investment of cash collateral.
PERCENTAGE OF
ECONOMIC SECTOR ALLOCATION NET ASSETS
- --------------------------------------------
Basic Materials 3.9
Consumer Discretionary 17.2
Consumer Staples 4.0
Energy 7.1
Financial 7.1
Health Care 20.0
Industrial 14.5
Technology 18.2
Utilities 2.6
Short-term and Net Other Assets 5.4
-----
100.0
The Fund is actively managed. Current holdings may be different than those
presented above.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--100.9%
EQUITIES--94.6%
BASIC MATERIALS--3.9%
Airgas, Inc. 51,940 $ 1,240,847
-----------
Arch Coal, Inc. (a) 23,170 996,542
Consol Energy, Inc. 42,590 2,002,58
Olin Corp. 41,580 927,234
-----------
5,167,205
-----------
CONSUMER DISCRETIONARY--17.2%
Applebee's International, Inc. 35,500 978,380
Cache, Inc.(*) 93,600 1,268,28
California Pizza Kitchen, Inc.(*) 38,850 910,644
Casual Male Retail Group, Inc.(*) 92,800 602,272
Coinstar, Inc.(*) 68,800 1,458,56
Emmis Communications Corp.( (a)*) 76,500 1,470,33
Hot Topic, Inc.(*) 17,700 386,745
Hughes Supply, Inc. 22,500 669,375
Imax Corp.(*) 67,000 619,080
Jarden Corp.(*) 24,960 1,145,16
Jos A Bank Clothiers, Inc.( (a)*) 45,040 1,319,67
Lions Gate Entertainment Corp.( (a)*) 215,200 2,377,96
Marvel Enterprises Inc.(*) 37,200 744,000
Nu Skin Enterprises, Inc. 44,700 1,006,19
Pacific Sunware of California(*) 26,160 731,957
Petco Animal Supplies, Inc.(*) 37,920 1,395,83
Playboy Enterprises, Inc., Class B( (a)*) 85,900 1,108,11
Provide Commerce, Inc.(*) 32,660 943,221
Rare Hospitality International, Inc.(*) 31,870 984,146
Speedway Motorsports, Inc. 16,630 593,691
Tractor Supply Co.(*) 15,800 689,670
Wabtec Corp. 67,120 1,375,28
-----------
22,778,579
-----------
CONSUMER STAPLES--4.0%
Arden Group, Inc. 1,764 125,209
J & J Snack Food Corp. 14,150 662,645
Peet's Coffee & Tea, Inc.(*) 70,600 1,740,29
Performance Food Group Co.(*) 60,300 1,669,10
Playtex Products, Inc.(*) 122,000 1,098,00
-----------
5,295,248
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
ENERGY--7.1%
Dril-Quip, Inc.(*) 18,620 $ 572,379
FMC Technologies, Inc.(*) 59,340 1,968,90
Global Industries, Ltd.(*) 82,800 778,320
Newpark Resources, Inc.(*) 114,900 676,761
Oil States International, Inc.(*) 102,400 2,104,32
Patterson-UTI Energy, Inc. 26,530 663,781
Penn Virginia Corp. 27,400 1,257,66
Pioneer Drilling Co.(*) 26,700 367,659
Tidewater Inc. 26,900 1,045,33
-----------
9,435,115
-----------
FINANCIAL--7.1%
Affiliated Managers Group( (a)*) 12,450 772,274
CVB Financial Corp. 1 25
Cathay General BanCorp 27,100 853,650
Center Financial Corp. 31,660 558,166
City National Corp., Class A 9,950 694,709
Cullen/Frost Bankers, Inc. 17,300 781,095
East West Bancorp, Inc. 25,700 948,844
First Community Bancorp, Inc., Class A 14,800 655,640
First Midwest Bancorp, Inc. 31,950 1,037,73
Investors Financial Services Corp. 13,050 638,276
Mercantile Bank Corp. 18,355 750,352
New York Community Bancorp(a) 4 77
Preferred Bank, Los Angeles 1,290 51,471
Southwest Bancorp of Texas, Inc. 36,700 673,445
Triad Guaranty, Inc.(*) 11,100 583,971
Vineyard National Bancorp Co.(a) 12,700 347,853
-----------
9,347,584
-----------
HEALTH CARE--20.0%
Able Laboratories, Inc.(*) 31,215 732,304
Align Technology, Inc.(*) 88,300 550,992
Animas Corp.(*) 56,500 1,141,86
Applera Corp.-Celera Genomics Group(*) 38,100 390,525
Bone Care International, Inc.(*) 16,200 420,228
Charles River Laboratories(*) 17,136 806,077
Community Health Systems, Inc.(*) 22,200 775,002
Conceptus, Inc.(*) 55,700 434,460
Connetics Corp.(*) 40,900 1,034,36
Cooper Cos, Inc. 20,350 1,483,51
Covance, Inc.(*) 54,400 2,589,98
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
HEALTH CARE (CONTINUED)
Coventry Health Care, Inc.(*) 8,550 $ 582,597
Fisher Scientific International( (a)) 41,200 2,345,10
ICOS Corp.(*) 22,500 505,350
Immunogen, Inc.(*) 68,800 359,824
IRIS International, Inc.(*) 49,800 559,254
Lifepoint Hospitals, Inc.( (a)*) 18,500 811,040
Matria Healthcare, Inc.(*) 73,500 2,257,18
Maxygen, Inc.(*) 37,810 324,410
Medicines Co.( (a)*) 23,800 539,308
Natus Medical, Inc.(*) 63,900 534,204
PSS World Medical, Inc.(*) 116,300 1,322,33
Resmed, Inc.( (a)*) 6,800 383,520
Respironics, Inc.(*) 46,400 2,703,72
Sybron Dental Specialties, Inc.(*) 21,900 786,210
Triad Hospitals(*) 15,650 784,065
VCA Antech, Inc.(*) 58,100 1,175,36
Zoll Medical Corp.(*) 7,000 157,710
-----------
26,490,516
-----------
INDUSTRIAL--14.5%
Bucyrus International, Inc., Class A 21,900 855,414
Cuno, Inc.(*) 17,440 896,242
Chicago Bridge & Iron Co. N.V 16,590 730,458
Educate, Inc.(*) 78,400 1,087,40
Education Management Corp.(*) 30,100 841,295
Forward Air Corp. 23,080 982,746
Healthcare Services Group 23,400 567,450
Jack Henry & Associates, Inc. 35,200 633,248
Huron Consulting Group, Inc.(*) 64,700 1,339,93
Interline Brands, Inc.(*) 51,900 991,809
Laureate Education, Inc.(*) 29,300 1,253,74
LECG Corp.(*) 69,600 1,364,16
MSC Industrial Direct Co., Inc. 45,450 1,388,95
Navigant Consulting, Inc.(*) 50,100 1,364,22
Pacer International, Inc.(*) 40,200 960,378
Stericycle, Inc.(*) 19,200 848,640
Wabash National Corp. 25,470 621,468
Waste Connections(*) 52,800 1,834,80
UTI Worldwide, Inc. 9,220 640,329
-----------
19,202,704
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
VALUE
SECURITY SHARES (NOTE 1A)
- --------------------------------------------------------------------------------
TECHNOLOGY--18.2%
Akamai Technologies, Inc.( (a)*) 95,900 $ 1,220,807
Anteon International Corp.(*) 41,600 1,619,48
Borland Software Corp.(*) 140,400 1,140,04
Cypress Semiconductor Corp.(*) 50,800 640,080
Exar Corp.(*) 60,300 808,020
Extreme Networks, Inc.(*) 171,600 1,010,72
Fastclick, Inc. 7,300 87,600
Foundry Networks, Inc.(*) 96,200 952,380
Infocrossing, Inc.(*) 61,800 978,912
InfoSpace, Inc.(*) 36,000 1,469,88
Ingram Micro, Inc., Class A(*) 98,150 1,636,16
Internet Security Systems(*) 56,600 1,035,78
Lam Research Corp.(*) 24,151 696,998
Macromedia, Inc.(*) 19,600 656,600
ManTech International Corp., Class A(*) 33,200 765,924
Mcafee, Inc.(*) 39,200 884,352
Mentor Graphics Corp.(*) 96,200 1,317,94
PMC-Sierra, Inc.( (a)*) 123,900 1,090,32
PortalPlayer, Inc.( (a)*) 27,420 625,999
Progress Software Corp.(*) 56,600 1,484,05
Silicon Laboratories, Inc.(*) 19,200 570,432
SS&C Technologies, Inc. 41,500 946,200
Varian Semiconductor Equipment Associates, Inc.(*) 28,000 1,064,28
Verisign, Inc.(*) 46,550 1,335,98
-----------
24,038,962
-----------
UTILITIES--2.6%
AGL Resources, Inc. 50,280 1,756,28
Atmos Energy Corp. 35,800 966,600
Black Hills Corp. 20,800 687,851
-----------
3,410,731
-----------
TOTAL EQUITIES (Cost $104,243,339) 125,166,644
-----------
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
SCHEDULE OF INVESTMENTS--MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.3% RATE MATURITY PAR VALUE
- -----------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT--0.3%
U.S. Treasury Bill((+)) (Cost $367,868) 2.730% 6/16/2005 $ 370,000 $ 367,893
--------------
INVESTMENT OF CASH COLLATERAL--6.0% SHARES
------
BlackRock Cash Strategies L.L.C. (Cost $7,915,087) 7,915,087 7,915,087
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $112,526,294) 133,449,624
------------
AFFILIATED INVESTMENTS--6.2%
Dreyfus Institutional Preferred Plus((+)(+)) (Cost $8,206,865)
8,206,865 8,206,865
------------
TOTAL INVESTMENTS--107.1% (COST $120,733,159) 141,656,489
LIABILITIES IN EXCESS OF OTHER ASSETS--(7.1%) (9,380,372)
------------
NET ASSETS-100% $132,276,117
============
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security
(+) Denotes all or part of security segregated as collateral for futures
transactions.
(+)(+) Affiliated institutional money market fund.
At March 31, 2005 the Fund held the following futures contracts:
UNDERLYING FACE UNREALIZED
CONTRACT POSITION EXPIRATION DATE AMOUNT AT VALUE (LOSS)
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (12 Contracts) Long 6/16/2005 $3,787,125 $(79,779)
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
Investments in securities, at value (Note 1A)
(including securities on loan, valued at $7,620,054 (Note7))
Unaffiliated investments (cost $112,526,294) $133,449,624
Affiliated investment (Note 1F) (cost $8,206,865) 8,206,865
Cash 747
Receivable for investments sold 1,231,175
Receivable for Fund shares sold 396,832
Interest and dividends receivable 42,774
Variation margin receivable (Note 6) 9,900
Prepaid expenses 21,899
------------
Total assets 143,359,816
LIABILITIES
Collateral for securities on loan (Note 7) $ 7,915,087
Payable for investments purchased 3,082,394
Payable for Fund shares redeemed 35,062
Accrued accounting, custody, administration and transfer agent fees (Note 2) 19,609
Accrued Trustees' fees and expenses (Note 2) 6,755
Other accrued expenses and liabilities 24,792
-----------
Total liabilities 11,083,699
------------
NET ASSETS $132,276,117
============
NET ASSETS CONSIST OF:
Paid-in capital $106,210,999
Accumulated net realized gain 5,463,802
Accumulated net investment loss (242,235)
Net unrealized appreciation 20,843,551
------------
TOTAL NET ASSETS $132,276,117
============
SHARES OF BENEFICIAL INTEREST OUTSTANDING 3,501,210
============
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
(Net Assets/Shares outstanding) $ 37.78
============
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2005 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (NOTE 1B)
Dividend income (net of foreign withholding taxes of $338) $ 319,788
Interest income 59,987
Security lending income (Note 7) 30,606
------------
Total investment income 410,381
EXPENSES
Investment advisory fee (Note 2) $ 516,056
Accounting, custody, administration and transfer agent fees (Note 2) 68,278
Professional fees 23,869
Registration fees 9,254
Trustees' fees and expenses (Note 2) 15,928
Insurance expense 6,209
Miscellaneous expenses 13,104
----------
Net expenses 652,698
------------
Net investment loss (242,317)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Investment securities 7,616,821
Futures contracts 345,494
----------
Net realized gain 7,962,315
Change in unrealized appreciation (depreciation) on:
Investment securities 2,981,657
Futures contracts (91,488)
----------
Net change in unrealized appreciation (depreciation) 2,890,169
------------
Net realized and unrealized gain (loss) on investments 10,852,484
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $10,610,167
===========
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
MARCH 31, 2005 YEAR ENDED
(UNAUDITED) SEPTEMBER 30, 2004
----------- ------------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS
Net investment loss $ (242,317) $ (841,402)
Net realized gains 7,962,315 15,242,461
Net change in unrealized appreciation (depreciation) 2,890,169 4,178,389
------------ ------------
Net increase (decrease) in net assets from operations 10,610,167 18,579,448
------------ ------------
FUND SHARE TRANSACTIONS (NOTE 4)
Net proceeds from sale of shares 11,312,681 19,103,910
Redemption fees credited to capital 119 242
Cost of shares redeemed (10,018,800) (24,029,775)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 1,294,000 (4,925,623)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 11,904,167 13,653,825
NET ASSETS
At beginning of period 120,371,950 106,718,125
------------ ------------
At end of period (including undistributed
net investment income (loss) of $(242,235) and $82) $132,276,117 $120,371,950
============ ============
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2005 -------------------------------------------------------------
(UNAUDITED) 2004 2003 2002 2001 2000
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 34.71 $ 29.58 $ 22.53 $ 26.23 $ 63.32 $ 40.70
----------- --------- --------- --------- --------- ---------
FROM OPERATIONS:
Net investment income (loss)(*(1)) (0.07) (0.24) (0.11) (0.13) (0.20) (0.39)
Net realized and unrealized gains
(loss) on investments 3.14 5.37(2) 7.16(2) (3.57)(2) (28.28) 33.65
----------- --------- --------- --------- --------- ---------
Total from operations 3.07 5.13 7.05 (3.70) (28.48) 33.26
----------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net realized gains on investments -- -- -- -- (8.61) (10.64)
----------- --------- --------- --------- --------- ---------
Total distributions to shareholders -- -- -- -- (8.61) (10.64)
----------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD 37.78 34.71 $ 29.58 $ 22.53 $ 26.23 $ 63.32
=========== ========= ========= ========= ========= =========
TOTAL RETURN((+)) 8.84% 17.34% 31.29% (14.11)% (49.81)% 86.20%
RATIOS/SUPPLEMENTAL DATA:
Expenses (to average daily net assets)* 1.01%((+)(+)) 1.03% 1.00% 1.00% 1.00% 0.87%
Net Investment Income (to average
daily net assets)* (0.38)%((+)(+)) (0.71)% (0.43)% (0.47)% (0.54)% (0.60)%
Portfolio Turnover 78%((+)(+)(+)) 150% 252% 241% 174% 182%
Net Assets, End of Period (000's omitted)$ 132,276 $ 120,372 $ 106,718 $ 82,469 $ 81,711 $ 215,201
- -------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose all or a portion of its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary action
had not been taken, the investment loss per share and ratios would have been:
Net investment loss per share(1) N/A N/A $(0.13) $(0.15) $(0.21) N/A
Ratios (to average daily net assets):
Expenses N/A N/A 1.07% 1.08% 1.04% N/A
Net investment income N/A N/A (0.50)% (0.55)% (0.58)% N/A
(+) Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
(+)(+) Computed on an annualized basis.
(+)(+)(+) Not annualized.
(1) Calculated based on average shares outstanding.
(2) Amount includes securities litigation proceeds received by the Fund of $0.03
for the year ended September 30, 2004, less than $0.01 for the year ended
September 30, 2003 and $0.02 for the year ended September 30, 2002.
The accompanying notes are an integral part of the financial statements.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Tax-Sensitive Equity Fund (the "Fund") is a
separate diversified investment series of the Trust.
The objective of the Fund is to maximize after-tax total return, consisting
of long-term growth of capital. The Fund seeks to achieve its objective by
investing, under normal circumstances, at least 80% of net assets in equity
securities of small capitalization U.S. companies.
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, or the
NASDAQ official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
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. Dividends representing a return of capital are
reflected as a reduction of cost.
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. 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
reclassifications, are primarily due to differing treatments for wash sales
and realized and unrealized gains or losses on futures.
Permanent book and tax basis differences will result in reclassifications
among undistributed net investment income, accumulated net realized gain
(loss) and paid in capital. Undistributed net investment income and
accumulated undistributed net realized gain (loss) on investments may
include temporary book and tax basis differences which will reverse in a
subsequent period. Any taxable income or gain remaining at fiscal year end
is distributed in the following year.
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.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY 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
Affiliated issuers represent investments in other investment companies
advised by The Boston Company Asset Management, LLC ("TBCAM"), a
wholly-owned subsidiary of Mellon Financial Corporation, or its affiliates
(2) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Fund's average daily net assets.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide
personnel and facilities to perform transfer agency and certain shareholder
services for the Fund. For these services the Fund pays Dreyfus Transfer,
Inc. a fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $14,123
during the period ended March 31, 2005.
The Fund has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM, to
provide custody, fund administration and fund accounting services for the
Fund. For these services, the Fund pays Mellon Bank a fixed fee plus asset
and transaction based fees, as well as, out-of-pocket expenses. Pursuant to
this agreement the Fund paid $53,219 during the period ended March 31,
2005.
The Fund entered into an agreement with Mellon Bank, a wholly-owned
subsidiary of Mellon Financial Corporation, to perform certain securities
lending activities and to act as the Fund's lending agent. Pursuant to this
agreement Mellon Bank receives an agreed upon percentage of the net lending
revenues. This compensation is a standard form of compensation received by
securities lending agents with respect to non-affiliated entities. See Note
7 for further details.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket expenses.
In addition, the Trust pays the legal fees for the independent counsel of
the Trustees.
(3) PURCHASES AND SALES OF INVESTMENTS:
Purchases and proceeds from sales of investments, other than short-term
obligations for the period ended March 31, 2005, were $96,741,503 and
$96,092,972, respectively. For the period ended March 31, 2005, the Fund
did not purchase or sell any long-term U.S. Government securities.
(4) SHARES OF BENEFICIAL INTEREST:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 2005 SEPTEMBER 30, 2004
-------------- ------------------
Shares sold 298,586 553,482
Shares redeemed (265,293) (692,914)
-------- --------
Net increase (decrease) 33,293 (139,432)
======== ========
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
HE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
At March 31, 2005,two shareholders of record held approximately 49% and 11%
of the total outstanding shares of the Fund. Investment activity of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market
impact, and other costs associated with short-term trading. The fee does
not apply to shares that were acquired through reinvestment of
distributions. For the period ended March 31, 2005, the Fund received $119
in redemption fees.
(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 tax basis components of distributable earnings and the federal tax cost
as of March 31, 2005, was as follows:
Aggregate Cost $ 112,818,072
=============
Unrealized appreciation $ 23,427,901
Unrealized depreciation (2,504,571)
-------------
Net unrealized appreciation/depreciation $ 20,923,330
(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 did not enter into option transactions during the period ended
March 31, 2005.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY 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 March 31, 2005, the Fund held financial futures contracts. See Schedule
of Investments for further detail.
(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 March 31, 2005 resulting
in security lending income of $30,606. At March 31, 2005, the Fund had
securities valued at $7,620,054 on loan. See Schedule of Investments for
further detail on the security positions on loan and collateral held.
(8) LINE OF CREDIT:
The Fund, and other funds in the Trust and subtrusts in the Mellon
Institutional Funds Master Portfolio Trust (the "Portfolio 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 facility fee, computed at an annual rate of .060 of 1% committed amount,
is allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, a facility fee of $2,171
was allocated to the Fund.
During the period ended March 31, 2005, the Fund did not use the line of
credit.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that the Fund's Board of
Trustees, including a majority of its Trustees who are not affiliated with
the Fund's investment adviser or underwriter (the "Independent Trustees")
voting separately, approve the Fund's advisory agreement and the related
fees on an annual basis. In their most recent deliberations concerning
their decision to approve the continuation of the Fund's investment
advisory agreement, the Fund's Board of Trustees conducted the review and
made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from
the Fund's investment adviser, The Boston Company Asset Management LLC
("TBCAM"), a broad range of information in response to a written request
prepared on their behalf by their own legal counsel. The Independent
Trustees met alone in a private session with their legal counsel on
September 15, 2004 to review these materials and to discuss the proposed
continuation of the Fund's advisory agreement. The entire Board then met on
October 14, 2004.
The information requested by the Independent Trustees and reviewed by the
entire Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a
separate presentation of TBCAM's profitability relative to that of several
publicly traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as
information concerning TBCAM's executive management, portfolio management,
and client service personnel and overall organizational structure,
insurance coverage, brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper
Analytical Services ("Lipper") regarding the Fund's historical performance,
management fee and expense ratio compared to other funds, and TBCAM's
separate account advisory fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance, the addition of a new portfolio manager, as well as a Fund's
"fact sheets" prepared by TBCAM providing salient data about the Fund,
including Fund holdings, strategies, recent market conditions and outlook,
as well as TBCAM's views concerning the issues of breakpoints in the
management fee schedule of the Fund and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency,
custody, administration and securities lending services provided to the
Funds by affiliates of Mellon.
In considering the continuation of the Fund's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any
single factor as all-important or controlling and individual Trustees did
not necessarily attribute the same weight or importance to each factor. The
Trustees determined that the terms and conditions of the Fund's advisory
agreement and the compensation to TBCAM provided therein are fair and
reasonable, and they approved the continuation of the agreement for a one
year period. Some of the factors that figured prominently in the Trustees'
determination are described below.
NATURE, EXTENT AND QUALITY OF SERVICES
The Board considered the nature, scope and quality of the overall services
provided to the Fund by TBCAM. In their deliberations as to the
continuation of the Fund's advisory agreement, the Trustees were also
mindful of the fact that, by choosing to invest in the Fund, the Fund's
shareholders have chosen to entrust TBCAM, under the supervision of the
Trustees, to manage the portion of their assets invested in the Fund.
Among the specific factors the Trustees reviewed were the portfolio
management, administrative, compliance and related services provided by
TBCAM. The Trustees determined that the services provided were of high
quality and at least commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and
expressed their
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
support for this change. The Trustees reviewed the background and
experience of the Fund's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered
the size, education and experience of TBCAM's investment staff,
technological infrastructure and overall responsiveness to changes in
market conditions.
The Board determined that TBCAM had the expertise and resources to manage
the Fund effectively.
INVESTMENT PERFORMANCE
The Board compared the relative investment performance of the Fund against
a peer group of investment companies selected by TBCAM with input from the
Trustees. The Board also compared the Fund's investment performance against
the average performance of a larger universe of funds regarded by Lipper as
having similar investment objectives and considered the Fund's performance
rankings with that universe. In addition to the comparative information
provided in connection with the September 15, 2004 meeting, the Trustees
received similar detailed comparative performance information for the Fund
at each regular quarterly Board meeting during the year.
The Lipper materials provided to the Board at the September 15, 2004
meeting indicated that the Fund's performance for the 1-, 3- and 5-year
periods ended July 31, 2004 was 19.99%, 1.61% and 4.64%. The Trustees found
that these results compared favorably with the Fund's peer group of similar
funds, the average performance of which was 11.52%, -1.74% and 1.85% for
the same periods.
ADVISORY FEE AND OTHER EXPENSES
The Board considered the advisory fee rate paid by the Fund to TBCAM. The
Fund's contractual advisory fee was 0.80%, in the 1st (best) quintile of
its peer group of funds, the median fee of which was 1.014%. The Fund's net
advisory fee, after giving effect to fee waivers, was 0.73%, well below the
peer group median net advisory fee of 1.00%. Based on the Lipper data, as
well as other factors discussed herein, the Board determined that the
Fund's advisory fee is reasonable relative to its peer group averages, both
with and without giving effect to fee waivers.
The Board also compared the fees payable by the Fund relative to those
payable by separate account clients of TBCAM. Based on the additional scope
and complexity of the services provided and responsibilities assumed by
these advisers with respect to the Fund relative to these other types of
clients, the Board concluded that the fees payable under the advisory
agreement were reasonable.
The Board considered the Fund's expense ratio and compared it to that of
its peer group of similar funds. They found that the actual net expense
ratio of 1.00% (after giving effect to expense limitations) was lower than
the median net expense ratio of the peer group of 1.281% notwithstanding
the fact that most of the other funds in the peer group were larger than
the Fund.
TBCAM'S PROFITABILITY
The Board considered TBCAM's profitability in managing the Fund and the
Mellon Institutional Funds as a group, as well as the methodology used to
compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon
Asset Management Company LLC ("Standish Mellon") in managing the Fund and
other Funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability
information submitted to them by TBCAM, TBCAM incurred losses in 2003 in
operating many of the investment companies in the Mellon family of funds
and achieved only marginal profitability as to several other funds. The
Trustees noted that TBCAM experienced modest profits in both 2002 and 2003
in operating the Fund.
MELLON INSTITUTIONAL FUNDS INVESTMENT TRUST
THE BOSTON COMPANY SMALL CAP TAX-SENSITIVE EQUITY FUND
FACTORS CONSIDERED BY BOARD OF TRUSTEES IN APPROVING ADVISORY AGREEMENT
- --------------------------------------------------------------------------------
ECONOMIES OF SCALE
While the Board recognized that economies of scale might be realized as the
Fund grows and noted that the Fund had increased in size in recent years,
they also observed that, at approximately $117 million, it remained small
relative to most of its peers. The Board concluded that, considering
current asset growth prospects, the implementation of fee breakpoints or
other fee reductions was not necessary at this time. The Trustees intend to
review the need for breakpoints in connection with future investment
advisory agreement approval deliberations.
OTHER BENEFITS
The Board also considered the additional benefits flowing to Mellon as a
result of its relationship with the Funds. Mellon affiliates provide
custodial, administrative, transfer agency and securities lending services
to the Funds. In each case, such affiliates were selected on the basis of a
comparative analysis of their capabilities and fees relative to those of
unaffiliated competitors. In addition, the Trustees, including a majority
of the Independent Trustees, conduct an examination annually of each such
arrangement as to whether (i) the terms of the relevant service agreement
are in the best interests of Fund shareholders; (ii) the services to be
performed by the affiliate pursuant to the agreement are required by and
appropriate for the Fund; (iii) the nature and quality of the services
provided by the affiliate pursuant to the agreement are at least equal to
those provided by other, unaffiliated firms offering the same or similar
services for similar compensation; and (iv) the fees payable by the Fund to
the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for
services of the same nature and quality.
The Board considered the fact that Mellon operates businesses other than
the Mellon Institutional Funds, some of which businesses share personnel,
office space and other resources and that these were a component of the
profitability analysis provided. The Board also considered the intangible
benefits that accrue to Mellon and its affiliates by virtue of its
relationship with the Fund and the Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in
determining that the terms and conditions of the Fund's advisory agreement
and the compensation to TBCAM provided therein are fair and reasonable and,
thus, in approving the continuation of the agreement for a one year period
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 TRUSTEE
PRINCIPAL PORTFOLIOS IN OTHER REMUNERATION
NAME TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS (PERIOD ENDED
ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST OVERSEEN BY HELD BY MARCH 31,
DATE OF BIRTH HELD WITH TRUST TIME SERVED 5 YEARS TRUSTEE TRUSTEE 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None $1,795
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 31 None $1,947
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, 31 None $1,795
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 31 None $1,795
P.O. Box 2333 11/3/1986 House, Inc. (hospice)
New London, NH 03257
4/11/35
INTERESTED TRUSTEES
Patrick J. Sheppard Trustee, President Since 2003 Senior Vice President 31 None $0
Mellon Institutional and Chief and Chief Operating Officer,
Asset Management Executive 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
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
NAME TERM OF OFFICE
ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH HELD WITH TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mello
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
THIS PAGE INTENTIONALLY LEFT BLANK
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0938SA0305
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
International Small Cap Fund
March 31, 2005 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC's web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
October 1, 2004 March 31, 2005 to March 31, 2005
- ----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,217.00 $6.47
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.10 $5.89
- ---------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.17%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period). The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
1
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Portfolio Information as of March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Country Sector Investments
- -------------------------------------------------------------------------------------------------------
Hyundai Mipo Dockyard SOUTH KOREA Industrial 1.1
Home Capital Group, Inc. CANADA Financial 1.1
Friends Provident PLC UNITED KINGDOM Financial 1.1
Trican Well Service Ltd. CANADA Energy 1.1
Elekta AB SWEDEN Consumer, Non-cyclical 1.0
Tandberg Television ASA NORWAY Communications 0.9
Nippon Shokubai Ltd. JAPAN Basic Materials 0.9
Euler Hermes SA FRANCE Financial 0.8
Sims Group Ltd. AUSTRALIA Industrial 0.8
Keihin Corp. JAPAN Consumer, Cyclical 0.8
----
9.6
* Excluding short-term securities and investments of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------------------------
Basic Materials 6.7
Communications 7.5
Consumer, Cyclical 15.4
Consumer, Non-cyclical 15.3
Energy 4.6
Financial 18.8
Industrial 23.3
Technology 4.5
Utilities 2.0
Short-Term and Net Other Assets 1.9
-----
100.0
Percentage of
Geographic Region Allocation* Investments
- --------------------------------------------------------------------------------
Europe ex U.K. 42.8
U.K. 20.6
Asia ex Japan 11.5
Japan 19.2
Americas ex U.S. 5.9
-----
100.0
* Excluding short-term securities and investment of cash collateral.
The Boston Company Small Cap Fund invests all of its investable assets in an
interest of the Boston Company International Small Cap Portfolio (See Note 1 of
the Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
2
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company International Small Cap Portfolio ("Portfolio"),
at value (Note 1A) $367,881,301
Receivable for Fund shares sold 684,272
Prepaid expenses 18,255
------------
Total assets 368,583,828
Liabilities
Payable for Fund shares redeemed $31,173
Accrued transfer agent fees (Note 2) 4,667
Accrued Trustees' fees (Note 2) 497
Other accrued expenses and liabilities 21,719
-------
Total liabilities 58,056
------------
Net Assets $368,525,772
------------
Net Assets consist of:
Paid-in capital $284,350,951
Accumulated net realized gain 10,595,588
Undistributed net investment income 350,063
Net unrealized appreciation 73,229,170
------------
Total Net Assets $368,525,772
============
Shares of beneficial interest outstanding 20,285,297
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 18.17
============
The accompanying notes are an integral part of the financial statements.
3
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio (net of foreign withholding taxes of $248,438) $ 2,197,742
Interest income allocated from Portfolio 84,088
Security lending income allocated from Portfolio 140,319
Expenses allocated from Portfolio (1,631,095)
-----------
Net investment income allocated from Portfolio 791,054
Expenses
Transfer agent fees (Note 2) $18,646
Professional fees 20,832
Registration fees 21,939
Trustees' fees (Note 2) 1,479
Insurance expense 568
Miscellaneous expenses 10,675
-------
Total expenses 74,139
-----------
Net investment income 716,915
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 11,803,358
Change in unrealized appreciation (depreciation) on investments allocated from Portfolio on:
Investment securities, futures contracts, foreign currency
exchange contracts and foreign currency transactions 40,791,063
-----------
Net realized and unrealized gain on investments 52,594,421
-----------
Net Increase (Decrease) in Net Assets from Operations $53,311,336
===========
The accompanying notes are an integral part of the financial statements.
4
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 716,915 $ 1,371,273
Net realized gains 11,803,358 18,477,139
Change in net unrealized appreciation 40,791,063 15,364,375
------------ ------------
Net increase in net assets from operations 53,311,336 35,212,787
------------ ------------
Distributions to Shareholders (Note 1C)
From net investment income (1,315,879) (1,083,002)
From net realized gains on investments (15,292,137) --
------------ ------------
Total distributions to shareholders (16,608,016) (1,083,002)
------------ ------------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 111,890,330 102,193,352
Value of shares issued to shareholders in reinvestment of distributions 15,542,491 859,847
Redemption fees credited to capital -- 1,605
Cost of shares redeemed (7,642,781) (14,722,174)
------------ ------------
Net increase (decrease) in net assets from Fund share transactions 119,790,040 88,332,630
------------ ------------
Total Increase (Decrease) in Net Assets 156,493,360 122,462,415
Net Assets
At beginning of period 212,032,412 89,569,997
------------ ------------
At end of period (including undistributed
net investment income of $350,063 and $949,027) $368,525,772 $212,032,412
============ ============
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the February 1, 2000
Six Months Ended Year Ended September 30, (commencement
March 31, 2005 ------------------------------------------ of operations) to
(Unaudited) 2004 2003 2002 2001(a) September 30, 2000
---------------- -------- ------- ------- ------- ------------------
Net Asset Value, Beginning of the year $ 15.93 $ 12.05 $ 8.91 $ 8.55 $ 10.65 $ 10.00
-------- -------- ------- ------- ------- -------
From Operations:
Net investment income* (1) 0.04 0.14 0.10 0.09 0.11 0.09
Net realized and unrealized
gains (loss) on investments 3.30 3.86 3.13 0.38 (1.89) 0.63
-------- -------- ------- ------- ------- -------
Total from operations 3.34 4.00 3.23 0.47 (1.78) 0.72
-------- -------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.09) (0.12) (0.09) (0.11) (0.08) (0.07)
From net realized gains on investments (1.01) -- -- -- (0.24) --
-------- -------- ------- ------- ------- -------
Total distributions to shareholders (1.10) (0.12) (0.09) (0.11) (0.32) (0.07)
-------- -------- ------- ------- ------- -------
Net Asset Value, End of Year $ 18.17 $ 15.93 $ 12.05 $ 8.91 $ 8.55 $ 10.65
======== ======== ======= ======= ======= =======
Total Return ++ 21.70% 33.35% 36.47% 5.39% (17.13)% 7.19%
Ratios/Supplemental data:
Expenses (to average daily net assets)* (3) 1.17%+ 1.27% 1.39% 1.25% 1.25% 1.25%+
Net Investment Income (to average daily net 0.50%+ 0.99% 1.01% 0.96% 1.10% 1.21%+
assets)*
Portfolio Turnover (2) N/A N/A 15% 69% 89% 70%+++
Net Assets, End of Period (000's omitted) $368,526 $212,032 $89,570 $33,770 $22,386 $17,092
- -----------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
and Portfolio for a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and ratios would
have been:
Net investment income per share (1) N/A N/A $0.08 $0.04 $0.04 $0.01
Ratios (to average daily net assets):
Expenses (3) N/A N/A 1.65% 1.82% 1.98% 2.29%+
Net investment income N/A N/A 0.75% 0.39% 0.37% 0.17%+
(1) Calculated based on average shares outstanding.
(2) Portfolio turnover represents activity while the Fund was investing directly
in securities until January 27, 2003. The portfolio turnover for the period
since the Fund transferred substantially all of its investable assets to the
Portfolio is shown in the Portfolio's financial statements which are
included elsewhere in this report.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
+ Computed on an annualized basis.
++ Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company International Small Cap Fund (the "Fund") is a separate
diversified investment series of the Trust.
The Fund invests all of its investable assets in an interest of The Boston
Company International Small Cap Portfolio (the "Portfolio"), a subtrust of
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust"), which
is organized as a New York trust, and has the same investment objective as
the Fund. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities in
companies that are located in foreign countries represented in the S&P
Citigroup EMI Ex-U.S. Index and, to a limited extent, 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 (89.7% at March
31, 2005). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. The Fund's net
investment income consists of the Fund's pro rata share of the net
investment income of the Portfolio, less all 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 Fund
represent pro rata shares of gains and losses of the Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on ex-dividend date. The Fund's
dividends from short-term and long-term capital gains, if any, after
reduction of capital losses will be declared and distributed at least
annually. In determining the amounts of its dividends, the Fund will take
into account its share of the income, gains or losses, expenses, and any
other tax items of the Portfolio. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless a shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences, which may
result in reclassifications, are primarily due to differing treatments for
foreign currency transactions, passive foreign investment companies (PFICs)
and capital loss carryovers and redemptions in-kind.
Permanent book and tax basis differences including distributions in kind,
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 or Portfolio Trust are directly
identifiable to an individual fund. Expenses which are not readily
identifiable to a specific fund or portfolio are allocated taking into
consideration, among other things, the nature and type of expense and the
relative size of the funds or portfolios.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM") for such services. See Note 2
of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
7
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide personnel
and facilities to perform transfer agency and certain shareholder services
for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a
fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $17,232
during the period ended March 31, 2005.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or Trustee
of the Trust. The Trust pays each Trustee who is not a director, officer or
employee of TBCAM or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out of pocket expenses. In addition,
the Trust pays the legal fees for the independent counsel of the Trustees.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2005, aggregated $126,981,257 and $24,314,347,
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:
For the For the
Six Months Ended Year Ended
March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 6,461,802 6,808,462
Shares issued to shareholders in reinvestment of distributions 951,776 60,513
Shares redeemed (438,654) (989,803)
--------- ---------
Net increase 6,974,924 5,879,172
========= =========
At March 31, 2005, two shareholders of record held approximately 24% and 14%
of the total outstanding shares of the Fund. Investment activities of these
shareholders could have a material impact on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market impact,
and other costs associated with short-term trading. The fee does not apply
to shares that were acquired through reinvestment of distributions. For the
period ended March 31, 2005, the Fund did not collect any redemption fees.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal
year.
See the Portfolio's financial statements included elsewhere in this report
for tax basis unrealized appreciation/(depreciation) information.
8
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--112.0%
EQUITY--96.9%
Australia--4.1%
Caltex Australia Ltd. 209,900 $ 2,512,314
Cochlear Ltd. 72,900 1,846,423
Just Group Ltd. 684,900 1,496,730
Oil Search Ltd. 1,647,300 3,078,349
Perpetual Trustees Australia Ltd. 72,300 3,191,805
Sims Group Ltd. (a) 258,000 3,366,946
West Australian Newspaper Holdings (a) 256,900 1,567,188
-----------
17,059,755
-----------
Austria--0.7%
Boehler-Uddeholm (a) 21,500 2,932,965
-----------
Belgium--1.7%
Colruyt SA 14,724 2,286,060
Mobistar SA 30,400 2,669,242
NV Union Miniere SA 20,100 2,039,684
-----------
6,994,986
-----------
Canada--5.9%
Astral Media, Inc. 52,100 1,461,058
Canfor Corp.* 179,600 2,412,094
CHC Helicopter Corp. 58,700 2,694,219
Ensign Resource Service Group, Inc. 78,400 1,747,337
Home Capital Group, Inc. 156,600 4,361,800
Inmet Mining Corp.* 118,200 1,803,498
Northbridge Financial 131,400 3,205,673
Rothmans, Inc. (a) 107,700 2,136,721
Trican Well Service Ltd.* 66,400 4,283,162
-----------
24,105,562
-----------
Denmark--1.4%
Bang & Olufsen A/S 17,400 1,166,139
GN Store Nord A/S (a) 159,900 1,837,099
Jyske Bank A/S* 78,300 2,927,084
5,930,322
Finland--2.8%
Kesko Oyj (a) 83,700 2,149,978
Nokian Renkaat Oyj (a) 11,800 1,900,895
OKO Bank (OKO Osuuspankkien Keskuspankki Oyi) (a) 79,700 1,303,535
Rautaruukki Oyj (a) 149,600 2,012,491
Wartsila Oyj-B SHARES (a) 84,050 2,222,148
YIT-Yhtyma Oyj 64,500 1,825,649
-----------
11,414,696
-----------
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
France--7.8%
Alten* 74,600 $ 1,836,950
Ciments Francais (a) 16,600 1,598,460
Clarins 22,106 1,410,409
CNP Assurances (a) 25,300 1,791,908
Eiffage (a) 22,522 2,597,778
Elior (a) 194,300 2,470,284
Euler Hermes SA (a) 40,800 3,368,252
Generale de Sante 68,400 1,356,290
Iliad SA 32,900 1,223,722
Imerys SA (a) 31,700 2,395,151
Legardere SCA (a) 19,400 1,468,316
Natexis Banques Populaires 18,000 2,694,384
Nexans SA (a) 33,900 1,401,507
Pierre & Vacances 10,500 1,197,504
SR Teleperformance (a) 43,900 1,273,297
Vallourec 7,820 1,652,973
Vinci SA (a) 16,900 2,435,547
-----------
32,172,732
-----------
Germany--5.2%
AWD Holding AG 34,100 1,502,582
Continental AG 43,300 3,357,468
Deutsche Postbank AG 59,500 2,737,476
Freenet.de AG (a) 48,900 1,301,076
Hannover Rueckversicherung AG (a) 29,750 1,176,344
Hypo Real Estate Holding 76,100 3,170,813
Puma AG (a) 6,700 1,676,986
Software AG 44,300 1,450,247
Stada Arzneimittel AG 47,200 1,474,838
Thyssenkrupp AG (a) 77,600 1,598,051
United Internet AG Registered Shares (a) 54,914 1,745,053
-----------
21,190,934
-----------
Hong Kong--2.9%
China Overseas Land & Investment Ltd. 4,868,000 1,079,794
Kerry Properties Ltd. 1,002,000 2,190,466
Orient Overseas International Ltd. 427,000 2,058,544
Skyworth Digital Holdings Ltd. 2,962,000 432,947
Solomon Systech (Intl.) 6,970,900 2,189,774
Varitronix International Ltd. 1,003,000 1,028,810
Wing Hang Bank Ltd. 221,800 1,350,826
Xinao Gas Holdings Ltd.* 2,860,000 1,540,138
-----------
11,871,299
-----------
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Ireland--1.0%
Fyffes PLC 766,700 $ 2,235,697
Grafton Group PLC* 173,700 2,050,799
-----------
4,286,496
-----------
Italy--3.5%
ASM Brescia Spa 350,600 1,185,926
Autostrada Torino-Milano Spa 68,600 1,523,842
Banco Popolare di Verona e Novara 87,100 1,624,366
Davide Campari-Milano Spa 18,100 1,258,500
Erg Spa 143,000 1,958,917
Milano Assicurazioni Spa 409,800 2,403,231
Pirelli & C Real Estate 57,900 3,134,354
Recordati Spa 46,800 1,288,872
-----------
14,378,008
-----------
Japan--18.2%
Clarion Co., Ltd* 580,000 1,125,478
CMK Corp. (a) 107,000 1,725,935
Cosmo Oil Co., Ltd. 461,000 1,492,369
Goldcrest Co., Ltd. 26,300 1,518,770
Hamamatsu Photonics KK (a) 67,600 1,504,114
Hisamitsu Pharamaceutical 89,000 1,971,966
Hitachi Construction Machinery Co., Ltd. 114,500 1,579,863
Izumi Co. Ltdronics, Inc. (a) 47,700 1,119,186
Kawasaki Kisen Kaisha Ltd. (a) 286,200 1,975,819
Keihin Corp. 199,000 3,358,438
Kirin Beverage Corp. 64,400 1,634,182
Koito Manufacturing Co. 241,000 2,403,480
Komeri Co., Ltd. 53,700 1,420,277
Koyo Seiko Co., Ltd. (a) 132,000 1,786,846
Kuroda Electric Co., Ltd. (a) 67,700 1,585,288
Kyowa Exeo Corp. 278,000 2,204,497
Makita Corp. 115,000 2,100,662
Mitsubishi Gas Chemical Co., Inc. 403,000 1,891,119
Mori Seiki Co., Ltd (a) 171,900 1,820,193
Nippon Shokubai Ltd. 397,000 3,592,593
Nisshin Seifun Group, Inc. (a) 164,000 1,744,193
Nisshin Steel Co., Ltd. (a) 1,157,000 3,033,091
NTN Corp. (a) 242,000 1,343,316
OSG Corp. 151,800 2,101,606
Otsuka Corp. 33,900 2,343,493
Ricoh Leasing Co., Ltd. 118,100 3,079,480
Ryohin Keikaku 28,500 1,409,180
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Japan (continued)
Santen Pharmaceutical Co., Ltd. 83,700 $ 1,795,970
Sanwa Shutter Corp. 310,000 1,703,424
Sanyo Shinpan Finance Co., Ltd. 40,800 2,771,005
Sodick Co., Ltd. 206,000 1,839,183
Sumisho Lease Co., Ltd. 80,200 2,985,334
Sumitomo Rubber Industries, Inc. (a) 237,000 2,283,991
Sysmex Corp. 51,500 2,935,582
Tokyo Tatemono Co., Ltd. 289,000 1,957,403
Tosoh Corp. (a) 428,000 2,116,242
Tsuruha Co., Ltd. 52,700 1,794,524
-----------
75,048,092
-----------
Netherlands--4.7%
Aalberts Industries NV 49,400 2,551,293
ASM International NV* 66,400 1,097,194
Axalto Holding NV* 53,600 1,771,373
Corio NV 46,500 2,599,186
Fugro NV* 16,100 1,463,722
Hunter Douglas NV 32,100 1,617,470
Koninklijke BAM Groep NV 43,800 2,582,798
Randstad Holding N.V 37,500 1,668,924
Stork NV 72,700 2,826,576
Wolters Kluwer NV* 55,700 1,017,118
-----------
19,195,654
-----------
Norway--0.9%
Tandberg Television ASA* 299,500 3,759,355
-----------
Portugal--0.5%
Jeronimo Martins, SGPS, SA* 133,800 2,037,506
-----------
Singapore--1.3%
First Engineering Ltd. 1,996,000 1,511,846
Jurong Technologies Industrial 2,480,300 2,374,643
MobileOne Ltd. 1,307,000 1,583,954
-----------
5,470,443
-----------
South Korea--3.1%
Dongbu Insurance Co., Ltd. 351,900 2,871,947
Hanjin Shipping Corp. 70,300 2,039,184
Honam Petrochemical Corp. 33,100 1,692,429
Hyundai Mipo Dockyard 82,300 4,612,684
Intops Co., Ltd. 67,600 1,389,223
-----------
12,605,467
-----------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Spain--4.0%
ACS Actividades 102,200 $2,529,818
Corp. Mapfre SA (a) 83,400 1,284,066
Cortefiel, SA 106,400 1,843,648
Ebro Puleva, SA (a) 120,000 2,015,539
Enagas (a) 117,100 1,784,716
Fadesa Inmobiliaria SA* 53,600 1,173,969
Inmobiliaria Urbis SA (a) 189,100 2,842,854
Indra Sistemas SA (a) 92,800 1,664,520
TPI Telefonica Publicidad e Informacion SA (a) 152,500 1,375,574
-----------
16,514,704
-----------
Sweden--1.9%
Elekta AB* 108,359 3,909,497
Lindex AB 29,200 1,384,023
Nobia AB (a) 140,800 2,659,498
-----------
7,953,018
-----------
Switzerland--4.3%
Hiestand Holding AG* 2,570 1,886,988
Logitech International SA* 29,510 1,795,327
Micronas Semiconductor Holdings* 49,500 2,065,605
Rieter Holding AG (a) 8,200 2,592,072
Saurer AG* 30,740 2,017,971
Sika AG* 3,700 2,759,993
Sulzer AG 3,700 1,593,494
Syngenta AG* 13,000 1,357,836
Verwalt & Privat-Bank AG 10,200 1,718,766
-----------
17,788,052
-----------
United Kingdom--21.0%
Alliance Unichem PLC 140,800 2,058,485
Barratt Developments PLC 118,100 1,472,141
BPB PLC 310,600 2,914,778
British Airways PLC* 281,400 1,404,148
BSS Group PLC 58,300 1,179,063
Carillion PLC 326,700 1,506,689
Charter PLC* 253,500 1,293,679
Close Brothers Group PLC 173,700 2,544,405
Daily Mail and General Trust 118,600 1,613,994
Eircom Group PLC 644,000 1,694,287
Enterprise Inns PLC 185,500 2,703,230
FirstGroup PLC 333,800 2,165,617
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
United Kingdom (continued)
Friends Provident PLC 1,281,000 $ 4,291,609
Future PLC 757,900 1,164,485
Greene King PLC 81,700 2,005,931
Greggs PLC 22,700 1,986,514
Hays PLC 662,600 1,665,666
HMV Group PLC 214,000 1,012,215
Inchcape PLC 68,200 2,554,894
ISOFT Group PLC 190,106 1,250,430
Kelda Group PLC 117,900 1,332,600
Kier Group PLC 139,400 2,265,927
Laird Group PLC 216,500 1,403,579
Mcbride PLC 849,000 2,431,113
McCarthy & Stone PLC 154,100 1,922,345
Next PLC 79,400 2,389,177
Northgate Information Solutions PLC* 933,000 1,194,746
Northgate PLC 120,100 2,037,334
Peacock Group PLC 223,000 1,088,504
Persimmon PLC 101,200 1,445,106
Rexam PLC 237,500 2,131,147
Schroders PLC 99,400 1,328,283
Shire Pharmaceuticals Group PLC 182,700 2,087,467
SIG PLC 197,200 2,320,230
Speedy Hire PLC 231,100 2,817,374
Sportingbet PLC* 222,600 1,140,953
The Carphone Warehouse PLC 793,100 2,428,442
Travis Perkins PLC 66,300 2,099,003
Tullow Oil PLC 763,400 2,507,043
Ultra Electronics Holdings 118,000 1,611,405
United Business Media PLC 153,600 1,544,499
Victrex PLC 149,000 1,191,273
Viridian Group PLC 164,000 2,349,621
Whitbread PLC 82,700 1,456,039
WS Atkins PLC 161,000 1,950,602
Yell Group PLC 140,000 1,251,625
------------
86,207,697
------------
TOTAL EQUITIES (Cost $323,787,985) 398,917,743
------------
PREFERRED STOCKS--1.2%
Fresenius AG* 16,100 1,852,865
Henkel KGaA (a)* 15,400 1,392,098
Rheinmetall AG (a)* 28,400 1,509,062
------------
TOTAL PREFERRED STOCKS (Cost $4,102,897) 4,754,025
------------
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.1%
U.S. Government--0.1%
U.S. Treasury Bill + (Cost $412,608) 2.730% 6/16/2005 $415,000 $ 412,637
------------
INVESTMENT OF CASH COLLATERAL--13.8% Shares
----------
BlackRock Cash Strategies L.L.C (Cost $56,673,833) 56,673,833 56,673,833
------------
TOTAL UNAFFILIATED INVESTMENTS-- (Cost $384,977,323) 460,758,238
------------
AFFILIATED INVESTMENTS--1.7%
Dreyfus Institutional Preferred Plus ++ (Cost $7,186,055) 7,186,055
------------
TOTAL INVESTMENTS--113.7% (Cost $392,163,378) 467,944,293
LIABILITIES IN ACCESS OF OTHER ASSETS--(13.7%) (56,530,691)
------------
NET ASSETS--100% $411,413,602
============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security
+ Denotes all or part of security segregated
as collateral.
++ Affiliated institutional money market fund.
At March 31, 2005 the Portfolio held the following forward foreign currency
exchange contracts:
Local
Principal Contract Value at USD Amount Unrealized
Contracts to Receive Amount Maturity Date March 31, 2005 to Deliver Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Australian Dollar 420,000 4/1/2005 $ 324,324 $ 324,660 $ (336)
Swiss Franc 320,000 4/1/2005 267,604 267,447 157
British Pound 1,710,000 4/1/2005 3,232,071 3,220,785 11,286
Japanese Yen 90,000,000 4/1/2005 839,631 839,161 470
Norwegian Krone 830,000 4/1/2005 131,047 131,256 (209)
Swedish Krona 1,960,000 4/1/2005 277,314 277,935 (621)
Singapore Dollar 734,000 4/1/2005 444,768 444,581 187
---------- ---------- -------
$5,516,759 $5,505,825 $10,934
========== ========== =======
At March 31, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain/(Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
MSCI Pan-Euro (44 contracts) Long 6/14/2005 $1,047,433 $4,399
Topix Futures (3 contracts) Long 6/30/2005 340,438 (340)
------
$4,059
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investments in securities, at value (Note 1A) (including securities on loan,
valued at $53,869,881 (Note 6))
Unaffiliated investments (cost $384,977,323) $460,758,238
Affiliated investment (Note 1G) (cost $7,186,055) 7,186,055
Foreign currency, at value (cost $11,974,152) 11,752,353
Receivable for securities sold 1,274,030
Interest and dividends receivable 1,359,008
Receivable for variation margin on open financial futures contracts (Note 5) 6,189
Appreciation on forward currency exchange contracts (Note 5) 12,100
Prepaid expenses 5,298
------------
Total assets 482,353,271
Liabilities
Collateral for securities on loan (Note 6) $56,673,833
Payable for securities purchased 14,187,796
Depreciation on forward foreign currency exchange contracts (Note 5) 1,166
Accrued accounting, administration and custody fees (Note 2) 53,924
Accrued Trustees' fees and expenses (Note 2) 5,894
Other accrued expenses and liabilities 17,056
-----------
Total liabilities 70,939,669
------------
Net Assets (applicable to investors' beneficial interest) $411,413,602
============
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $271,160) $2,401,806
Interest income 90,675
Securities lending income (Note 6) 151,315
Total investment income 2,643,796
----------
Expenses
Investment advisory fee (Note 2) $ 1,561,650
Accounting, administration and custody fees (Note 2) 147,020
Professional fees 15,823
Trustees' fees and expenses (Note 2) 21,312
Insurance expense 4,770
Miscellaneous expenses 7,476
----------
Total expenses 1,758,051
----------
Net investment income 885,745
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 13,209,255
Futures contracts 55,235
Foreign currency and forward foreign currency exchange contracts (483,141)
-----------
Net realized gain 12,781,349
Change in unrealized appreciation (depreciation) on:
Investment securities 43,350,565
Futures contracts 67,071
Foreign currency and forward foreign currency exchange contracts (387,879)
-----------
Net Change in unrealized appreciation (depreciation) 43,029,757
-----------
Net realized and unrealized gain 55,811,106
-----------
Net Increase in Net Assets from Operations $56,696,851
===========
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 885,745 $ 1,503,725
Net realized gains 12,781,349 18,879,636
Change in net unrealized appreciation 43,029,757 15,368,956
------------ ------------
Net increase in net assets from operations 56,696,851 35,752,317
------------ ------------
Capital Transactions
Contributions 161,574,875 112,536,550
Withdrawals (26,226,094) (18,465,788)
------------ ------------
Net increase in net assets from capital transactions 135,348,781 94,070,762
------------ ------------
Total Increase in Net Assets 192,045,632 129,823,079
Net Assets
At beginning of period 219,367,970 89,544,891
------------ ------------
At end of period $411,413,602 $219,367,970
============ ============
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
For the January 28, 2003
Six Months Ended For the (commencement of
March 31, 2005 Year Ended operations) to
(Unaudited) September 30 2004 September 30, 2003
---------------- ----------------- ------------------
Total Return + 21.75%(1) 33.42% 36.44%(1)
Ratios:
Expenses (to average daily net assets)* 1.12%(2) 1.20% 1.46%(2)
Net Investment Income (to average daily net assets)* 0.57%(2) 1.06% 1.29%(2)
Portfolio Turnover 28%(1) 72% 46%(1)
Net Assets, End of Period (000's omitted) $411,414 $219,368 $89,545
- ---------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the
Portfolio for a portion of its operating expenses. If this voluntary action
had not been taken, the ratios would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 1.49%(2)
Net investment income N/A N/A 1.26%(2)
+ Total return for the Portfolio includes performance of The Boston Company
International Small Cap Fund prior to its conversion to a master-feeder
structure and contribution of its investments to the Portfolio. Total return
would have been lower in the absence of expense waivers.
(1) Not annualized.
(2) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
19
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Boston
Company International Small Cap Portfolio (the "Portfolio"), a separate
diversified investment series of the Portfolio Trust, commenced operations
on January 28, 2003.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of companies
that are located in foreign countries represented in the Salomon Smith
Barney Extended Market Ex-U.S. Index and, to a limited extent, emerging
markets.
At March 31, 2005, there were two funds, The Boston Company International
Small Cap Fund and Dreyfus Premier International Small Cap Fund invested in
the Portfolio (the "Funds"). The value of the Funds' investment in the
Portfolio reflects the Funds' proportionate interests in the net assets of
the Portfolio. At March 31, 2005, The Boston Company International Small Cap
Fund and the Dreyfus Premier International Small Cap Fund held 89.7% and
10.3% interests in the Portfolio, respectively.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price, or the NASDAQ
official close if applicable, in the principal market in which such
securities are normally traded. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
Portfolio's shares may change on days when shareholders are not able to buy
or sell them. Many securities markets and exchanges outside the U.S. close
prior to the close of the New York Stock Exchange and therefore the closing
prices for securities in such markets or on such exchanges may not fully
reflect the events that occur after such close but before the close of the
New York Stock Exchange.
If market quotations are not readily available or do not accurately reflect
fair value, or the value of a security has been materially affected by
events occurring after the close of the exchange or market on which the
security is principally traded (for example, a foreign exchange or market),
the Portfolio may value its assets by a method the Trustees believe
accurately reflects the fair value. The Trustees have adopted fair value
pricing procedures, which, among other things, require the Portfolio to fair
value such securities if there has been a movement in the U.S. market that
exceeds a specified threshold. Although the threshold may be revised from
time to time and the number of days on which fair value prices will be used
will depend on market activity, it is possible that fair value prices for
foreign securities will be used by each fund to a significant extent.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost, which approximates market value. If the
Portfolio acquires a short-term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized value
based upon the value on such date unless the Trustees determine during such
sixty-day period that amortized value does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method.
Dividend income is recorded on the ex-dividend date. Realized gains and
losses from securities sold are recorded on the identified cost basis. The
Portfolio does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments. Net realized gains and losses on foreign currency
transactions represent gains and losses on disposition of foreign currencies
and forward foreign currency exchange contracts, currency gains and losses
realized between the trade and settlement dates on securities transactions,
and the difference between the amount of investment income and foreign
withholding taxes recorded on the Portfolio's books and the U.S. dollar
equivalent amounts usually received or paid.
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.
20
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap 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. 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
Affiliated issuers represent issuers in which the Portfolio held investments
in other investment companies advised by The Boston Company Asset
Management, LLC (TBCAM), a wholly-owned subsidiary of Mellon Financial
Corporation, or its affiliates.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 1.00% of the Portfolio's average daily net assets. For
the period ended March 31, 2005, the Portfolio paid $1,561,650 in investment
advisory fees to TBCAM.
The Portfolio has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly
owned subsidiary of Mellon Financial Corporation and an affiliate of TBCAM,
to provide custody, fund administration and fund accounting services for the
Portfolio. For these services the Portfolio pays Mellon Bank a fixed fee
plus fees that are asset and transaction based, as well as, out-of-pocket
expenses. Pursuant to this agreement the Portfolio was charged $129,995
during the period ended March 31, 2005.
The Portfolio entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Portfolio's lending agent.
Pursuant to this agreement the Mellon Bank receives an agreed upon
percentage of the net lending revenues. This compensation is a standard form
of compensation received by securities lending agents with respect to
non-affiliated entities.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM or its affiliates an annual fee and a
per meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Portfolio Trust pays the legal fees for the
independent counsel of the Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended March 31, 2005 were $223,551,505 and
$83,128,119, respectively. For the period ended March 31, 2005, the
Portfolio did not purchase or sell any long-term U.S. government securities.
21
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $335,489,546
============
Gross unrealizedappreciation $ 77,755,040
Gross unrealized depreciation (1,974,125)
------------
Net unrealized appreciation $ 75,780,915
============
(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 Portfolio may trade the following financial instruments with off-balance
sheet risk:
Options
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Portfolio's
exposure to the underlying instrument, or hedge other Portfolio investments.
Options, both held and written by the Portfolio, are reflected in the
accompanying Statement of Assets and Liabilities at market value. The
underlying face amount at value of any open purchased options is shown in
the Schedule of Investments. This amount reflects each contract's exposure
to the underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms. Premiums received from writing options which expire are
treated as realized gains.
Premiums received from writing options which are exercised or are closed are
added to or offset against the proceeds or amount paid on the transaction to
determine the realized gain or loss. Realized gains and losses on purchased
options are included in realized gains and losses on investment securities,
except purchased options on foreign currency which are included in realized
gains and losses on foreign currency transactions. If a put option written
by the Portfolio is exercised, the premium reduces the cost basis of the
securities purchased by the Portfolio. The Portfolio, as a writer of an
option, has no control over whether the underlying securities may be sold
(call) or purchased (put) and as a result bears the market risk of an
unfavorable change in the price of the security underlying the written
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Portfolio did not enter into option transactions during the period ended
March 31, 2005.
Forward currency exchange contracts
The Portfolio may enter into forward foreign currency and cross currency
exchange contracts for the purchase or sale of a specific foreign currency
at a fixed price on a future date. Risks may arise upon entering these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar and other foreign currencies.
The forward foreign currency and cross currency exchange contracts are
marked to market using the forward foreign currency rate of the underlying
currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date or upon the
closing of the contract. Forward currency exchange contracts are used by the
Portfolio primarily to protect the value of the Portfolio's foreign
securities from adverse currency movements. Unrealized appreciation and
depreciation of forward currency exchange contracts is included in the
Statement of Assets and Liabilities.
At March 31, 2005, the Portfolio did not hold any forward currency exchange
contracts.
22
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Futures contracts
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the underlying
instrument or hedge other investments. In addition, there is the risk that
the Portfolio may not be able to enter into a closing transaction because of
an illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the exchange
on which they trade.
At March 31, 2005, the Portfolio held futures contracts. See Schedule of
Investments for further details.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the period ended March 31, 2005
resulting in $151,315 of security lending income. At December 31, 2004, the
Portfolio had securities valued at $53,869,881 on loan. See the Statement of
Investments for further detail on the security positions on loan and
collateral held.
(7) 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 facility fee, computed at an annual rate of 0.060 of 1% on the daily
unused portion of the facility, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the period ended March 31,
2005, the expense allocated to the Portfolio was $2,898.
During the period ended March 31, 2005, the Portfolio did not use the line
of credit.
23
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that a fund's Board of Trustees,
including a majority of its Trustees who are not affiliated with the fund's
investment adviser or underwriter (the "Independent Trustees") voting
separately, approve the fund's advisory agreement and the related fees on an
annual basis. The Fund is not a party to an investment advisory agreement
directly with any investment adviser and does not invest directly in portfolio
securities. Instead, the Fund invests all of its investable assets in The Boston
Company International Small Cap Portfolio (the "Portfolio"), which is managed by
The Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the Portfolio.
The members of the Fund's Board of Trustees also serve as the Board of Trustees
of the Portfolio. In that capacity, they consider annually whether to continue
the investment advisory agreement between the Portfolio and TBCAM. In their most
recent deliberations concerning their decision to approve the continuation of
the investment advisory agreement, the Board of Trustees conducted the review
and made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from TBCAM
a broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 15, 2004 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. The entire Board then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a separate
presentation of TBCAM's profitability relative to that of several publicly
traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as information
concerning TBCAM's executive management, portfolio management, and client
service personnel and overall organizational structure, insurance coverage,
brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and TBCAM's separate account advisory
fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance (rather than the Portfolio alone), the addition of a new portfolio
manager, as well as "fact sheets" prepared by TBCAM providing salient data about
the Fund and Portfolio, including Portfolio's holdings, strategies, recent
market conditions and outlook, as well as TBCAM's views concerning the issues of
breakpoints in the management fee schedule of the Portfolio and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable, and they
approved the continuation of the agreement for a one-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by TBCAM. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust TBCAM, under the supervision of the Trustees, to manage the
portion of their assets invested in the Fund.
24
Mellon Institutional Funds Master Portfolio
The Boston Company International Small Cap Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio management,
administrative, compliance and related services provided by TBCAM. The Trustees
determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to the portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and expressed
their support for this change. The Trustees reviewed the background and
experience of the Portfolio's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered the
size, education and experience of TBCAM's investment staff, technological
infrastructure and overall responsiveness to changes in market conditions.
The Board determined that TBCAM had the expertise and resources to manage the
Portfolio effectively.
Investment Performance
The Board compared the relative investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected by
TBCAM with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
The Lipper materials provided to the Board at the September 15, 2004 meeting
indicated that the Fund's performance for the 1 and 3-year periods ended July
31, 2004 was 39.24% and 17.34%. The Trustees found that these results compared
favorably with the Fund's peer group of similar funds, the average performance
of which was 32.99% and 11.73% for the same periods.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to TBCAM. The
Portfolio's contractual advisory fee was 1.00%, in the 2nd quintile (second
lowest) of its peer group of funds, the median fee of which was 1.061%. The
Portfolio's net advisory fee, after giving effect to fee waivers, was 0.738% and
below the peer group median net advisory fee of 0.909%. Based on the factors
discussed herein, the Board determined that the Portfolio's advisory fee is
reasonable relative to its peer group averages, both with and without giving
effect to fee waivers.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of TBCAM. Based on the additional scope and
complexity of the services provided and responsibilities assumed by these
advisers with respect to the Portfolio relative to these other types of clients,
the Board concluded that the fees payable under the advisory agreement were
reasonable.
The Board considered the Fund's (rather than solely the Portfolio's) expense
ratio and compared it to that of its peer group of similar funds. The Board
found that the actual net expense ratio of 1.391% (after giving effect to
expense limitations) was lower than the median net expense ratio of the peer
group of 1.413% notwithstanding the fact that most of the other funds in the
peer group were larger than the Fund.
TBCAM's Profitability
The Board considered TBCAM's profitability in managing the Portfolio and Fund
and the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon Asset
Management Company LLC ("Standish
25
Mellon Institutional Funds Investment Trust
The Boston Company International Small Cap Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Mellon") in managing the Portfolio and Fund and other funds in the Mellon
Institutional Funds family of funds. The Independent Trustees had observed that,
based on the profitability information submitted to them by TBCAM, TBCAM
incurred losses in recent years in operating many of the investment companies in
the Mellon family of funds, including the Portfolio and Fund, and achieved only
marginal profitability as to several other funds. The Trustees observed that
TBCAM had incurred losses in operating the Portfolio and the Fund in both 2002
and 2003.
Economies of Scale
While the Board recognized that economies of scale might be realized as the Fund
grows, the Board concluded that, considering current asset growth prospects, the
implementation of fee breakpoints or other fee reductions was not necessary at
this time. The Trustees intend to review the need for breakpoints in connection
with future investment advisory agreement approval deliberations.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Funds. Mellon affiliates provide custodial,
administrative, transfer agency and securities lending services to the Funds. In
each case, such affiliates were selected on the basis of a comparative analysis
of their capabilities and fees relative to those of unaffiliated competitors. In
addition, the Trustees, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i) the
terms of the relevant service agreement are in the best interests of Fund
shareholders; (ii) the services to be performed by the affiliate pursuant to the
agreement are required by and appropriate for the Fund; (iii) the nature and
quality of the services provided by the affiliate pursuant to the agreement are
at least equal to those provided by other, unaffiliated firms offering the same
or similar services for similar compensation; and (iv) the fees payable by the
Fund to the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for services of
the same nature and quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Fund and the
Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable and, thus, in
approving the continuation of the agreement for a one year period.
26
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None Fund: $250
c/o Decision Resources, 11/3/1986 and Chief Executive Portfolio: $2,146
Inc. Officer, Decision
260 Charles Street Resources, Inc.
Waltham, MA 02453
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 31 None Fund: $250
c/o Essex Street 11/3/1986 Associates (family Portfolio: $2,384
Associates investment trust office)
P.O. Box 181
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 31 None Fund: $250
c/o Harvard University 9/13/1986 Professor of Political Portfolio: $2,146
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, Mertens 31 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $2,146
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 Senior Vice President 31 None Fund: $0
Mellon Institutional President and Chief Operating Portfolio: $0
Asset Management and Chief Officer,
One Boston Place Executive Mellon Institutional
Boston, MA 02108 Officer Asset Management;
7/24/65 formerly Vice President
and Chief Financial
Officer, Mellon
Institutional Asset
Management
27
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations,
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mellon
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
28
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One Boston Place
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--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Large Cap Core Fund
- --------------------------------------------------------------------------------
March 31, 2005 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC's web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
October 1, 2004 March 31, 2005 to March 31, 2005
- -------------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,084.20 $4.42
Hypothetical (5% return
per year before expenses) $1,000.00 $1,020.69 $4.28
+ Expenses are equal to the Fund's annualized expense ratio of 0.85%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period).The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
1
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Portfolio Information as of March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Equity Holdings* Sector Net Assets
- -------------------------------------------------------------------------------------------------
General Electric Corp. Industrial 3.5
Exxon Mobil Corp. Energy 3.4
Citigroup, Inc. Financial 3.0
Microsoft Corp. Technology 2.7
Bank of America Corp. Financial 2.5
International Business Machines Corp. Technology 2.4
Goldman Sachs Group, Inc. Financial 2.1
Pfizer, Inc. Healthcare 2.0
Johnson & Johnson Healthcare 2.0
Wachovia Corp. Financial 1.8
----
25.4
* Excludes short-term investments.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
Basic Materials 2.9
Consumer Discretionary 13.2
Consumer Staples 9.2
Energy 8.3
Financial 17.7
Health Care 14.2
Industrial 12.6
Technology 14.6
Telecommunication Service 2.1
Utilities 3.0
Short-term and Net Other Assets 2.2
-----
100.0
The Boston Company Large Cap Core Fund invests all of its investable assets in
an interest of the Boston Company Large Cap Core Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
2
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Large Cap Core Portfolio ("Portfolio"), at value $57,808,812
(Note 1A)
Receivable for Fund shares sold 700
Prepaid expenses 13,211
-----------
Total assets 57,822,723
Liabilities
Accrued transfer agent fees (Note 2) $2,319
Payable for Fund shares redeemed 3,253
Professional fees 6,149
Other accrued expenses and liabilities 2,116
------
Total liabilities 13,837
-----------
Net Assets $57,808,886
===========
Net Assets consist of:
Paid-in capital $50,665,264
Accumulated net realized gain 2,587,119
Undistributed net investment income 222,695
Net unrealized appreciation 4,333,808
-----------
Total Net Assets $57,808,886
===========
Shares of beneficial interest outstanding 1,521,704
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 37.99
===========
The accompanying notes are an integral part of the financial statements.
3
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 644,942
Interest income allocated from Portfolio 10,689
Expenses allocated from Portfolio (207,266)
----------
Net investment income allocated from Portfolio 448,365
Expenses
Transfer agent fees (Note 2) $ 9,380
Professional fees 16,636
Registration fees 8,228
Trustees' fees (Note 2) 498
Insurance expense 506
Miscellaneous expenses 3,564
----------
Total expenses 38,812
----------
Net investment income 409,553
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 4,052,253
Futures contracts 29,898
----------
Net realized gains 4,082,151
Change in unrealized appreciation (depreciation)
on investments allocated from Portfolio on:
Investment securities 217,476
Futures contracts (14,117)
----------
Net change in unrealized appreciation (depreciation) 203,359
Net realized and unrealized gain (loss) on investments 4,285,510
----------
Net Increase in Net Assets from Operations $4,695,063
==========
The accompanying notes are an integral part of the financial statements.
4
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 409,553 $ 397,729
Net realized gains (loss) 4,082,151 5,036,921
Net change in unrealized appreciation 203,359 2,262,590
----------- -----------
Net increase in net assets from operations 4,695,063 7,697,240
----------- -----------
Distributions to Shareholders (Note 1C)
From net investment income (325,581) (568,427)
----------- -----------
Total distributions to shareholders (325,581) (568,427)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 2,306,999 6,450,338
Value of shares issued to shareholders in reinvestment of distributions 236,396 401,721
Cost of shares redeemed (5,170,554) (22,063,953)
----------- -----------
Net decrease in net assets from Fund share transactions (2,627,159) (15,211,894)
----------- -----------
Total Increase (Decrease) in Net Assets 1,742,323 (8,083,081)
Net Assets
At beginning of period 56,066,563 64,149,644
----------- -----------
At end of period (including undistributed
net investment income of $222,695 and $138,723) $57,808,886 $56,066,563
=========== ===========
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2005 -----------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 35.24 $ 31.43 $ 26.13 $ 34.00 $ 41.71 $ 37.79
------- ------- ------- ------- ------- -------
From Operations:
Net investment income* (1) 0.27 0.23 0.36 0.32 0.39 0.29
Net realized and unrealized gains (loss) on 2.69(2) 3.92(2) 5.30 (5.77)(2) (2.77) 5.73
------- ------- ------- ------- ------- -------
investments
Total from operations 2.96 4.15 5.66 (5.45) (2.38) 6.02
------- ------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net investment income (0.21) (0.34) (0.36) (0.21) (0.29) (0.23)
From net realized gains on investments -- -- -- (2.21) (5.04) (1.87)
------- ------- ------- ------- ------- -------
Total distributions to shareholders (0.21) (0.34) (0.36) (2.42) (5.33) (2.10)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $37.99 $ 35.24 $ 31.43 $ 26.13 $ 34.00 $ 41.71
------- ------- ------- ------- ------- -------
Total Return+ 8.42% 13.23% 21.76% (17.70)% (7.18)% 16.52%
======= ======= ======= ======= ======= =======
Ratios/Supplemental data:
Expenses (to average daily net assets) (3) 0.85%++ 0.83% 0.71% 0.71% 0.71% 0.71%
Net Investment Income (to average daily net 1.42%++ 0.67% 1.23% 0.96% 1.00% 0.76%
assets)
Net Assets, End of Period (000's omitted) $57,809 $56,067 $64,150 $55,029 $75,489 $93,315
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income per share(1) N/A $0.23 $0.29 $0.27 $0.38 $0.28
Ratios (to average daily net assets):
Expenses (4) N/A 0.84% 0.93% 0.83% 0.73% 0.73%
Net investment income N/A 0.66% 1.01% 0.84% 0.98% 0.74%
(1) Calculated based on average shares outstanding.
(2) Amount includes litigation proceeds received by the Portfolio of $0.02 for
the period ended March 31, 2005, $0.02 for the year ended September 30, 2004
and.$0.06 for the year ended September 30, 2002. (3) Includes the Fund's
share of the Portfolio's allocated expenses.
+ Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
++ Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Large Cap Core Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest of The Boston
Company Large Cap Core Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and which has the same investment objective
as the Fund. The Portfolio seeks to achieve its objective by investing,
under normal circumstances, at least 80% of net assets in equity securities
in companies that appear to be undervalued relative to underlying business
fundamentals. The value of the Fund's investment in the Portfolio reflects
the Fund's proportionate interest in the net assets of the Portfolio. As of
March 31, 2005 the Fund owned approximately 100% of the Portfolio's net
assets. 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 based on the net
asset value of the Portfolio. 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
Investment 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 expenses of the Fund determined
in accordance with accounting principles generally accepted in the United
States of America. The Fund's realized and unrealized gains and losses
represent its share of the gains and losses of the Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on ex-dividend date. The Fund's
dividends from short-term and long-term capital gains, if any, after
reduction of capital losses will be declared and distributed at least
annually. In determining the amounts of its dividends, the Fund will take
into account its share of the income, gains or losses, expenses, and any
other tax items of the Portfolio.
Dividends from net investment income and distributions from capital gains,
if any, are reinvested in additional shares of the Fund unless a shareholder
elects to receive them in cash. Income and capital gain distributions are
determined in accordance with income tax regulations which may differ from
accounting principles generally accepted in the United States of America.
These differences are primarily due to differing treatments for wash sales,
post-October losses and realized and unrealized gains or losses on futures.
Permanent book and tax basis differences will result in reclassifications to
undistributed net investment income, accumulated net realized gain (loss)
and paid in capital. Undistributed net investment income and accumulated net
realized gain (loss) on investments may include temporary book and tax basis
differences which will reverse in a subsequent period. Any taxable income or
gain remaining at fiscal year end is distributed in the following year.
D. Expenses
The majority of expenses of the Trust or Portfolio Trust are directly
identifiable to an individual fund or portfolio. 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 or portfolios.
7
Mellon Institutional Funds Investment Trust
The Boston Company Large Cap Core Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Commitment and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) Investment Advisory Fee:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM") 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.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide personnel
and facilities to perform transfer agency and certain shareholder services
for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a
fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $10,164
during the period ended March 31, 2005.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or Trustee
of the Trust. The Trust pays each Trustee who is not a director, officer or
employee of TBCAM or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out of pocket expenses. In addition,
the Trust pays the legal fees for the independent counsel of the Trustees.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2005, aggregated $2,592,536 and $5,551,829,
respectively. The Fund receives a proportionate share of the Portfolio's
income, expenses, and realized and unrealized gains and losses based on
applicable tax allocation rules. Book/tax differences arise when changes in
proportionate interest for funds investing in the Portfolio occur. At March
31, 2005, unrealized appreciation (depreciation) on the Portfolio was
allocated in the amount of $4,333,770 to the Fund and $1,219,888 to other
entities previously invested in the Portfolio but since ceased operations.
(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:
For the For the
Six Months Ended Year Ended
March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 60,870 185,329
Shares issued to shareholders in reinvestment of 6,245 11,699
distributions
Shares redeemed (136,313) (647,475)
-------- --------
Net decrease (69,198) (450,447)
======== ========
At March 31, 2005, three shareholders of record held approximately 15%, 14%
and 12% of the total outstanding shares of the Fund, respectively.
Investment activities of these shareholders could have a material impact on
the Fund.
(5) Federal Taxes:
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal
year.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
8
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--97.9%
EQUITIES--97.8%
Basic Materials--2.9%
Alcoa, Inc. 17,100 $ 519,669
Dow Chemical Co. 12,900 643,065
El Du Pont de Nemours & Co. 4,880 250,051
PPG Industries, Inc. 4,180 298,954
1,711,739
Consumer Discretionary--13.2%
Advance Auto Parts, Inc.* 8,450 426,303
Carnival Corp. 9,750 505,148
Coach, Inc.* 9,330 528,358
Comcast Corp.* 14,476 488,999
J.C. Penny Company, Inc. 6,390 331,769
Marriott International, Class A 4,380 292,847
McDonalds Corp. 23,800 741,132
Nordstrom, Inc. 11,620 643,516
Omnicom Group 3,470 307,164
Petco Animal Supplies, Inc.* 12,450 458,285
Staples, Inc. 17,230 541,539
The Home Depot, Inc. 12,120 463,469
Time Warner, Inc.* 47,700 837,135
Viacom, Inc., Class B 8,140 283,516
Walt Disney Co. 27,520 790,650
----------
7,639,830
----------
Consumer Staples--9.2%
Altria Group, Inc. 10,140 663,055
Archer-Daniels-Midland Co. 11,290 277,508
Bunge Ltd. 5,680 306,038
CVS Corp. 5,850 307,827
Dean Foods Corp.* 11,000 377,300
Diageo PLC ADR 4,940 281,086
Estee Lauder Cos., Class A 8,800 395,824
Gillette Co. 12,570 634,534
Kellogg Co. 6,310 273,034
Procter & Gamble Co. 17,100 906,300
Wal-Mart Stores, Inc. 17,500 876,925
----------
5,299,431
----------
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Energy--8.3%
Anadarko Petroleum Corp. 2,370 $ 180,357
BP PLC ADR 4,790 298,896
ChevronTexaco Corp. 5,332 310,909
ConocoPhillips 6,700 722,528
Devon Energy Corp. 10,600 506,150
Exxon Mobil Corp. 32,094 1,912,802
Transocean, Inc.* 7,020 361,249
Weatherford International Ltd.* 8,500 492,490
-----------
4,785,381
-----------
Financial--17.7%
American Express Co. 5,260 270,206
American International Group 9,659 535,205
Ameritrade Holding Corp.* 25,800 263,418
Bank of America Corp. 32,500 1,433,250
CIT Group, Inc. 12,890 489,820
Chubb Corp. 9,390 744,345
Citigroup, Inc. 38,466 1,728,662
Freddie Mac 3,930 248,376
Franklin Resources, Inc. 12,120 832,038
Goldman Sachs Group, Inc. 10,900 1,198,891
Lehman Brothers Holdings, Inc. 6,660 627,106
Merrill Lynch & Co., Inc. 4,600 260,360
Radian Group, Inc. 11,600 553,784
Wachovia Corp. 20,490 1,043,146
-----------
10,228,607
-----------
Health Care--14.2%
Andrx Corp.* 12,990 294,483
Cephalon, Inc.* 6,160 288,473
Charles River Laboratories* 6,200 291,648
Fisher Scientific International 9,300 529,356
Hospira, Inc.* 9,110 293,980
Johnson & Johnson 16,540 1,110,826
Laboratory Corp. of America Holdings* 4,570 220,274
Manor Care, Inc. 7,800 283,608
McKesson Corp. 7,570 285,768
Medco Health Solutions* 6,570 325,675
Pfizer, Inc. 43,840 1,151,677
Sanofi-Aventis ADR 13,600 575,824
Triad Hospitals* 7,880 394,788
Waters Corp.* 9,000 322,110
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
WebMD Corp.* 38,170 $ 324,445
Wellpoint, Inc.* 5,020 629,257
Wyeth 20,690 872,704
----------
8,194,896
----------
Industrial--12.6%
Danaher Corp. 12,060 644,125
Deere & Co. 5,580 374,585
Eaton Corp. 6,560 429,024
FedEx Corp. 3,200 300,640
General Dynamics Corp. 3,940 421,777
General Electric Corp. 54,420 1,962,385
Manpower, Inc. 6,380 277,658
Norfolk Southern Corp. 18,000 666,900
Paccar, Inc. 3,010 217,894
Rockwell Automation, Inc. 4,000 226,560
Ryder System, Inc. 6,760 281,892
Textron, Inc. 4,400 328,328
Tyco International Ltd. 18,140 613,132
United Technologies Corp. 5,500 559,130
----------
7,304,030
----------
Technology--14.6%
Alliance Data Systems Corp.* 12,900 521,160
Altera Corp.* 18,630 368,501
Cisco Systems, Inc.* 35,160 629,012
EMC Corp./Massachusetts 55,970 689,550
Global Payments, Inc. 5,080 327,609
Hewlett-Packard Co. 28,140 617,392
Intel Corp. 40,720 945,926
International Business Machines Corp. 14,870 1,358,821
Microsoft Corp. 62,400 1,508,208
Motorola, Inc. 26,540 397,304
Texas Instruments, Inc. 28,450 725,191
Verisign, Inc.* 11,730 336,651
----------
8,425,325
----------
Telecommunication Service--2.1%
SBC Communications, Inc. 21,200 502,228
Verizon Communications, Inc. 20,600 731,300
----------
1,233,528
----------
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ------------------------------------------------------------------------------------------------------------------------------------
Utilities--3.0%
Constellation Energy Group, Inc. 13,600 $ 703,120
P G & E Corp. 18,700 637,670
Sempra Energy 10,200 406,365
-----------
1,747,155
-----------
TOTAL EQUITIES (Cost $51,000,959) 56,569,922
-----------
SHORT-TERM INVESTMENTS--0.1% Rate Maturity Par Value
---- -------- ---------
U.S. Government--0.1%
U.S. Treasury Bill + (Cost $74,568) 2.730% 6/16/2005 75,000 74,573
-----------
TOTAL UNAFFILIATED INVESTMENT (Cost $51,075,527) 56,644,495
-----------
AFFILIATED INVESTMENTS--1.1% Shares
------
Dreyfus Institutional Preferred Plus ++ (Cost $613,611) 613,611 613,611
-----------
TOTAL INVESTMENTS--99.0% (Cost $51,689,138) 57,258,106
OTHER ASSETS, LESS LIABILITIES--1.0% 550,706
-----------
NET ASSETS-100% $57,808,812
===========
Notes to Schedule of Investments:
ADR-American Depository Receipt
* Non-income producing security.
+ Denotes all or part of security segregated as collateral.
++ Affiliated institutional money market fund.
At March 31, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value (Loss)
- -------------------------------------------------------------------------------------------------------------------------
S&P 500 (2 Contracts) Long 6/1/2005 $607,250 $(15,309)
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Unaffiliated investments, at value (Note 1A) (cost $51,075,527) $56,644,495
Affiliated investment, at value (Note 1A) (cost $613,611) (Note 1E) 613,611
Receivable for investments sold 941,613
Interest and dividends receivable 92,448
Prepaid expenses 2,352
-----------
Total assets 58,294,519
Liabilities
Payable for investments purchased $425,775
Payable for variation margin on open futures contracts (Note 5) 750
Accrued accounting, administration and custody fees (Note 2) 12,487
Accrued Trustees' fees and expenses (Note 2) 4,816
Other accrued expenses and liabilities 41,879
--------
Total liabilities 485,707
-----------
Net Assets (applicable to investors' beneficial interest) $57,808,812
===========
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income $ 644,942
Interest income 10,689
-----------
Total investment Income 655,631
Expenses
Investment advisory fee (Note 2) $ 144,288
Accounting, administration and custody fees (Note 2) 37,731
Professional fees 11,841
Trustees' fees and expenses (Note 2) 6,479
Insurance expense 4,552
Miscellaneous expenses 2,375
----------
Total expenses 207,266
-----------
Net investment income 448,365
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 4,052,253
Futures contracts 29,898
----------
Net realized gain 4,082,151
Change in unrealized appreciation (depreciation) on:
Investment securities 217,476
Futures contracts (14,117)
----------
Net change in unrealized appreciation (depreciation) 203,359
-----------
Net realized and unrealized gain 4,285,510
-----------
Net Increase in Net Assets from Operations $4,733,875
===========
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income $ 448,365 $ 457,631
Net realized gains (losses) 4,082,151 5,036,921
Net change in unrealized appreciation (depreciation) 203,359 2,262,590
----------- -----------
Net increase in net assets from operations 4,733,875 7,757,142
----------- -----------
Capital Transactions
Contributions 2,592,536 6,813,122
Withdrawals (5,551,782) (22,706,053)
----------- -----------
Net increase (decrease) in net assets from capital transactions (2,959,246) (15,892,931)
----------- -----------
Total Increase (Decrease) in Net Assets 1,774,629 (8,135,789)
Net Assets
At beginning of period 56,034,183 64,169,972
----------- -----------
At end of period $57,808,812 $56,034,183
=========== ===========
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2005 -----------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Total Return + 8.55%(1) 13.34% 21.76% (17.69)% (7.11)% 16.59%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.72%++ 0.72% 0.71% 0.70% 0.64% 0.64%
Net Investment Income (to average daily net 1.55%++ 0.77% 1.23% 0.97% 1.06% 0.83%
assets)*
Portfolio Turnover 44%+++ 66% 104% 80% 62% 92%
Net Assets, End of Period (000's omitted) $57,809 $56,034 $64,170 $55,007 $124,213 $146,105
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Ratios (to average daily net assets):
Expenses N/A N/A 0.77% 0.72% N/A N/A
Net investment income N/A N/A 1.17% 0.95% N/A N/A
(1) Returns for periods of less than one year have not been annualized.
+ Total return for the Portfolio has been calculated based on the total return
for the 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 these
waivers.
++ Calculated on an annualized basis.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the state of New York on
January 18, 1996 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Boston
Company Large Cap Core Portfolio (the "Portfolio") is a separate diversified
investment series of the Portfolio Trust.
At March 31, 2005, there was one fund, The Boston Company Large Cap Core
Fund (the "Fund"), invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at March
31, 2005 was 100%.
The objective of the Portfolio is long-term growth of capital. The Portfolio
seeks to achieve its objective by investing, under normal circumstances, at
least 80% of net assets in equity and equity-related securities of companies
which appear to be undervalued relative to current earnings growth.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price, or the NASDAQ
official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost, which approximates market value. If the
Portfolio acquires a short-term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized value
based upon the value on such date unless the Trustees determine during such
sixty-day period that amortized value does not represent fair value.
B. Securities transaction and income
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis. Dividends representing a return of capital are
reflected as a reduction of cost.
C. Income taxes
The Portfolio is treated as a disregarded entity 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 the Portfolio's
only investor 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 investor to satisfy them. The Portfolio allocates at
least annually its net investment income, net realized capital gains, and
any other items of income, gain, loss deduction or credit.
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Portfolio
under these arrangements is unknown, as this would involve future claims
that may be made against the Portfolio that have not yet occurred. However,
based on experience, the Portfolio expects the risks of loss to be remote.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Affiliated issuers
Affiliated issuers represent other investment companies advised by The
Boston Company Asset Management, LLC ("TBCAM") a wholly-owned subsidiary of
Mellon Financial Corporation, or its affiliates.
(2) Investment Advisory Fee:
The investment advisory fee paid to TBCAM for overall investment advisory
and administrative services is paid monthly at the annual rate of 0.50% of
the Portfolio's average daily net assets.
The Portfolio has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly
owned subsidiary of Mellon Financial Corporation and an affiliate of TBCAM,
to provide custody, fund administration and fund accounting services for the
Portfolio. For these services the Portfolio pays Mellon Bank a fixed fee
plus fees that are asset and transaction based, as well as, out-of-pocket
expenses. Pursuant to this agreement the Portfolio paid $37,443 during the
period ended March 31, 2005.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM or its affiliates an annual fee and a
per meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Portfolio Trust pays the legal fees for the
independent counsel of the Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended March 31, 2005, were $24,848,380 and
$27,513,953, respectively. For the period ended March 31, 2005, the
Portfolio did not purchase or sell any long-term U.S. Government securities.
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate Cost $51,689,138
===========
Gross unrealized appreciation 7,208,803
Gross unrealized depreciation (1,639,836)
-----------
Net unrealized appreciation $ 5,568,967
===========
(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 tends to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tends 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.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Portfolio is exercised, the premium reduces
the cost basis of the securities purchased by the Portfolio. The Portfolio,
as a writer of an option, has no control over whether the underlying
securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Portfolio did not enter into any option transactions during the period
ended March 31, 2005.
Futures contracts
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the underlying
instrument or hedge other investments. In addition, there is the risk that
the Portfolio may not be able to enter into a closing transaction because of
an illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the exchange
on which they trade.
At March 31, 2005, the Portfolio held futures contracts. See Schedule of
Investments for further detail.
(6) 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 facility fee, computed at an annual rate of 0.060 of 1% on the daily
unused portion of the facility, is allocated ratably among the participating
portfolios/funds at the end of each quarter. For the period ended March 31,
2005, the expense allocated to the Portfolio was $1,177.
During the period ended March 31, 2005, the Portfolio had average borrowings
outstanding of $29,000 on a total of one day and incurred $3 of interest
expense.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that a fund's Board of Trustees,
including a majority of its Trustees who are not affiliated with the fund's
investment adviser or underwriter (the "Independent Trustees") voting
separately, approve the fund's advisory agreement and the related fees on an
annual basis. The Fund is not a party to an investment advisory agreement
directly with any investment adviser and does not invest directly in portfolio
securities. Instead, the Fund invests all of its investable assets in The Boston
Company Large Cap Core Portfolio (the "Portfolio"), which is managed by The
Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the Portfolio.
The members of the Fund's Board of Trustees also serve as the Board of Trustees
of the Portfolio. In that capacity, they consider annually whether to continue
the investment advisory agreement between the Portfolio and TBCAM. In their most
recent deliberations concerning their decision to approve the continuation of
the investment advisory agreement, the Board of Trustees conducted the review
and made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from TBCAM
a broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 15, 2004 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. The entire Board then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a separate
presentation of TBCAM's profitability relative to that of several publicly
traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as information
concerning TBCAM's executive management, portfolio management, and client
service personnel and overall organizational structure, insurance coverage,
brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and TBCAM's separate account advisory
fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance (rather than the Portfolio alone), the addition of a new portfolio
manager, as well as "fact sheets" prepared by TBCAM providing salient data about
the Fund and Portfolio, including Portfolio's holdings, strategies, recent
market conditions and outlook, as well as TBCAM's views concerning the issues of
breakpoints in the management fee schedule of the Portfolio and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable, and they
approved the continuation of the agreement for a one-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by TBCAM. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust TBCAM, under the supervision of the Trustees, to manage the
portion of their assets invested in the Fund.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio management,
administrative, compliance and related services provided by TBCAM. The Trustees
determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to the portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and expressed
their support for this change. The Trustees reviewed the background and
experience of the Portfolio's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered the
size, education and experience of TBCAM's investment staff, technological
infrastructure and overall responsiveness to changes in market conditions.
The Board determined that TBCAM had the expertise and resources to manage the
Portfolio effectively.
Investment Performance
The Board compared the relative investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected by
TBCAM with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
The Lipper materials provided to the Board at the September 15, 2004 meeting
indicated that the Fund's performance for the 1-, 3- and 5-year periods ended
July 31, 2004 was 11.96%, 0.04% and 2.83%. The Board found that for the 1-and 3-
year periods, the Fund had underperformed its peer group average return of
14.98% and 0.08%, respectively, but outperformed the peer group average return
of 1.15% for the 5-year period.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to TBCAM. The
Portfolio's contractual advisory fee was 0.50%, in the 1st (best) quintile of
its peer group of funds, the median fee of which was 0.77%. The Portfolio's net
advisory fee, after giving effect to fee waivers, was 0.28%, well below the peer
group median net advisory fee of 0.662%. Based on the Lipper data, as well as
other factors discussed herein, the Board determined that the Portfolio's
advisory fee is reasonable relative to its peer group averages, both with and
without giving effect to fee waivers.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of TBCAM. Based on the additional scope and
complexity of the services provided and responsibilities assumed by these
advisers with respect to the Portfolio relative to these other types of clients,
the Board concluded that the fees payable under the advisory agreement were
reasonable.
The Board considered the Fund's (rather than solely the Portfolio's) expense
ratio and compared it to that of its peer group of similar funds. The Board
found that the Fund's actual net expense ratio of 0.71% (after giving effect to
expense limitations) was below the median net expense ratio of the peer group of
0.937% notwithstanding the fact that all of the other funds in the peer group
were larger than the Fund.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Large Cap Core Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
TBCAM's Profitability
The Board considered TBCAM's profitability in managing the Portfolio and Fund
and the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon Asset
Management Company LLC ("Standish Mellon") in managing the Portfolio and Fund
and other funds in the Mellon Institutional Funds family of funds. The
Independent Trustees had observed that, based on the profitability information
submitted to them by TBCAM, TBCAM incurred losses in recent years in operating
many of the investment companies in the Mellon family of funds, including the
Portfolio and Fund, and achieved only marginal profitability as to several other
funds. The Trustees observed that TBCAM had incurred losses in operating the
Portfolio and the Fund in both 2002 and 2003.
Economies of Scale
While the Board recognized that economies of scale might be realized as the Fund
grows, the Trustees noted that the Fund's asset size fluctuated somewhat in
recent years (between approximately $54 million and $65 million), and remained
quite small relative to its peers. The Board concluded that, considering current
asset growth prospects, the implementation of fee breakpoints or other fee
reductions was not necessary at this time. The Trustees intend to review the
need for breakpoints in connection with future investment advisory agreement
approval deliberations.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Funds. Mellon affiliates provide custodial,
administrative, transfer agency and securities lending services to the Funds. In
each case, such affiliates were selected on the basis of a comparative analysis
of their capabilities and fees relative to those of unaffiliated competitors. In
addition, the Trustees, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i) the
terms of the relevant service agreement are in the best interests of Fund
shareholders; (ii) the services to be performed by the affiliate pursuant to the
agreement are required by and appropriate for the Fund; (iii) the nature and
quality of the services provided by the affiliate pursuant to the agreement are
at least equal to those provided by other, unaffiliated firms offering the same
or similar services for similar compensation; and (iv) the fees payable by the
Fund to the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for services of
the same nature and quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Fund and the
Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable and, thus, in
approving the continuation of the agreement for a one year period.
22
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None Fund: $250
c/o Decision Resources, 11/3/1986 and Chief Executive Portfolio: $760
Inc. Officer, Decision
260 Charles Street Resources, Inc.
Waltham, MA 02453
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 31 None Fund: $250
c/o Essex Street 11/3/1986 Associates (family Portfolio: $833
Associates investment trust office)
P.O. Box 181
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 31 None Fund: $250
c/o Harvard University 9/13/1986 Professor of Political Portfolio: $760
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, Mertens 31 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $760
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 Senior Vice President 31 None Fund: $0
Mellon Institutional President and Chief Operating Portfolio: $0
Asset Management and Chief Officer,
One Boston Place Executive Mellon Institutional
Boston, MA 02108 Officer Asset Management;
7/24/65 formerly Vice President
and Chief Financial
Officer, Mellon
Institutional Asset
Management
23
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations,
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mellon
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
24
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One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0930SA0305
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company
Small Cap Value Fund
- --------------------------------------------------------------------------------
March 31, 2005 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC's web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
October 1, 2004 March 31, 2005 to March 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,090.90 $5.79
Hypothetical (5% return
per year before expenses) $1,000.00 $1,019.40 $5.59
- ----------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.11%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period). The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
1
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Portfolio Information as of March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Holdings* Sector Net Assets
- ------------------------------------------------------------------------------------------------------
Ralcorp Holdings, Inc. Consumer Staples 1.9
The Brink's Co. Industrial 1.7
FMC Technologies, Inc. Energy 1.7
Arch Coal, Inc. Basic Materials 1.6
Laidlaw International, Inc. Industrial 1.6
Jones Lang Lasalle Financial 1.5
Knight Trading Group Financial 1.4
Aztar Corp. Consumer Discretionary 1.4
United Rentals, Inc. Industrial 1.3
Toro Co. Consumer Discretionary 1.2
----
15.3
* Excluding short-term investments and investment of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- --------------------------------------------------------------
Basic Materials 6.5
Consumer Discretionary 15.8
Consumer Staples 7.1
Energy 4.9
Financial 19.3
Health Care 8.0
Industrial 18.9
Technology 13.8
Telecommunication Service 0.3
Utilities 3.3
Short-term and Net Other Assets 2.1
-----
100.0
The Boston Company Small Cap Value Fund invests all of its investable assets in
an interest of the Boston Company Small Cap Value Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap Value Portfolio ("Portfolio"), at value (Note 1A) $83,222,285
Receivable for Fund shares sold 2,595,005
Prepaid expenses 11,793
-----------
Total assets 85,829,083
Liabilities
Accrued transfer agent fees (Note 2) $ 3,028
Accrued Trustees' fees (Note 2) 497
Other accrued expenses and liabilities 17,057
-------
Total liabilities 20,582
-----------
Net Assets $85,808,501
-----------
Net Assets consist of:
Paid-in capital $69,788,117
Accumulated net realized gain 3,761,001
Accumulated net investment loss (40,201)
Net unrealized appreciation 12,299,584
-----------
Total Net Assets $85,808,501
===========
Shares of beneficial interest outstanding 4,234,344
===========
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding) $ 20.26
===========
The accompanying notes are an integral part of the financial statements.
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 301,014
Interest income allocated from Portfolio 23,015
Security lending income allocated from Portfolio 3,983
Expenses allocated from Portfolio (325,396)
----------
Net investment income allocated from Portfolio 2,616
Expenses
Transfer agent fees (Note 2) $10,597
Professional fees 17,540
Registration fees 10,721
Trustees' fees (Note 2) 935
Insurance expense 486
Miscellaneous expenses 5,384
-------
Total expenses 45,663
----------
Net investment loss (43,047)
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 3,801,412
Change in unrealized appreciation (depreciation) allocated from Portfolio on:
Investment securities 1,649,547
----------
Net realized and unrealized gain (loss) 5,450,959
----------
Net Increase (Decrease) in Net Assets from Operations $5,407,912
==========
The accompanying notes are an integral part of the financial statements.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment loss $ (43,047) $ (127,820)
Net realized gains 3,801,412 9,973,051
Change in net unrealized appreciation 1,649,547 3,761,962
----------- -----------
Net increase in net assets from operations 5,407,912 13,607,193
----------- -----------
Distributions to Shareholders (Note 1C)
From net realized gains on investments (9,863,596) (4,564,248)
----------- -----------
Total distributions to shareholders (9,863,596) (4,564,248)
----------- -----------
Fund Share Transactions (Note 4)
Net proceeds from sale of shares 27,761,698 11,834,111
Value of shares issued to shareholders in reinvestment of distributions 8,437,601 4,026,790
Cost of shares redeemed (7,116,851) (9,027,160)
----------- -----------
Net increase (decrease) in net assets from Fund share transactions 29,082,448 6,833,741
----------- -----------
Total Increase in Net Assets 24,626,764 15,876,686
Net Assets
At beginning of period 61,181,737 45,305,051
----------- -----------
At end of period (including undistributed
net investment income (loss) of $(40,221) and $2,846) $85,808,501 $61,181,737
=========== ===========
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Financial Highlights
- --------------------------------------------------------------------------------
For the Period
For the February 1, 2000
Six Months Ended Year Ended September 30, (commencement
March 31, 2005 ------------------------------------------ of operations) to
(Unaudited) 2004 2003 2002 2001(a) September 30, 2000
---------------- -------- ------- ------- ------- ------------------
Net Asset Value, Beginning of Period $ 21.91 $ 18.49 $ 14.30 $ 13.86 $ 14.01 $11.05
------- ------- ------- ------- ------- ------
From Operations:
Net investment income* (1) (0.01) (0.05) (0.01) 0.05 0.10 0.04
Net realized and unrealized
gains (loss) on investments 2.03 5.27 4.24 0.75 0.31 2.94
------- ------- ------- ------- ------- ------
Total from operations 2.02 5.22 4.23 0.80 0.41 2.98
------- ------- ------- ------- ------- ------
Less Distributions to Shareholders:
From net investment income -- -- (0.02) (0.04) (0.06) (0.02)
From net realized gains on investments (3.67) (1.80) (0.02) (0.32) (0.50) --
------- ------- ------- ------- ------- ------
Total distributions to shareholders (3.67) (1.80) (0.04) (0.36) (0.56) (0.02)
------- ------- ------- ------- ------- ------
Net Asset Value, End of Period $ 20.26 $ 21.91 $ 18.49 $ 14.30 $ 3.86 $14.01
======= ======= ======= ======= ======= ======
Total Return + 9.09% 29.92% 29.64% 5.43% 3.12% 26.98%
Ratios/Supplemental data:
Expenses (to average daily net assets) (2) 1.11%++ 1.18% 1.15% 1.00% 1.00% 1.00%++
Net Investment Income (Loss)
(to average daily net assets) (0.13)%++ (0.24)% (0.05)% 0.32% 0.68% 0.50%++
Portfolio Turnover (3) N/A N/A 51% 164% 149% 71%+++
Net Assets, End of Period (000's omitted) $85,809 $61,182 $45,305 $35,934 $28,532 $3,764
- --------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its investment advisory fee and/or reimbursed the Fund
for all or a portion of its operating expenses. If this voluntary action had
not been taken, the investment income per share and the ratios would have
been:
Net investment income per share (1) N/A N/A $(0.03) $0.01 $0.05 $(0.26)
Ratios (to average daily net assets):
Expenses (2) N/A N/A 1.28% 1.24% 1.37% 4.51%++
Net investment income (loss) N/A N/A (0.18)% 0.08% 0.31% (3.01)%++
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) Portfolio turnover represents activity while the Fund was investing directly
in securities until January 27, 2003. The portfolio turnover ratio for the
period since the Fund transferred substantially all of its investable assets
to the Portfolio is shown in the Portfolio's financial statements which are
included elsewhere in this report.
+ Total return would have been lower in the absence of expense waivers,
returns for periods of less than one year have not been annualized.
++ Calculated on an annualized basis.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Value Fund (the "Fund") is a separate diversified
investment series of the Trust.
The Fund invests all of its investable assets in an interest of The Boston
Company Small Cap Value Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as the
Fund. The Portfolio seeks to achieve its objective by investing, under
normal circumstances, at least 80% of net assets in equity securities of
small cap U.S. companies. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (88% at March 31, 2005). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial
statements of the Portfolio are included elsewhere in this report and should
be read in conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. The Fund's net
investment income consists of the Fund's pro rata share of the net
investment income of the Portfolio, less all actual and accrued expenses of
the Fund determined in accordance with accounting principles generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Fund represent pro rata shares of the gain and losses of
the Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on ex-dividend date. The Fund's
dividends from short-term and long-term capital gains, if any, after
reduction of capital losses will be declared and distributed at least
annually. In determining the amounts of its dividends, the Fund will take
into account its share of the income, gains or losses, expenses, and any
other tax items of the Portfolio. Dividends from net investment income and
distributions from capital gains, if any, are reinvested in additional
shares of the Fund unless a shareholder elects to receive them in cash.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily
due to differing treatments for realized and unrealized gains or losses on
REITS and wash sales.
Permanent book and tax basis differences 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 or Portfolio Trust are directly
identifiable to an individual fund or portfolio. Expenses which are not
readily identifiable to a specific fund or portfolio are allocated taking
into consideration, among other things, the nature and type of expense and
the relative size of the funds or portfolios.
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.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM"), a wholly owned subsidiary of
Mellon Institutional Asset Management, for such services. See Note 2 of the
Portfolio's Notes to Financial Statements which are included elsewhere in
this report.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide personnel
and facilities to perform transfer agency and certain shareholder services
for the Fund. For these services the Fund pays Drays Transfer, Inc. a fixed
fee plus per account and transaction based fees, as well as, out-of-pocket
expenses. Pursuant to this agreement the Fund paid $10,915 during the period
ended March 31, 2005.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or Trustee
of the Trust. The Trust pays each Trustee who is not a director, officer or
employee of TBCAM or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out of pocket expenses. In addition,
the Trust pays the legal fees for the independent counsel of the Trustees.
(3) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2005 aggregated $33,663,796 and $17,035,757,
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:
For the For the
Six Months Ended Year Ended
March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 1,352,781 566,701
Shares issued to shareholders
in reinvestment of distributions 411,390 215,710
Shares redeemed (332,545) (440,530)
--------- --------
Net increase (decrease) 1,431,626 341,881
========= ========
The Fund began imposing a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market impact,
and other costs associated with short-term trading. The fee does not apply
to shares that were acquired through reinvestment of distributions. For the
period ended March 31, 2005, the Fund did not collect any redemption fees.
(5) Federal taxes
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal
year.
See the Portfolio's financial statements included elsewhere in this report
for tax basis unrealized appreciation/(depreciation) information.
8
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--105.3%
EQUITIES--97.9%
Basic Materials--6.5%
Arch Coal, Inc. (a) 35,400 $ 1,522,554
Balchem Corp. 15,700 365,025
Compass Minerals International, Inc. 22,600 575,170
FMC Corp.* 13,600 726,920
Florida Rock Industries, Inc. 11,000 647,020
Hercules, Inc.* 46,100 667,528
NN, Inc. 32,600 401,632
RTI International Metals, Inc.* 31,700 741,780
Spartech Corp. 29,300 581,605
-----------
6,229,234
-----------
Consumer Discretionary--15.8%
American Greetings Corp., Class A (a) 27,900 710,892
Aztar Corp.* 44,800 1,279,488
Big 5 Sporting Goods Corp. 28,400 701,480
Cache, Inc.* 23,200 314,360
Charming Shoppes, Inc.* 85,600 695,928
Gemstar-TV Guide International, Inc.* 136,600 594,210
Gray Television, Inc. 36,400 526,708
Interface, Inc.* 49,400 336,908
Jos A Bank Clothiers, Inc. (a)* 35,700 1,046,010
La-Z-Boy, Inc. 39,100 544,663
Lifetime Hoan Corp. 23,100 357,819
Matthews International Corp., Class A 11,700 383,292
The Men's Wearhouse, Inc.* 14,100 595,161
The Reader's Digest Association 47,500 822,225
Regis Corp. 17,500 716,275
Saks, Inc. 33,800 610,090
School Specialty, Inc.* 29,000 1,135,640
Stanley Furniture Co., Inc. 11,600 548,448
Toro Co. 12,900 1,141,650
Wabtec Corp. 26,500 542,985
The Yankee Candle Co. (a) 31,000 982,700
Zale Corp.* 15,500 460,660
-----------
15,047,592
-----------
Consumer Staples--7.1%
Del Monte Foods Co.* 81,100 879,935
Fresh Del Monte Produce 24,300 741,636
Green Mountain Coffee Roasters* 16,000 384,000
J & J Snack Food Corp. 9,100 426,153
The accompanying notes are an integral part of the financial statements.
9
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
Lance, Inc. 30,100 $ 483,707
Longs Drug Stores Corp. 21,700 742,574
Performance Food Group Co.* 41,100 1,137,648
Ralcorp Holdings, Inc. 37,900 1,794,565
The Great Atlantic & Pacific Tea Co., Inc.* 11,400 169,860
-----------
6,760,078
-----------
Energy--4.9%
Dril-Quip, Inc.* 20,900 642,466
FMC Technologies, Inc. 47,100 1,562,778
Oil States International, Inc.* 39,400 809,670
Tetra Technologies* 36,600 1,040,904
Universal Compression Holdings, Inc.* 16,200 613,494
-----------
4,669,312
-----------
Financial--19.3%
Alabama National Bancorp/Del 8,200 507,498
Alexandria Real Estate Equities, Inc. REIT 9,600 618,048
Aspen Insurance Holdings Ltd. 36,600 922,686
Assured Guaranty Ltd.A121 39,600 710,820
Boykin Lodging Co. REIT* 36,400 346,892
Capital Automotive REIT 23,900 791,568
Capital Trust, Inc., Class A REIT 18,700 620,466
Financial Federal Corp. 15,300 541,161
First Republic Bank 20,300 657,111
Horace Mann Educators Corp. (a) 29,500 523,330
Innkeepers USA Trust REIT 49,400 637,754
ITLA Capital Corp.* 8,200 409,672
Jones Lang Lasalle* 29,900 1,394,835
Knight Trading Group (a)* 136,900 1,319,716
Lasalle Hotel Properties REIT 18,900 549,045
Metris Cos., Inc.* 63,800 739,442
Mission West Properties REIT 49,500 524,700
Pacific Capital BanCorp 22,360 665,881
Provident Bancorp, Inc. 31,900 390,456
Provident Bankshares Corp. 17,800 586,688
Raymond James Financial, Inc. 34,000 1,030,200
Santander BanCorp 13,200 347,556
Scottish Annuity & Life Holding 32,100 722,892
SL Green Realty Corp. REIT (a) 12,000 674,640
Southwest Bancorp of Texas, Inc. 50,100 919,335
Sterling Bancshares, Inc.* 33,800 479,960
Sterling Financial Corp.* 12,200 435,540
Summit Bancshares, Inc. (Texas) 19,800 337,590
-----------
18,405,482
-----------
The accompanying notes are an integral part of the financial statements.
10
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
Health Care--8.0%
Amedisys, Inc.* 35,200 $ 1,064,800
America Service Group, Inc.* 25,100 555,463
Andrx Corp.(a)* 24,200 548,614
Apria Healthcare Group, Inc.* 12,200 391,620
Hooper Holmes, Inc. 96,600 369,012
Magellan Health Services, Inc.* 14,200 483,510
Medicines Co.* 25,500 577,830
Pediatrix Medical Group, Inc.* 11,600 795,644
Polymedia Corp. 29,400 933,744
Res-Care, Inc.* 54,400 680,544
Sierra Health Services* 12,300 785,232
U.S. Physical Therapy, Inc.* 30,800 430,584
-----------
7,616,597
-----------
Industrial--18.9%
Bowne & Co., Inc. (a) 61,300 921,952
The Brink's Co. 45,900 1,588,140
C&D Technologies, Inc. 30,800 309,540
Casella Waste Systems, Inc.* 35,400 468,342
Central Parking Corp. 32,600 560,068
Chicago Bridge & Iron Co. N.V 21,900 964,257
CIRCOR International, Inc. 19,200 473,280
Comfort Systems USA, Inc.* 45,000 348,750
Courier Corp. 9,400 492,936
Cubic Corp. 28,600 541,684
Esterline Technologies Corp.* 32,400 1,119,420
GSI Lumonics, Inc.* 83,200 752,128
Granite Construction, Inc. 30,000 788,100
Herley Industries, Inc.* 35,900 614,249
Insituform Technologies, Inc.* 29,100 422,241
Labor Ready* 34,400 641,560
Laidlaw International, Inc.* 72,300 1,503,840
McGrath RentCorp. 27,800 649,964
Modtech Holdings, Inc.* 49,700 422,450
Reliance Steel & Aluminum 15,200 608,152
Simpson Manufacturing 17,100 528,390
Source Interlink Cos., Inc.* 37,700 424,125
United Rentals, Inc.* 58,000 1,172,180
Wabash National Corp. 32,100 783,240
Waste Connections* 27,100 941,725
-----------
18,040,713
-----------
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- -------------------------------------------------------------------------------------------------------------------------------
Technology--13.8%
Anaren, Inc.* 30,300 $ 367,539
Borland Software Corp.* 84,300 684,516
C-COR, Inc.* 63,100 383,648
Comtech Telecommunications Corp.* 13,800 718,980
Cymer, Inc.* 24,800 663,896
Digi International, Inc.* 44,100 605,052
EPIQ Systems, Inc.* 26,600 345,268
EFunds Corp.* 31,500 703,080
Electronics for Imaging, Inc.* 33,000 588,720
Foundry Networks, Inc.* 42,100 416,790
Hutchinson Technology, Inc. (a)* 14,700 511,266
Informatica Corp.* 49,500 409,365
Komag, Inc.* 24,900 556,515
Maxtor Corp.* 126,800 674,576
McData Corp. (a)* 119,400 450,138
NIC, Inc.* 90,700 432,639
Newport Corp.* 41,000 594,090
Perot Systems Corp., Class A* 68,900 926,016
Phase Forward, Inc.* 65,700 429,021
Photon Dynamics, Inc.* 24,900 474,594
Progress Software Corp.* 35,700 936,054
SafeNet, Inc.* 21,200 621,372
Sybase, Inc.* 35,000 646,100
-----------
13,139,235
-----------
Telecommunication Service--0.3%
Surewest Communications 12,500 288,250
Utilities--3.3%
Cleco Corp. 43,800 932,940
PNM Resources, Inc. 41,700 1,112,556
UGI Corp. 23,700 1,076,453
-----------
3,121,949
-----------
TOTAL EQUITIES (Cost $80,821,702) 93,318,442
-----------
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Par Value
Security Rate Maturity Value (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS--0.3%
U.S. Government--0.3%
U.S. Treasury Bill + 2.450% 4/7/2005 $120,000 $ 119,951
U.S. Treasury Bill + 2.730 6/16/2005 150,000 149,146
------------
TOTAL SHORT-TERM INVESTMENTS (cost $269,088) 269,097
------------
INVESTMENT OF CASH COLLATERAL--7.1% Shares
---------
BlackRock Cash Strategies L.L.C. (Cost $6,789,232) 6,789,232 6,789,232
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $87,880,022) 100,376,771
------------
AFFILIATED INVESTMENTS--9.9%
Dreyfus Institutional Preferred Plus ++ (cost $9,404,680) 9,404,680 9,404,680
------------
TOTAL INVESTMENTS--115.2% (cost $97,284,702) 109,781,451
------------
LIABILITIES IN EXCESS OF OTHER ASSETS--(15.2%) (14,522,086)
------------
NET ASSETS--100% $ 95,259,365
============
Notes to Schedule of Investments:
ADR-American Depository Receipt
REIT--Real Estate Investment Trust
(a) Security, or a portion of thereof, was on loan at 3/31/05
* Non-income producing security
+ Denotes all or part of security segregated as collateral for futures
contracts.
++ Affiliated institutional money market fund.
At March 31, 2005 the Fund held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value Gain/(Loss)
- -------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (6 contracts) Long 6/16/2005 $1,851,750 $1,923
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $6,455,008 (Note 6))
Unaffiliated investments (cost $87,880,022) $100,376,771
Affiliated investment (Note 1E) (cost $9,404,680) 9,404,680
Cash 887
Receivable for investments sold 852,134
Interest and dividends receivable 75,886
Prepaid expenses 975
------------
Total assets 110,711,333
Liabilities
Collateral for securities on loan (Note 6) $6,789,232
Payable for investments purchased 8,614,832
Payable for margin variation 17,608
Accrued accounting, administration and custody fees (Note 2) 12,621
Accrued Trustees' fees and expenses (Note 2) 3,005
Other accrued expenses and liabilities 14,670
----------
Total liabilities 15,451,968
------------
Net Assets (applicable to investors' beneficial interest) $ 95,259,365
============
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign with holding taxes of $356) $ 340,020
Interest income 26,298
Securities lending income (Note 6) 4,551
----------
Total investment Income 370,869
Expenses
Investment advisory fee (Note 2) $ 303,955
Accounting, administration and custody fees 37,207
Professional fees 14,784
Trustees' fees and expenses (Note 2) 6,818
Insurance expense 4,195
Miscellaneous expenses 1,336
----------
Total expenses 368,295
----------
Net investment income 2,574
----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 4,352,201
Futures contracts (25,502)
----------
Net realized gains 4,326,699
Change in unrealized appreciation (depreciation) on:
Investment securities 1,630,651
Futures contracts 1,923
---------
Net change in unrealized appreciation (depreciation) 1,632,574
----------
Net realized and unrealized gain (loss) 5,959,273
----------
Net Increase (Decrease) in Net Assets from Operations $5,961,847
==========
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment income (loss) $ 2,574 $ (52,543)
Net realized gains (losses) 4,326,699 10,097,630
Net change in net unrealized appreciation (depreciation) 1,632,574 3,979,928
------------ -----------
Net increase (decrease) in net assets from operations 5,961,847 14,025,015
------------ -----------
Capital Transactions
Contributions 41,078,898 21,855,319
Withdrawals (18,093,322) (14,941,264)
------------ -----------
Net increase (decrease) in net assets from capital transactions 22,985,574 6,914,055
------------ -----------
Total Increase (Decrease) in Net Assets 28,947,421 20,939,070
Net Assets
At beginning of period 66,311,942 45,372,872
------------ -----------
At end of period $ 95,259,365 $66,311,942
============ ===========
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the period
For the January 28, 2003
Six Months Ended For the (commencement of
March 31, 2005 Year Ended operations) to
(Unaudited) September 30, 2004 September 30, 2003
---------------- ------------------ ------------------
Total Return + 9.23%(1) 30.07% 29.85%(1)
Ratios/Supplemental data:
Expenses (to average daily net assets)* 0.97%(2) 1.03% 1.10%(2)
Net Investment Income (Loss) (to average daily net assets)* 0.01%(2) (0.10)% (0.07)%(2)
Portfolio Turnover 36%(1) 123% 102%(1)
Net Assets, End of Period (000's omitted) $95,259 $66,312 $45,373
- ---------------
* 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 the 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 N/A 1.10%(2)
Net investment income (loss) N/A N/A (0.07)%(2)
+ Total return for the Portfolio has been calculated based on the total return
for the investor Fund, assuming all distributions were reinvested, and
adjusted for the difference in expenses as set out in the notes to the
financial statements. Total return would have been lower in the absence of
expense waivers.
(1) Not annualized.
(2) Computed on an annualized basis.
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Boston
Company Small Cap Value Portfolio (the "Portfolio"), a separate diversified
investment series of the Portfolio Trust, commenced operations on January
28, 2003.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of net assets in equity securities of small cap
U.S. companies.
At March 31, 2005, there were two funds, The Boston Company Small Cap Value
Fund and Dreyfus Premier Small Cap Equity Fund invested in the Portfolio
(the "Funds"). The value of the Funds' investment in the Portfolio reflects
the Funds' proportionate interests in the net assets of the Portfolio. At
March 31, 2005, The Boston Company Small Cap Value Fund and the Dreyfus
Premier Small Cap Equity Fund held 88% and 12% interests in the Portfolio,
respectively.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price, or the NASDAQ
official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost, which approximates market value. If the
Portfolio acquires a short-term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized value
based upon the value on such date unless the Trustees determine during such
sixty-day period that amortized value does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of trade date. Interest income is
determined on the basis of interest accrued, adjusted for amortization of
premium or discount on long-term debt securities when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
Realized gains and losses from securities sold are recorded on the
identified cost basis. Dividends representing a return of capital are
reflected as a reduction of cost, when the amount of return of capital is
conclusively determined.
C. Income taxes
The Portfolio is treated as a partnership for federal tax purposes. No
provision is made by the Portfolio for federal or state taxes on any taxable
income of the Portfolio because each investor in the Portfolio is ultimately
responsible for the payment of any taxes. Since at least one of the
Portfolio's investors is a regulated investment company that invests all or
substantially all of its assets in the Portfolio, the Portfolio normally
must satisfy the source of income and diversification requirements
applicable to regulated investment companies (under the Internal Revenue
Code) in order for its investors to satisfy them. The Portfolio allocates at
least annually among its investors each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss deduction or credit.
D. Commitments and contingencies
In the normal course of business, the Portfolio may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Portfolio
under these arrangements is unknown, as this would involve future claims
that may be made against the Portfolio that have not yet occurred. However,
based on experience, the Portfolio expects the risks of loss to be remote.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
E. Affiliated issuers:
Affiliated issuers represent investments in other investment companies
advised by The Boston Company Asset Management, LLC (TBCAM), a wholly-owned
subsidiary of Mellon Financial Corporation, or its affiliates.
(2) Investment Advisory and Other Transactions With Affiliates:
The investment advisory fee paid to TBCAM for overall investment advisory,
administrative services, and general office facilities, is paid monthly at
the annual rate of 0.80% of the Portfolio's average daily net assets.
The Portfolio has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly
owned subsidiary of Mellon Financial Corporation and an affiliate of TBCAM,
to provide a custody, fund administration and fund accounting services for
the Portfolio. For these services the Portfolio pays Mellon Bank a fixed fee
plus fees that are asset and transaction based, as well as, out-of-pocket
expenses. Pursuant to this agreement the Portfolio paid $38,592 during the
period ended March 31, 2005.
The Portfolio entered into an agreement with Mellon Bank to perform certain
securities lending activities and to act as the Portfolio lending agent.
Pursuant to this agreement the Mellon Bank receives an agreed upon
percentage of the net lending revenues. This compensation is a standard form
of compensation received by securities lending agents with respect to
non-affiliated entities.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Trust pays each Trustee who is not a director,
officer or employee of TBCAM or its affiliates an annual fee and a per
meeting fee as well as reimbursement for travel and out of pocket expenses.
In addition, the Portfolio Trust pays the legal fees for the independent
counsel of the Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended March 31, 2005 were $48,874,469 and
27,077,106, respectively. For the period ended March 31, 2005, the Portfolio
did not purchase or sell any long-term U.S. Government securities.
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $90,495,469
===========
Gross unrealized appreciation $14,051,775
Gross unrealized depreciation (1,555,026)
-----------
Net unrealized appreciation $12,496,749
===========
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value 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 Portfolio may trade the following financial instruments with off-balance
sheet risk:
Options
Call and put options give the holder the right to purchase or sell a
security or currency or enter into a swap arrangement on a future date at a
specified price. The Portfolio may use options to seek to hedge against
risks of market exposure and changes in security prices and foreign
currencies, as well as to seek to enhance returns. Writing puts and buying
calls tend to increase the Portfolio's exposure to the underlying
instrument. Buying puts and writing calls tend to decrease the Portfolio's
exposure to the underlying instrument, or hedge other Portfolio investments.
Options, both held and written by the Portfolio, are reflected in the
accompanying Statement of Assets and Liabilities at market value. The
underlying face amount at value of any open purchased options is shown in
the Schedule of Investments. This amount reflects each contract's exposure
to the underlying instrument at period end. Losses may arise from changes in
the value of the underlying instruments if there is an illiquid secondary
market for the contract or if the counterparty does not perform under the
contract's terms.
Premiums received from writing options which expire are treated as realized
gains. Premiums received from writing options which are exercised or are
closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Portfolio is exercised, the premium reduces
the cost basis of the securities purchased by the Portfolio. The Portfolio,
as a writer of an option, has no control over whether the underlying
securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Portfolio did not enter into option transactions during the period ended
March 31, 2005.
Futures contracts
The Portfolio may enter into futures contracts for the delayed sale or
delivery of securities or contracts based on financial indices at a fixed
price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the underlying
instrument or hedge other investments. In addition, there is the risk that
the Portfolio may not be able to enter into a closing transaction because of
an illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the exchange
on which they trade.
At March 31, 2005, the Portfolio held futures contracts. See the Schedule of
Investments for further details.
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the period ended March 31, 2005
resulting in security lending income of $4,551. At March 31, 2005, the
Portfolio had securities valued at $6,455,008 on loan. See Schedule of
Investments for further detail on the security positions on loan and
collateral held.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (the "Trust") are parties to a
committed line of credit facility, which enables each portfolio/fund to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of .060 of 1% on the committed amount, is
allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, the facility fee was
$1,048 for the Portfolio.
During the period ended March 31, 2005, the Portfolio had average borrowings
outstanding of $66,714 on a total of seven days and incurred $27 of interest
expense.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that a fund's Board of Trustees,
including a majority of its Trustees who are not affiliated with the fund's
investment adviser or underwriter (the "Independent Trustees") voting
separately, approve the fund's advisory agreement and the related fees on an
annual basis. The Fund is not a party to an investment advisory agreement
directly with any investment adviser and does not invest directly in portfolio
securities. Instead, the Fund invests all of its investable assets in The Boston
Company Small Cap Value Portfolio (the "Portfolio"), which is managed by The
Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the Portfolio.
The members of the Fund's Board of Trustees also serve as the Board of Trustees
of the Portfolio. In that capacity, they consider annually whether to continue
the investment advisory agreement between the Portfolio and TBCAM. In their most
recent deliberations concerning their decision to approve the continuation of
the investment advisory agreement, the Board of Trustees conducted the review
and made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from TBCAM
a broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 15, 2004 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. The entire Board then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a separate
presentation of TBCAM's profitability relative to that of several publicly
traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as information
concerning TBCAM's executive management, portfolio management, and client
service personnel and overall organizational structure, insurance coverage,
brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and TBCAM's separate account advisory
fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance (rather than the Portfolio alone), as well as "fact sheets" prepared
by TBCAM providing salient data about the Fund and Portfolio, including
Portfolio's holdings, strategies, recent market conditions and outlook, as well
as TBCAM's views concerning the issues of breakpoints in the management fee
schedule of the Portfolio and potential economies of scale; and
(v) Other Benefits: The benefits flowing to Mellon Financial Corporation
("Mellon") and its affiliates in the form of fees for transfer agency, custody,
administration and securities lending services provided to the Funds by
affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable, and they
approved the continuation of the agreement for a one-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by TBCAM. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust TBCAM, under the supervision of the Trustees, to manage the
portion of their assets invested in the Fund.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Value Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio management,
administrative, compliance and related services provided by TBCAM. The Trustees
determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to the portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and expressed
their support for this change. The Trustees reviewed the background and
experience of the Portfolio's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered the
size, education and experience of TBCAM's investment staff, technological
infrastructure and overall responsiveness to changes in market conditions.
The Board determined that TBCAM had the expertise and resources to manage the
Portfolio effectively.
Investment Performance
The Board compared the relative investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected by
TBCAM with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
The Lipper materials provided to the Board at the September 15, 2004 meeting
indicated that the Fund's performance for the 1 and 3-year periods ended July
31, 2004 was 25.83% and 13.52%. The Trustees found that these results compared
favorably with the Fund's peer group of similar funds, the average performance
of which was 22.00% and 9.42% for the same periods.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to TBCAM. The
Portfolio's contractual advisory fee was 0.80%, in the 3rd quintile of its peer
group of funds, the median fee of which was 0.82%. The Portfolio's net advisory
fee, after giving effect to fee waivers, was 0.667%, below the peer group median
net advisory fee of 0.79%. Based on the Lipper data, as well as other factors
discussed herein, the Board determined that the Portfolio's advisory fee is
reasonable relative to its peer group averages, both with and without giving
effect to fee waivers.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of TBCAM. Based on the additional scope and
complexity of the services provided and responsibilities assumed by these
advisers with respect to the Portfolio relative to these other types of clients,
the Board concluded that the fees payable under the advisory agreement were
reasonable.
The Board considered the Fund's (rather than solely the Portfolio's) expense
ratio and compared it to that of its peer group of similar funds. The Board
found that the Fund's actual net expense ratio of 1.15% (after giving effect to
expense limitations) was higher than the median net expense ratio of the peer
group of 1.117%. The Board observed, however, that most of the other funds in
the peer group were larger than the Fund.
TBCAM's Profitability
The Board considered TBCAM's profitability in managing the Portfolio and Fund
and the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon Asset
Management Company LLC ("Standish
23
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Value Fund
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Mellon") in managing the Portfolio and Fund and other funds in the Mellon
Institutional Funds family of funds. The Independent Trustees had observed that,
based on the profitability information submitted to them by TBCAM, TBCAM
incurred losses in recent years in operating many of the investment companies in
the Mellon family of funds, including the Portfolio and Fund, and achieved only
marginal profitability as to several other funds. The Trustees observed that
TBCAM had incurred losses in operating the Portfolio and the Fund in both 2002
and 2003.
Economies of Scale
While the Board recognized that economies of scale might be realized as the Fund
grows, and noted that the Fund had increased in size in recent years, they also
observed that, at approximately $103 million, it remained small relative to its
peers. The Board concluded that, considering current asset growth prospects, the
implementation of fee breakpoints or other fee reductions was not necessary at
this time. The Trustees intend to review the need for breakpoints in connection
with future investment advisory agreement approval deliberations.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Funds. Mellon affiliates provide custodial,
administrative, transfer agency and securities lending services to the Funds. In
each case, such affiliates were selected on the basis of a comparative analysis
of their capabilities and fees relative to those of unaffiliated competitors. In
addition, the Trustees, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i) the
terms of the relevant service agreement are in the best interests of Fund
shareholders; (ii) the services to be performed by the affiliate pursuant to the
agreement are required by and appropriate for the Fund; (iii) the nature and
quality of the services provided by the affiliate pursuant to the agreement are
at least equal to those provided by other, unaffiliated firms offering the same
or similar services for similar compensation; and (iv) the fees payable by the
Fund to the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for services of
the same nature and quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Fund and the
Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable and, thus, in
approving the continuation of the agreement for a one year period.
24
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None Fund: $250
c/o Decision Resources, 11/3/1986 and Chief Executive Portfolio: $785
Inc. Officer, Decision
260 Charles Street Resources, Inc.
Waltham, MA 02453
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 31 None Fund: $250
c/o Essex Street 11/3/1986 Associates (family Portfolio: $863
Associates investment trust office)
P.O. Box 181
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 31 None Fund: $250
c/o Harvard University 9/13/1986 Professor of Political Portfolio: $785
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, Mertens 31 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $785
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 Senior Vice President 31 None Fund: $0
Mellon Institutional President and Chief Operating Portfolio: $0
Asset Management and Chief Officer,
One Boston Place Executive Mellon Institutional
Boston, MA 02108 Officer Asset Management;
7/24/65 formerly Vice President
and Chief Financial
Officer, Mellon
Institutional Asset
Management
25
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations,
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mellon
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
26
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[Logo] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0944SA0305
[LOGO] Mellon
--------------------------
Mellon Institutional Funds
Semiannual Report The Boston Company Small Cap Growth Fund
(Institutional and Service Class Shares)
- --------------------------------------------------------------------------------
March 31, 2005 (Unaudited)
This report and the financial statements contained herein are submitted for the
general information of the shareholders of the Fund. This report is not
authorized for distribution to prospective investors in the Fund unless preceded
or accompanied by an effective prospectus.
Any information in this shareholder report regarding market or economic trends
or the factors influencing the Fund's historical or future performance are
statements of the opinion of Fund management as of the date of this report.
These statements should not be relied upon for any other purposes. Past
performance is no guarantee of future results, and there is no guarantee that
market forecasts discussed will be realized.
Commencing with the fiscal quarter ending December 31, 2004, the Fund files its
complete schedule of portfolio holdings with the Securities and Exchange
Commission (SEC) for the first and third quarters of each fiscal year on Form
N-Q. Forms N-Q are available on the SEC's web site at http://www.sec.gov. The
Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room
in Washington D.C. Information regarding the operation of the SEC's Public
Reference Room may be obtained by calling 1-800-SEC-0330.
To view the Fund's proxy voting guidelines and proxy voting record for the
12-month period ended June 30, 2004, visit the SEC's web site at
http://www.sec.gov. You may also call 1-800-221-4795 to request a free copy of
the proxy voting guidelines.
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Shareholder Expense Example (Unaudited)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including redemption fees, and (2) ongoing costs, including management
fees and other Fund expenses. This Example is intended to help you understand
your ongoing costs (in dollars) of investing in the Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period (October 1, 2004 to March 31, 2005).
Actual Expenses
The first line of the table below provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000.00=8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expenses
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs. Therefore, the
second line of the table is useful in comparing ongoing costs and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
Institutional Class October 1, 2004 March 31, 2005 to March 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,089.00 $6.25
Hypothetical (5% return per year
before expenses) $1,000.00 $1,018.95 $6.04
- -------------
+ Expenses are equal to the Fund's annualized expense ratio of 1.20%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period). The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
Expenses Paid
Beginning Ending During Period+
Account Value Account Value October 1, 2004
Service Class October 1, 2004 March 31, 2005 to March 31, 2005
- -----------------------------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,087.90 $7.55
Hypothetical (5% return per year
before expenses) $1,000.00 $1,017.70 $7.29
+ Expenses are equal to the Fund's annualized expense ratio of 1.45%,
multiplied by the average account value over the period, multiplied by
182/365 (to reflect the one-half year period). The Example reflects the
combined expenses of the Fund and the Portfolio in which it invests all its
assets.
1
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Portfolio Information as of March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Percentage of
Top Ten Equity Holdings* Sector Net Assets
- ------------------------------------------------------------------------------------------------------
Covance, Inc. Health Care 2.2
Respironics, Inc. Health Care 2.1
Lions Gate Entertainment Corp. Consumer Discretionary 1.9
Matria Healthcare, Inc. Health Care 1.8
Fisher Scientific International Health Care 1.8
Oil States International, Inc. Energy 1.7
Consol Energy, Inc. Basic Materials 1.6
FMC Technologies, Inc. Energy 1.6
Waste Connections Industrials 1.4
Peet's Coffee & Tea, Inc. Consumer Staples 1.4
----
17.5
* Excludes short-term investments and investments of cash collateral.
Percentage of
Economic Sector Allocation Net Assets
- -------------------------------------------------------------
Basic Materials 4.0
Consumer Discretionary 17.5
Consumer Staples 4.1
Energy 7.3
Financial 7.1
Healthcare 20.3
Industrial 14.7
Technology 18.4
Utilities 2.6
Short-term and Net Other Assets 4.0
-----
100.0
The Boston Company Small Cap Growth Fund invests all of its investable assets in
an interest of the Boston Company Small Cap Growth Portfolio (See Note 1 of the
Fund's Notes to Financial Statements). The Portfolio is actively managed.
Current holdings may be different than those presented above.
2
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in The Boston Company Small Cap
Growth Portfolio ("Portfolio"), at value (Note 1A) $ 34,422,429
Receivable for Fund shares sold 200
Prepaid expenses 16,395
------------
Total assets 34,439,024
Liabilities
Payable for Fund shares redeemed $238,119
Accrued service fees--Service Class (Note 3) 9,130
Accrued Trustees' fees (Note 2) 2,049
Accrued transfer agent fees (Note 2) 1,651
Other accrued expenses and liabilities 26,498
Total liabilities --------
277,447
------------
Net Assets $ 34,161,577
============
Net Assets consist of:
Paid-in capital $ 47,965,052
Accumulated net realized loss (17,985,657)
Accumulated net investment loss (114,754)
Net unrealized appreciation 4,296,936
------------
Total Net Assets $ 34,161,577
============
Net Assets Attributable to:
Institutional Class $ 19,200,974
============
Service Class $ 14,960,603
============
Shares of beneficial interest outstanding
Institutional Class 464,555
============
Service Class 366,227
============
Net Asset Value, offering and redemption price per share
(Net Assets/Shares outstanding)
Institutional Class $ 41.33
============
Service Class $ 40.85
============
The accompanying notes are an integral part of the financial statements.
3
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income allocated from Portfolio $ 88,399
Interest income allocated from Portfolio 22,417
Expenses allocated from Portfolio (201,192)
-----------
Net investment loss allocated from Portfolio (90,376)
Expenses
Professional fees $ 16,936
Registration fees 16,948
Service Fees--Service Class (Note 3) 18,611
Transfer agent fees--Institutional Class (Note 2) 5,371
Transfer agent fees--Service Class (Note 2) 1,435
Trustees' fees (Note 2) 994
Insurance expense 379
Miscellaneous expenses 12,321
----------
Total expenses 72,995
Deduct:
Reimbursement of Fund operating expenses--Institutional Class (Note 2) (29,112)
Reimbursement of Fund operating expenses--Service Class (Note 2) (19,505)
----------
Total expense deductions (48,617)
----------
Net expenses 24,378
-----------
Net investment loss (114,754)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) allocated from Portfolio on:
Investment securities 2,444,230
Futures contracts 62,413
----------
Net realized gain 2,506,643
Change in unrealized appreciation (depreciation)
on investments allocated from Portfolio on:
Investment securities 507,984
Futures contracts (22,030)
----------
Net change in net unrealized appreciation (depreciation) 485,954
-----------
Net realized and unrealized gain (loss) on investments 2,992,597
-----------
Net Increase in Net Assets from Operations $ 2,877,843
===========
The accompanying notes are an integral part of the financial statements.
4
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment loss $ (114,754) $ (333,479)
Net realized gains 2,506,643 4,987,476
Net change in net unrealized appreciation 485,954 378,758
----------- -----------
Net increase in net assets from operations 2,877,843 5,032,755
----------- -----------
Fund Share Transactions (Note 5)
Net proceeds from sale of shares
Institutional Class 891,503 1,679,964
Service Class 1,898,195 7,576,844
Redemption fees credited to capital
Institutional Class 199 51
Cost of shares redeemed
Institutional Class (1,571,597) (8,131,829)
Service Class (2,668,124) (3,512,445)
----------- -----------
Net decrease in net assets from Fund share transactions (1,449,824) (2,387,415)
----------- -----------
Total Increase in Net Assets 1,428,019 2,645,340
Net Assets
At beginning of period 32,733,558 30,088,218
----------- -----------
At end of period (including undistributed
net investment income (loss) of $(114,754) and $0) $34,161,577 $32,733,558
=========== ===========
The accompanying notes are an integral part of the financial statements.
5
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Financial Highlights--Institutional Class
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2005 -----------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Net Asset Value, Beginning of Period $ 37.95 $ 32.41 $ 24.78 $ 29.28 $ 60.87 $ 38.28
------- ------- ------- ------- ------- -------
From Operations:
Net investment income* (1) (0.12) (0.33) (0.11) (0.16) (0.19) (0.43)
Net realized and unrealized gains (loss) on
investments 3.50 5.87(3) 7.74(3) (4.34)(3) (25.66) 26.82
------- ------- ------- ------- ------- -------
Total from operations 3.38 5.54 7.63 (4.50) (25.85) 26.39
------- ------- ------- ------- ------- -------
Less Distributions to Shareholders:
From net realized gains on investments -- -- -- -- (5.74) (3.80)
------- ------- ------- ------- ------- -------
Total distributions to shareholders -- -- -- -- (5.74) (3.80)
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 41.33 $ 37.95 $ 32.41 $ 24.78 $ 29.28 $ 60.87
======= ======= ======= ======= ======= =======
Total Return + 8.90% 17.09% 30.79% (15.37)% (45.36)% 71.60%
Ratios/Supplemental data:
Expenses (to average daily net assets) (2) 1.20%++ 1.18% 1.00% 1.00% 1.00% 0.98%
Net Investment Income (to average daily net (0.56)%++ (0.87)% (0.42)% (0.52)% (0.48)% (0.70)%
assets)
Net Assets, End of Period (000's omitted) $19,201 $18,274 $21,168 $18,780 $31,365 $82,840
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income per share (1) $(0.18) $(0.40) $(0.30) $ (0.25) $ (0.28) N/A
Ratios (to average daily net assets):
Expenses (2) 1.50%++ 1.37% 1.66% 1.29% 1.20% N/A
Net investment income (0.86)%++ (1.06)% (1.08)% (0.81)% (0.68)% N/A
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) Amounts include litigation proceeds received by the Fund of $0.06 for the
year ended September 30, 2004, less than $0.01 for the year ended September
30, 2003, and $0.01 for the year ended September 30, 2002.
+ Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
++ Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
6
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Financial Highlights--Service Class
- --------------------------------------------------------------------------------
For the Period
For the May 8, 2000
Six Months Ended Year Ended September 30, (commencement
March 31, 2005 --------------------------------------------- of operations) to
(Unaudited) 2004 2003 2002 2001(a) September 30, 2000
----------- ------- ------- ------- ------- ------------------
Net Asset Value, Beginning of the year $ 37.55 $ 32.16 $24.65 $29.19 $60.83 $59.04
------- ------- ------ ------ ------ ------
From Investment Operations:
Net investment income* (1) (0.16) (0.41) (0.19) (0.23) (0.29) (0.21)
Net realized and unrealized gains
(loss) on investments 3.46 5.80(3) 7.70(3) (4.31)(3) (25.63) 2.00
------- ------- ------ ------ ------ ------
Total from investment operations 3.30 5.39 7.51 (4.54) (25.92) 1.79
------- ------- ------ ------ ------ ------
Less Distributions to Shareholders:
From net realized gains on investments -- -- -- -- (5.72) --
------- ------- ------ ------ ------ ------
Total distributions to shareholders -- -- -- -- (5.72) --
------- ------- ------ ------ ------ ------
Net Asset Value, End of Period $ 40.85 $ 37.55 $32.16 $24.65 $29.19 $60.83
======= ======= ====== ====== ====== ======
Total Return + 8.79% 16.76% 30.47% (15.55)% (45.49)% 3.03%
Ratios/Supplemental data:
Expenses (to average daily net assets) (2) 1.45%++ 1.43% 1.25% 1.25% 1.25% 1.23%++
Net Investment Income (Loss)
(to average daily net assets) (0.80)%++ (1.12)% (0.68)% (0.74)% (0.75)% (0.84)%++
Net Assets, End of Period (000's $14,961 $14,460 $8,921 $5,718 $6,156 $8,031
omitted)
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Net investment income (loss) per share (1) $(0.22) $(0.51) $(0.40) $(0.35) $(0.41) $(0.24)
Ratios (to average daily net assets):
Expenses (2) 1.71%++ 1.70% 2.00% 1.66% 1.55% 1.36%++
Net investment income (1.06)%++ (1.38)% (1.43)% (1.15)% (1.05)% (0.97)%++
(1) Calculated based on average shares outstanding.
(2) Includes the Fund's share of the Portfolio's allocated expenses.
(3) Amounts include litigation proceeds received by the Fund of $0.06 for the
year ended September 30, 2004, less than $0.01 for the year ended September
30, 2003, and $0.01 for the year ended September 30, 2002.
+ Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
++ Calculated on an annualized basis.
The accompanying notes are an integral part of the financial statements.
7
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Investment Trust (the "Trust") is organized as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end, management investment company. The
Boston Company Small Cap Growth Fund (the "Fund") is a separate diversified
investment series of the Trust.
The objective of the Fund is to achieve long-term growth of capital. The
Fund invests all of its investable assets in an interest in The Boston
Company Small Cap Growth Portfolio (the "Portfolio"), a subtrust of Mellon
Institutional Funds Master Portfolio (the "Portfolio Trust"), which is
organized as a New York trust, and has the same investment objective as the
Fund. The Portfolio seeks to achieve its investment objective by investing,
under normal circumstances, at least 80% of its net assets in equity
securities of small cap U.S. companies. The value of the Fund's investment
in the Portfolio reflects the Fund's proportionate interest in the net
assets of the Portfolio. As of March 31, 2005 the Fund owned 100% of the
Portfolio assets. The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio are
included elsewhere in this report and should be read in conjunction with the
Fund's financial statements.
The Fund currently offers two classes of shares: Institutional Class and
Service Class. Expenses of the Fund are borne pro-rata by the holders of
each class of shares, except for transfer agent fees and an account service
fee of 0.25% of the average daily net assets of the Service Class of shares.
Each class votes separately as a class only with respect to its own
distribution plan (Service Class only) or other matters that relate only to
that class. Shares of each class would receive their pro-rata share of the
net assets of the Fund (after satisfaction of any class-specific expenses)
if the Fund were liquidated. In addition, the Trustees declare separate
dividends on each class of shares.
Shares of the Service Class may be purchased by entities ("Account
Administrators") that provide omnibus accounting services for groups of
individuals who beneficially own Service Class shares ("Omnibus Accounts").
Omnibus Accounts include pension and retirement plans (such as 401(k) plans,
457 plans and 403(b) plans), and programs through which personal and or
account maintenance services are provided to groups of individuals whether
or not such individuals invest on a tax-deferred basis. Individual investors
may only purchase Service Class shares through their Omnibus Account
Administrators.
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
A. Investment security valuations
The Fund records its investment in the Portfolio at value. The method by
which the Portfolio values its securities is discussed in Note 1A of the
Portfolio's Notes to Financial Statements, which are included elsewhere in
this report.
B. Securities transactions and income
Investment transactions are recorded as of the trade date. The Fund's net
investment income consists of the Fund's pro rata share of the net
investment income of the Portfolio, less all actual and accrued expenses of
the Fund determined in accordance with accounting principles generally
accepted in the United States of America. All realized and unrealized gains
and losses of the Portfolio are allocated pro rata among the investors in
the Portfolio.
C. Distributions to shareholders
Distributions to shareholders are recorded on ex-dividend date. The Fund's
distributions 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 distributions, 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 reclassifications, are primarily due to differing treatments for
losses deferred due to wash sales, capital loss carryovers and realized and
unrealized gains or losses on futures.
Permanent book and tax basis differences will result in reclassifications to
undistributed net investment income, accumulated net realized gain (loss)
and paid in capital. Undistributed net investment income and accumulated
undistributed net realized gain (loss) on investments may include temporary
book and tax basis differences which will reverse in a subsequent period.
Any taxable income or gain remaining at fiscal year end is distributed in
the following year. The calculation of net investment income per share in
the financial highlights table excludes these reclassifications.
8
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
D. Allocation of operating activity
The majority of expenses of the Trust are directly identifiable to an
individual fund. Expenses which are not readily identifiable to a specific
fund are allocated taking into consideration, among other things, the nature
and type of expense and the relative size of the funds. Investment income,
common expenses and realized and unrealized gains and losses are allocated
among the share classes of the Fund based on the relative net assets of each
class. Transfer agent fees, which are directly attributable to a class of
shares, are charged to that class' operations. Service fees, which are
directly attributable to the Service Class shares, are charged to the
Service Class operations.
E. Commitments and contingencies
In the normal course of business, the Fund may enter into contracts and
agreements that contain a variety of representations and warranties, which
provide general indemnifications. The maximum exposure to the Fund under
these arrangements is unknown, as this would involve future claims that may
be made against the Fund that have not yet occurred. However, based on
experience, the Fund expects the risks of loss to be remote.
(2) Investment Advisory Fee and Other Transactions With Affiliates:
The Fund does not directly pay any investment advisory fees, but indirectly
bears its pro rata share of the compensation paid by the Portfolio to The
Boston Company Asset Management, LLC ("TBCAM") for such services. See Note 2
of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. TBCAM voluntarily agreed to limit the
Institutional Class total annual operating expenses (excluding brokerage
commission, taxes and extraordinary expense) to 1.20% of the Institutional
Class' average daily net assets and the Service Class total annual operating
expenses (excluding brokerage commissions, taxes and extraordinary
expenses), so that the Service Class' total annual operating expenses do not
exceed the total operating expenses of the Institutional Class (net of any
expense limitation) for the comparable period plus 0.25% (the maximum
Service Fee). Pursuant to this agreement, for the period ended March 31,
2004, TBCAM reimbursed the Institutional Class $29,112 and the Service Class
$19,505 for class-specific and Fund operating expenses. This agreement is
voluntary and temporary and may be discontinued or revised by TBCAM at any
time.
The Fund entered into an agreement with Dreyfus Transfer, Inc., a wholly
owned subsidiary of The Dreyfus Corporation, a wholly owned subsidiary of
Mellon Financial Corporation and an affiliate of TBCAM, to provide personnel
and facilities to perform transfer agency and certain shareholder services
for the Fund. For these services the Fund pays Dreyfus Transfer, Inc. a
fixed fee plus per account and transaction based fees, as well as,
out-of-pocket expenses. Pursuant to this agreement the Fund paid $13,950
during the period ended March 31, 2004.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Fund for serving as an officer or Trustee
of the Trust. The Trust pays each Trustee who is not a director, officer or
employee of TBCAM or its affiliates an annual fee and a per meeting fee as
well as reimbursement for travel and out of pocket expenses. In addition,
the Trust pays the legal fees for the independent counsel of the Trustees.
(3) Service Fee:
Pursuant to a service plan, the Service Class pays a service fee at an
aggregate annual rate of up to 0.25% of the class' average daily net assets.
The service fee is payable for the benefit of participants in the omnibus
accounts that are shareholders in the Service Class and is intended to be
compensation to Account Administrators for providing personal services
and/or account maintenance services to participants in omnibus accounts that
are the beneficial owners of Service Class shares.
(4) Investment Transactions:
Increases and decreases in the Fund's investment in the Portfolio for the
period ended March 31, 2004 aggregated $2,793,108 and
$4,042,299,respectively.
9
Mellon Institutional Funds Investment Trust
The Boston Company Small Cap Growth Fund
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(5) Shares of Beneficial Interest:
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest having a par value of
one cent per share. Transactions in Fund shares were as follows:
For the For the
Six Months Ended Year Ended
Institutional Class: March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 21,099 43,938
Shares redeemed (38,086) (215,460)
------- --------
Net decrease (16,987) (171,522)
======= ========
For the For the
Six Months Ended Year Ended
Service Class: March 31, 2005 September 30, 2004
---------------- ------------------
Shares sold 46,308 202,065
Shares redeemed (65,127) (94,424)
------- -------
Net increase (decrease) (18,819) 107,641
======= =======
At March 31, 2005, one shareholder of record held approximately 13% of the
total outstanding shares of the Institutional Class and one shareholder held
of record approximately 100% of the total outstanding shares of the Service
Class. Investment activity of this shareholder could have a material impact
on the Fund.
The Fund imposes a redemption fee of 2% of the net asset value of the
shares, with certain exceptions, which are redeemed or exchanged less than
90 days from the day of their purchase. The redemption fee is paid directly
to the Fund, and is designed to offset brokerage commissions, market impact,
and other costs associated with short-term trading. The fee does not apply
to shares that were acquired through reinvestment of distributions. For the
period ended March 31, 2005, the Fund received $199 in redemption fees.
(6) Federal taxes
As a regulated investment company qualified under Subchapter M of the
Internal Revenue Code, the Fund is not subject to income taxes to the extent
that it distributes substantially all of its taxable income for its fiscal
period.
See corresponding master portfolio for tax basis unrealized
appreciation/(depreciation) information.
10
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
UNAFFILIATED INVESTMENTS--105.3%
EQUITIES--96.0%
Basic Materials--4.0%
Airgas, Inc. 14,380 $ 343,538
Arch Coal, Inc. (a) 6,200 266,662
Consol Energy, Inc. 11,440 537,909
Olin Corp. 10,890 242,847
----------
1,390,956
----------
Consumer Discretionary--17.5%
Applebee's International, Inc. 9,400 259,064
Cache, Inc.* 24,900 337,395
California Pizza Kitchen, Inc.* 10,180 238,619
Casual Male Retail Group, Inc.* 24,500 159,005
Coinstar, Inc.* 18,300 387,960
Emmis Communications Corp. (a)* 20,300 390,166
Hot Topic, Inc.* 4,700 102,695
Hughes Supply, Inc. 6,000 178,500
Imax Corp.* 18,000 166,320
Jarden Corp.* 6,570 301,432
Jos A Bank Clothiers, Inc. (a)* 11,830 346,619
Lions Gate Entertainment Corp.* 56,700 626,535
Marvel Enterprises, Inc.* 9,900 198,000
Nu Skin Enterprises, Inc. 11,700 263,367
Pacific Sunware of California* 6,960 194,741
Petco Animal Supplies, Inc.* 9,850 362,579
Playboy Enterprises, Inc., Class B (a)* 21,900 282,510
Provide Commerce, Inc.* 8,580 247,790
Rare Hospitality International, Inc.* 8,350 257,848
Speedway Motorsports, Inc. (a) 4,440 158,508
Tractor Supply Co.* 4,240 185,076
Wabtec Corp. 17,990 368,615
----------
6,013,344
----------
Consumer Staples--4.1%
Arden Group, Inc. 472 33,503
J & J Snack Food Corp. 3,940 184,510
Peet's Coffee & Tea, Inc.* 19,000 468,350
Performance Food Group Co.* 15,940 441,219
Playtex Products, Inc.* 32,400 291,600
----------
1,419,182
----------
Energy--7.3%
Dril-Quip, Inc.* 4,960 152,470
FMC Technologies, Inc.* 15,690 520,594
Global Industries, Ltd.* 22,000 206,800
Newpark Resources, Inc.* 30,500 179,645
The accompanying notes are an integral part of the financial statements.
11
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Energy (continued)
Oil States International, Inc.* 27,200 $ 558,960
Patterson-UTI Energy, Inc. 7,020 175,640
Penn Virginia Corp. 7,220 331,398
Pioneer Drilling Co.* 7,000 96,390
Tidewater, Inc. 7,200 279,792
----------
2,501,689
----------
Financial--7.1%
Affiliated Managers Group (a)* 3,250 201,598
Cathay General Bancorp 7,200 226,800
Center Financial Corp. 8,442 148,832
City National Corp., Class A 2,700 188,514
Cullen/Frost Bankers, Inc. 4,700 212,205
East West Bancorp, Inc. 6,800 251,056
First Community Bancorp, Inc., Class A 3,900 172,770
First Midwest Bancorp, Inc. 8,100 263,088
Investors Financial Services Corp. 3,500 171,185
Mercantile Bank Corp. 4,635 189,479
Preferred Bank, Los Angeles 350 13,965
Southwest Bancorp. of Texas, Inc. 9,600 176,160
Triad Guaranty, Inc.* 2,900 152,569
Vineyard National Bancorp Co. (a) 3,400 93,126
----------
2,461,347
----------
Health Care--20.3%
Able Laboratories, Inc.* 8,000 187,680
Align Technology, Inc.* 23,300 145,392
Animas Corp.* 15,000 303,150
Applera Corp.-Celera Genomics Group* 9,800 100,450
Bone Care International, Inc.* 4,200 108,948
Charles River Laboratories* 4,408 207,352
Community Health Systems, Inc.* 5,900 205,969
Conceptus, Inc.* 15,000 117,000
Connetics Corp.* 10,900 275,661
Cooper Cos, Inc. 5,400 393,660
Covance, Inc.* 15,500 737,955
Coventry Health Care, Inc.* 2,250 153,315
Fisher Scientific International (a) 10,500 597,660
ICOS Corp.* 5,800 130,268
Immunogen, Inc.* 17,900 93,617
IRIS International, Inc.* 13,200 148,236
Lifepoint Hospitals, Inc.* 5,200 227,968
Matria Healthcare, Inc.* 19,500 598,845
Maxygen, Inc.* 10,130 86,915
Medicines Co. (a)* 6,350 143,891
Natus Medical, Inc.* 16,700 139,612
The accompanying notes are an integral part of the financial statements.
12
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Health Care (continued)
PSS World Medical, Inc.* 29,300 $ 333,141
Resmed, Inc. (a)* 1,800 101,520
Respironics, Inc.* 12,000 699,240
Sybron Dental Specialties, Inc.* 5,700 204,630
Triad Hospitals* 4,150 207,915
VCA Antech, Inc.* 15,200 307,496
Zoll Medical Corp.* 1,800 40,554
----------
6,998,040
----------
Industrial--14.7%
Bucyrus International, Inc., Class A 5,800 226,548
Cuno, Inc.* 4,840 248,728
Chicago Bridge & Iron Co. N.V 4,410 194,172
Educate, Inc.* 20,200 280,174
Education Management Corp.* 8,000 223,600
Forward Air Corp. 6,150 261,867
Healthcare Services Group 6,200 150,350
Jack Henry & Associates, Inc. 9,400 169,106
Huron Consulting Group Inc.* 17,000 352,070
Interline Brands, Inc.* 13,600 259,896
Laureate Education, Inc.* 7,900 338,041
LECG Corp.* 17,900 350,840
MSC Industrial Direct Co., Inc. 11,680 356,941
Navigant Consulting, Inc.* 12,900 351,267
Pacer International, Inc.* 10,600 253,234
Stericycle, Inc.* 5,000 221,000
Wabash National Corp. 6,810 166,164
Waste Connections (a)* 13,550 470,863
UTI Worldwide, Inc. 2,450 170,153
----------
5,045,014
----------
Technology--18.4%
Akamai Technologies, Inc. (a)* 25,400 323,342
Anteon International Corp.* 10,400 404,872
Borland Software Corp.* 37,300 302,876
Cypress Semiconductor Corp.* 13,600 171,360
Exar Corp.* 15,700 210,380
Extreme Networks, Inc.* 45,400 267,406
Fastclick, Inc. 1,910 22,900
Foundry Networks, Inc.* 25,250 249,975
Infocrossing, Inc.* 16,300 258,192
InfoSpace, Inc.* 9,500 387,885
Ingram Micro, Inc., Class A* 25,200 420,084
Internet Security Systems* 14,500 265,350
Lam Research Corp.* 6,500 187,590
Macromedia, Inc.* 5,200 174,200
The accompanying notes are an integral part of the financial statements.
13
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Schedule of Investments--March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Value
Security Shares (Note 1A)
- ---------------------------------------------------------------------------------------------------------------------------------
Technology (continued)
ManTech International Corp., Class A* 8,800 $ 203,016
Mcafee, Inc.* 10,400 234,624
Mentor Graphics Corp.* 25,600 350,720
PMC-Sierra, Inc.* 34,000 299,200
PortalPlayer, Inc. (a)* 7,360 168,029
Progress Software Corp.* 15,300 401,166
Silicon Laboratories, Inc.* 5,100 151,521
SS&C Technologies, Inc. 11,100 253,080
Varian Semiconductor Equipment Associates, Inc.* 7,300 277,473
Verisign, Inc.* 11,900 341,530
------------
6,326,771
------------
Utilities--2.6%
AGL Resources, Inc. 12,910 450,946
Atmos Energy Corp. 9,600 259,200
Black Hills Corp. 5,500 181,885
------------
892,031
------------
TOTAL EQUITIES (Cost $28,731,162) 33,048,374
------------
SHORT-TERM INVESTMENTS--0.6% Rate Maturity Par Value
------ --------- ---------
U.S. Government--0.6%
U.S. Treasury Bill + (Cost $188,905) 2.735% 6/16/2005 $190,000 188,918
------------
INVESTMENT OF CASH COLLATERAL--23.1% Shares
---------
BlackRock Cash Strategies L.L.C (Cost $2,992,590) 2,992,590 2,992,590
------------
TOTAL UNAFFILIATED INVESTMENTS (Cost $31,912,657) 36,229,882
------------
AFFILIATED INVESTMENTS--4.7%
Dreyfus Institutional Preferred Plus ++ (Cost $1,629,973) 1,629,973 1,629,973
------------
TOTAL INVESTMENTS--110.0% (Cost $33,542,630) 37,859,855
LIABILITIES IN EXCESS OF OTHER ASSETS--(10.0%) (3,437,426)
------------
NET ASSETS--100% $ 34,422,429
============
Notes to Schedule of Investments:
(a) Security, or a portion of thereof, was on loan at 3/31/05.
* Non-income producing security
+ Denotes all or part of security segregated as collateral.
At March 31, 2005 the Portfolio held the following futures contracts:
Underlying Face Unrealized
Contract Position Expiration Date Amount at Value (Loss)
- -------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (3 Contracts) Long 6/16/2005 $947,125 $(20,289)
The accompanying notes are an integral part of the financial statements.
14
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Assets and Liabilities
March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Assets
Investment in securities, at value (Note 1A) (including securities on loan,
valued at $2.893,052 (Note 6))
Unaffiliated investments (cost $31,912,657) $36,229,882
Affiliated investment (Note 1E) (cost $1,629,973) 1,629,973
Cash 198
Receivable for investments sold 327,977
Interest and dividends receivable 10,263
Receivable for variation margin on open financial futures contracts (Note 5) 2,475
Prepaid expenses 4,256
-----------
Total assets 38,205,024
Liabilities
Collateral for securities on loan (Note 6) $2,992,590
Payable for investments purchased 765,711
Accrued accounting, administration and custody fees (Note 2) 12,806
Accrued Trustees' fees and expenses (Note 2) 1,601
Other accrued expenses and liabilities 9,887
----------
Total liabilities 3,782,595
-----------
Net Assets (applicable to investors' beneficial interest) $34,422,429
===========
The accompanying notes are an integral part of the financial statements.
15
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statement of Operations
For the Six Months Ended March 31, 2005 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Note 1B)
Dividend income (net of foreign withholding taxes of $242) $ 88,399
Interest income 15,921
Securities lending income (Note 6) 7,296
-----------
Total investment Income 110,816
Expenses
Investment advisory fee (Note 2) $ 138,174
Accounting, administration and custody fees 41,885
Professional fees 11,619
Trustees' fees and expenses (Note 2) 3,722
Insurance expense 3,414
Miscellaneous expenses 2,378
----------
Total expenses 201,192
-----------
Net investment loss (90,376)
-----------
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investment securities 2,444,230
Futures contracts 62,413
----------
Net realized gain (loss) 2,506,643
Change in unrealized appreciation (depreciation) on:
Investment securities 507,984
Futures contracts (22,030)
----------
Net change in net unrealized appreciation (depreciation) 485,954
-----------
Net realized and unrealized gain (loss) 2,992,597
-----------
Net Increase (Decrease) in Net Assets from Operations $ 2,902,221
===========
The accompanying notes are an integral part of the financial statements.
16
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
For the
Six Months Ended For the
March 31, 2005 Year Ended
(Unaudited) September 30, 2004
---------------- ------------------
Increase (Decrease) in Net Assets:
From Operations
Net investment loss $ (90,376) $ (288,951)
Net realized gains 2,506,643 4,987,476
Net change in net unrealized appreciation 485,954 378,655
----------- -----------
Net increase in net assets from operations 2,902,221 5,077,180
----------- -----------
Capital Transactions
Contributions 2,793,108 9,465,370
Withdrawals (4,042,299) (11,682,896)
----------- -----------
Net increase (decrease) in net assets from capital transactions (1,249,191) (2,217,526)
----------- -----------
Total Increase in Net Assets 1,653,030 2,859,654
Net Assets
At beginning of period 32,769,399 29,909,745
----------- -----------
At end of period $34,422,429 $32,769,399
=========== ===========
The accompanying notes are an integral part of the financial statements.
17
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
For the
Six Months Ended Year Ended September 30,
March 31, 2005 -----------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
----------- ------- ------- ------- ------- -------
Total Return+ 8.94% 17.12% 30.79% (15.37)% (45.36)% 71.67%
Ratios/Supplemental data:
Expenses (to average daily net assets)* 1.16%++ 1.15% 1.00% 1.00% 1.00% 0.91%
Net Investment Income (loss)
(to average daily net assets)* (0.52)%++ (0.83)% (0.42)% (0.51)% (0.49)% (0.63)%
Portfolio Turnover 78%+++ 153% 261% 239% 191% 305%
Net Assets, End of Period (000's omitted) $34,422 $32,769 $29,910 $24,500 $37,590 $91,114
- --------------
* For the periods indicated, the investment advisor voluntarily agreed not to
impose a portion of its its investment advisory fee and/or reimbursed the
Fund for all or a portion of its operating expenses. If this voluntary
action had not been taken, the investment income per share and the ratios
would have been:
Ratios (to average daily net assets):
Expenses NA 1.18% 1.28% 1.18% 1.08% N/A
Net investment income (loss) NA (0.86)% (0.70)% (0.69)% (0.57)% N/A
+ Total return would have been lower in the absence of expense waivers.
Returns for periods of less than one year have not been annualized.
++ Calculated on an annualized basis.
+++ Not annualized.
The accompanying notes are an integral part of the financial statements.
18
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies:
Mellon Institutional Funds Master Portfolio (the "Portfolio Trust") was
organized as a master trust fund under the laws of the State of New York on
January 18, 1996 and is registered under the Investment Company Act of 1940,
as amended, as an open-end, management investment company. The Boston
Company Small Cap Growth Portfolio (the "Portfolio") is a separate
diversified investment series of the Portfolio Trust.
The objective of the Portfolio is to achieve long-term growth of capital.
The Portfolio seeks to achieve its objective by investing, under normal
circumstances, at least 80% of its net assets in equity securities of small
cap U.S. companies.
At March 31, 2005, there was one Fund, The Boston Company Small Cap Growth
Fund (the "Fund") invested in the Portfolio. The value of the Fund's
investment in the Portfolio reflects the Fund's proportionate interest in
the net assets of the Portfolio. The Fund's proportionate interest at March
31, 2005 was 100%.
The following is a summary of significant accounting policies followed by
the Portfolio in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts and
disclosures in the financial statements. Actual results could differ from
those estimates.
A. Investment security valuations
Securities for which quotations are readily available are valued at the last
sale price, or if no sale price, at the closing bid price, or the NASDAQ
official close if applicable, in the principal market in which such
securities are normally traded. Securities (including illiquid securities)
for which quotations are not readily available are valued at their fair
value as determined in good faith under consistently applied procedures
under the general supervision of the Trustees.
Short-term instruments with less than sixty-one days remaining to maturity
are valued at amortized cost, which approximates market value. If the
Portfolio acquires a short-term instrument with more than sixty days
remaining to its maturity, it is valued at current market value until the
sixtieth day prior to maturity and will then be valued at amortized value
based upon the value on such date unless the Trustees determine during such
sixty-day period that amortized value does not represent fair value.
B. Securities transactions and income
Securities transactions are recorded as of the trade date. Interest income
is determined on the basis of interest accrued, adjusted for accretion of
discount or amortization of premium using the yield-to-maturity method on
long-term debt securities. Dividend income is recorded on the ex-dividend
date. Realized gains and losses from securities sold are recorded on the
identified cost basis.
C. Income taxes
The Portfolio is treated as a disregarded entity 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 the Portfolio's
only investor 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 investor to satisfy them. The Portfolio allocates at
least annually its 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.
E. Affiliated issuers
Affiliated issuers represent issuers in which the Portfolio held investments
in other investment companies advised by The Boston Company Asset
Management, LLC (TBCAM), a wholly-owned subsidiary of Mellon Financial
Corporation, or its affiliates.
19
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
(2) Investment Advisory Fee and Other Transactions with Affiliates:
The investment advisory fee paid to TBCAM, a wholly-owned subsidiary of
Mellon Financial Corporation, for overall investment advisory and
administrative services is paid monthly at the annual rate of 0.80% of the
Portfolio's average daily net assets.
The Portfolio has contracted Mellon Bank, N.A. ("Mellon Bank"), a wholly
owned subsidiary of Mellon Financial Corporation and an affiliate of TBCAM,
to provide custody, fund administration and fund accounting services for the
Portfolio. For these services the Portfolio pays Mellon Bank a fixed fee
plus fees that are asset and transaction based, as well as, out-of-pocket
expenses. Pursuant to this agreement the Portfolio paid $42,278 during the
period ended March 31, 2005.
The Portfolio entered into an agreement with Mellon Bank a wholly owned
subsidiary of Mellon Financial Corporation and an affiliate of TBCAM to
perform certain securities lending activities and to act as the Portfolio's
lending agent. Pursuant to this agreement the Mellon Bank receives an agreed
upon percentage of the net lending revenues. This compensation is a standard
form of compensation received by securities lending agents with respect to
non-affiliated entities. See Note 6 for further details.
No director, officer or employee of TBCAM or its affiliates receives any
compensation from the Trust or the Portfolio for serving as an officer or
Trustee of the Trust. The Portfolio Trust pays each Trustee who is not a
director, officer or employee of TBCAM or its affiliates an annual fee and a
per meeting fee as well as reimbursement for travel and out of pocket
expenses. In addition, the Portfolio Trust pays the legal fees for the
independent counsel of the Trustees.
(3) Purchases and Sales of Investments:
Purchases and proceeds from sales of investments, other than short-term
obligations, for the period ended March 31, 2005, were $26,152,256 and
$27,262,243, respectively. For the period ended March 31, 2005, the
Portfolio did not purchase or sell any long-term U.S. Government securities.
(4) Federal Taxes:
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at March 31, 2005, as computed on a federal
income tax basis, were as follows:
Aggregate cost $30,550,040
===========
Gross unrealized appreciation $ 5,014,013
Gross unrealized depreciation (696,788)
-----------
Net unrealized appreciation $ 4,317,225
===========
(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
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
20
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Notes to Financial Statements (Unaudited)
- --------------------------------------------------------------------------------
losses on purchased options are included in realized gains and losses on
investment securities, except purchased options on foreign currency which
are included in realized gains and losses on foreign currency transactions.
If a put option written by the Portfolio is exercised, the premium reduces
the cost basis of the securities purchased by the Portfolio. The Portfolio,
as a writer of an option, has no control over whether the underlying
securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the security underlying
the written option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over-the-counter are valued using
prices supplied by the dealers.
The Portfolio did not enter into option transactions during the period ended
March 31, 2005.
Futures contracts
The Portfolio may enter into financial futures contracts for the delayed
sale or delivery of securities or contracts based on financial indices at a
fixed price on a future date. Pursuant to margin requirements the Portfolio
deposits either cash or securities in an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received
by the Portfolio each day, depending on the daily fluctuations in the value
of the underlying security, and are recorded for financial statement
purposes as unrealized gains or losses by the Portfolio. There are several
risks in connection with the use of futures contracts as a hedging device.
The change in value of futures contracts primarily corresponds with the
value of their underlying instruments or indices, which may not correlate
with changes in the value of hedged investments. Buying futures tends to
increase the Portfolio's exposure to the underlying instrument, while
selling futures tends to decrease the Portfolio's exposure to the underlying
instrument or hedge other investments. In addition, there is the risk that
the Portfolio may not be able to enter into a closing transaction because of
an illiquid secondary market. Losses may arise if there is an illiquid
secondary market or if the counterparty does not perform under the
contract's terms. The Portfolio enters into financial futures transactions
primarily to seek to manage its exposure to certain markets and to changes
in securities prices and foreign currencies. Gains and losses are realized
upon the expiration or closing of the futures contracts. Futures contracts
are valued at the quoted daily settlement prices established by the exchange
on which they trade.
At March 31, 2005, the Portfolio held financial futures contracts. See
Schedule of Investments for further detail.
(6) Security Lending:
The Portfolio may lend its securities to financial institutions which the
Portfolio deems to be creditworthy. The loans are collateralized at all
times with cash or securities with a market value at least equal to the
market value of the securities on loan. The market value of securities
loaned is determined daily and any additional required collateral is
allocated to the Portfolio on the next business day. For the duration of a
loan, the Portfolio receives the equivalent of the interest or dividends
paid by the issuer on the securities loaned and also receives compensation
from the investment of the collateral. As with other extensions of credit,
the Portfolio bears the risk of delay in recovery or even loss of rights in
its securities on loan should the borrower of the securities fail
financially or default on its obligations to the Portfolio. In the event of
borrower default, the Portfolio generally has the right to use the
collateral to offset losses incurred. The Portfolio may incur a loss in the
event it was delayed or prevented from exercising its rights to dispose of
the collateral. The Portfolio also bears the risk in the event that the
interest and/or dividends received on invested collateral is not sufficient
to meet the Portfolio's obligations due on the loans.
The Portfolio loaned securities during the period ended March 31, 2005
resulting in security lending income of $7,296. At March 31, 2005, the
Portfolio had securities valued at $2,893,052 on loan. See Schedule of
Investments for further detail on the security positions on loan and
collateral held.
(7) Line of Credit:
The Portfolio, and other subtrusts in the Portfolio Trust and funds in the
Mellon Institutional Funds Investment Trust (the "Trust") are parties to a
committed line of credit facility, which enables each portfolio/fund to
borrow, in the aggregate, up to $35 million. Interest is charged to each
participating portfolio/fund based on its borrowings at a rate equal to the
Federal Funds effective rate plus 1/2 of 1%. In addition, a facility fee,
computed at an annual rate of .060 of 1% on the committed amount, is
allocated ratably among the participating portfolios/funds at the end of
each quarter. For the period ended March 31, 2005, the facility fee was $580
for the Portfolio.
During the period ended March 31, 2005, the Portfolio had average borrowings
outstanding of $226,700 on a total of ten days and incurred $148 of interest
expense.
21
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
The Investment Company Act of 1940 requires that a fund's Board of Trustees,
including a majority of its Trustees who are not affiliated with the fund's
investment adviser or underwriter (the "Independent Trustees") voting
separately, approve the fund's advisory agreement and the related fees on an
annual basis. The Fund is not a party to an investment advisory agreement
directly with any investment adviser and does not invest directly in portfolio
securities. Instead, the Fund invests all of its investable assets in The Boston
Company Small Cap Growth Portfolio (the "Portfolio"), which is managed by The
Boston Company Asset Management ("TBCAM"). The Fund's Board of Trustees
determines annually whether the Fund should continue to invest in the Portfolio.
The members of the Fund's Board of Trustees also serve as the Board of Trustees
of the Portfolio. In that capacity, they consider annually whether to continue
the investment advisory agreement between the Portfolio and TBCAM. In their most
recent deliberations concerning their decision to approve the continuation of
the investment advisory agreement, the Board of Trustees conducted the review
and made the determinations that are described below. In conducting this review
and in making such determinations, the Independent Trustees received from TBCAM
a broad range of information in response to a written request prepared on their
behalf by their own legal counsel. The Independent Trustees met alone in a
private session with their legal counsel on September 15, 2004 to review these
materials and to discuss the proposed continuation of the Fund's advisory
agreement. The entire Board then met on October 14, 2004.
The information requested by the Independent Trustees and reviewed by the entire
Board included:
(i) Financial and Economic Data: TBCAM's audited balance sheets and income
statements, as well as a profitability analysis of TBCAM, including a separate
presentation of TBCAM's profitability relative to that of several publicly
traded investment advisers;
(ii) Management Teams and Operations: TBCAM's Form ADV, as well as information
concerning TBCAM's executive management, portfolio management, and client
service personnel and overall organizational structure, insurance coverage,
brokerage and soft dollar policies and practices;
(iii) Comparative Performance and Fees: Analyses prepared by Lipper Analytical
Services ("Lipper") regarding the Fund's historical performance, management fee
and expense ratio compared to other funds, and TBCAM's separate account advisory
fee schedules;
(iv) Specific Facts Relating to the Fund: TBCAM's commentary on the Fund's
performance (rather than the Portfolio alone), the addition of a new portfolio
manager, as well as "fact sheets" prepared by TBCAM providing salient data about
the Fund and Portfolio, including Portfolio's holdings, strategies, recent
market conditions and outlook, as well as TBCAM's views concerning the issues of
breakpoints in the management fee schedule of the Portfolio and potential
economies of scale; and
(v) Other Benefits: The benefits flowing to
Mellon Financial Corporation ("Mellon") and its affiliates in the form of fees
for transfer agency, custody, administration and securities lending services
provided to the Funds by affiliates of Mellon.
In considering the continuation of the Portfolio's advisory agreement, the Board
of Trustees, including the Independent Trustees, did not identify any single
factor as all-important or controlling and individual Trustees did not
necessarily attribute the same weight or importance to each factor. The Trustees
determined that the terms and conditions of the advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable, and they
approved the continuation of the agreement for a one-year period. Some of the
factors that figured prominently in the Trustees' determination are described
below.
Nature, Extent and Quality of Services
The Board considered the nature, scope and quality of the overall services
provided to the Portfolio by TBCAM. In their deliberations as to the
continuation of the advisory agreement, the Trustees were also mindful of the
fact that, by choosing to invest in the Fund, the Fund's shareholders have
chosen to entrust TBCAM, under the supervision of the Trustees, to manage the
portion of their assets invested in the Fund.
22
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Among the specific factors the Trustees reviewed were the portfolio management,
administrative, compliance and related services provided by TBCAM. The Trustees
determined that the services provided were of high quality and at least
commensurate with industry standards.
The Trustees observed that TBCAM had recently announced that it intended to
implement a team approach to the portfolio management of its mutual funds,
requiring that each fund have at least two portfolio managers, and expressed
their support for this change. The Trustees reviewed the background and
experience of the Portfolio's two portfolio managers and also met with senior
management of TBCAM to receive an overview of its organization, personnel,
resources and strategic plans. Among other things, the Trustees considered the
size, education and experience of TBCAM's investment staff, technological
infrastructure and overall responsiveness to changes in market conditions.
The Board determined that TBCAM had the expertise and resources to manage the
Portfolio effectively.
Investment Performance
The Board compared the relative investment performance of the Fund (rather than
the Portfolio alone) against a peer group of investment companies selected by
TBCAM with input from the Trustees. The Board also compared the Fund's
investment performance against the average performance of a larger universe of
funds regarded by Lipper as having similar investment objectives and considered
the Fund's performance rankings with that universe. In addition to the
comparative information provided in connection with the September 15, 2004
meeting, the Trustees received similar detailed comparative performance
information for the Fund at each regular quarterly Board meeting during the
year.
The Lipper materials provided to the Board at the September 15, 2004 meeting
indicated that the performance of the Fund's Institutional Class shares for the
1-, 3- and 5-year periods ended July 31, 2004 was 18.78%, 0.56% and 4.19%. The
Trustees found that these results compared favorably with the Fund's peer group
of similar funds, the average performance of which was 9.33%, -3.72% and 0.17%
for the same periods.
Advisory Fee and Other Expenses
The Board considered the advisory fee rate paid by the Portfolio to TBCAM. The
Portfolio's contractual advisory fee was 0.80%, in the 3rd quintile of its peer
group of funds, the median fee of which was 0.834%. The Portfolio's net advisory
fee, after giving effect to fee waivers, was 0.139%, well below the peer group
median net advisory fee of 0.754%. Based on the Lipper data, as well as other
factors discussed herein, the Board determined that the Portfolio's advisory fee
is reasonable relative to its peer group averages, both with and without giving
effect to fee waivers.
The Board also compared the fees payable by the Portfolio relative to those
payable by separate account clients of TBCAM. Based on the additional scope and
complexity of the services provided and responsibilities assumed by these
advisers with respect to the Portfolio relative to these other types of clients,
the Board concluded that the fees payable under the advisory agreement were
reasonable.
The Board considered the expense ratio of the Fund's Institutional Class shares
(rather than the Portfolio's) and compared it to that of its peer group of
similar funds. The Board found that the actual net expense ratio of 1.003%
(after giving effect to expense limitations) was lower than the median net
expense ratio of the peer group of 1.362% notwithstanding the fact that all of
the other funds in the peer group were larger than the Fund.
TBCAM's Profitability
The Board considered TBCAM's profitability in managing the Portfolio and Fund
and the Mellon Institutional Funds as a group, as well as the methodology used
to compute such profitability, and the various direct and indirect expenses
incurred by TBCAM or its affiliated investment adviser, Standish Mellon Asset
Management Company LLC ("Standish
23
Mellon Institutional Funds Master Portfolio
The Boston Company Small Cap Growth Portfolio
Factors Considered by Board of Trustees in Approving Advisory Agreement
- --------------------------------------------------------------------------------
Mellon") in managing the Portfolio and Fund and other funds in the Mellon
Institutional Funds family of funds. The Independent Trustees had observed that,
based on the profitability information submitted to them by TBCAM, TBCAM
incurred losses in recent years in operating many of the investment companies in
the Mellon family of funds, including the Portfolio and Fund, and achieved only
marginal profitability as to several other funds. The Trustees observed that
TBCAM had incurred losses in operating the Portfolio and the Fund in both 2002
and 2003.
Economies of Scale
While the Board recognized that economies of scale might be realized as the Fund
grows, the Trustees noted that the Fund's asset size fluctuated somewhat in
recent years (between approximately $17.8 million and $34 million), and remained
small relative to its peers. The Board concluded that, considering current asset
growth prospects, the implementation of fee breakpoints or other fee reductions
was not necessary at this time. The Trustees intend to review the need for
breakpoints in connection with future investment advisory agreement approval
deliberations.
Other Benefits
The Board also considered the additional benefits flowing to Mellon as a result
of its relationship with the Funds. Mellon affiliates provide custodial,
administrative, transfer agency and securities lending services to the Funds. In
each case, such affiliates were selected on the basis of a comparative analysis
of their capabilities and fees relative to those of unaffiliated competitors. In
addition, the Trustees, including a majority of the Independent Trustees,
conduct an examination annually of each such arrangement as to whether (i) the
terms of the relevant service agreement are in the best interests of Fund
shareholders; (ii) the services to be performed by the affiliate pursuant to the
agreement are required by and appropriate for the Fund; (iii) the nature and
quality of the services provided by the affiliate pursuant to the agreement are
at least equal to those provided by other, unaffiliated firms offering the same
or similar services for similar compensation; and (iv) the fees payable by the
Fund to the affiliate for its services are fair and reasonable in light of the
usual and customary charges imposed by other, unaffiliated firms for services of
the same nature and quality.
The Board considered the fact that Mellon operates businesses other than the
Mellon Institutional Funds, some of which businesses share personnel, office
space and other resources and that these were a component of the profitability
analysis provided. The Board also considered the intangible benefits that accrue
to Mellon and its affiliates by virtue of its relationship with the Fund and the
Mellon Institutional Funds as a group.
* * *
The foregoing factors were among those weighed by the Trustees in determining
that the terms and conditions of the Portfolio's advisory agreement and the
compensation to TBCAM provided therein are fair and reasonable and, thus, in
approving the continuation of the agreement for a one year period.
24
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; 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; and total remuneration paid
as of the period ended March 31, 2005. 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 Trustee
Principal Portfolios in Other Remuneration
Name Term of Office Occupation(s) Fund Complex Directorships (period ended
Address, and Position(s) and Length of During Past Overseen by Held by March 31,
Date of Birth Held with Trust Time Served 5 Years Trustee Trustee 2005)
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel C. Fleming Trustee Trustee since Chairman of the Board 31 None Fund: $250
c/o Decision Resources, 11/3/1986 and Chief Executive Portfolio: $404
Inc. Officer, Decision
260 Charles Street Resources, Inc.
Waltham, MA 02453
9/30/40
Caleb Loring III Trustee Trustee since Trustee, Essex Street 31 None Fund: $250
c/o Essex Street 11/3/1986 Associates (family Portfolio: $448
Associates investment trust office)
P.O. Box 181
Beverly, MA 01915
11/14/43
Benjamin M. Friedman Trustee Trustee since William Joseph Maier, 31 None Fund: $250
c/o Harvard University 9/13/1986 Professor of Political Portfolio: $404
Cambridge, MA 02138 Economy, Harvard
8/5/44 University
John H. Hewitt Trustee Trustee since Trustee, Mertens 31 None Fund: $250
P.O. Box 2333 11/3/1986 House, Inc. (hospice) Portfolio: $404
New London, NH 03257
4/11/35
Interested Trustees
Patrick J. Sheppard Trustee, Since 2003 Senior Vice President 31 None Fund: $0
Mellon Institutional President and Chief Operating Portfolio: $0
Asset Management and Chief Officer,
One Boston Place Executive Mellon Institutional
Boston, MA 02108 Officer Asset Management;
7/24/65 formerly Vice President
and Chief Financial
Officer, Mellon
Institutional Asset
Management
25
Principal Officers who are Not Trustees
Name Term of Office
Address, and Position(s) and Length of Principal Occupation(s)
Date of Birth Held with Trust Time Served During Past 5 Years
- ------------------------------------------------------------------------------------------------------------------------------------
Barbara A. McCann Vice President Since 2003 Senior Vice President and Head of Operations
Mellon Institutional and Secretary Mellon Institutional Asset Management, formerly
Asset Management First Vice President, Mellon Institutional Asset
One Boston Place Management and Mellon Global Investments
Boston, MA 02108
2/20/61
Steven M. Anderson Vice President Vice President Vice President and Mutual Funds Controller,
Mellon Institutional and Treasurer since 1999; Mellon Institutional Asset Management
Asset Management Treasurer Institutional Asset
One Boston Place since 2002
Boston, MA 02108
7/14/65
Denise B. Kneeland Assistant Vice Since 1996 Vice President and Manager, Mutual Funds Operations,
Mellon Institutional President Mellon Institutional Asset Management
Asset Management
One Boston Place
Boston, MA 02108
8/19/51
Cara E. Hultgren Assistant Vice Since 2001 Assistant Vice President and Manager,
Mellon Institutional President Shareholder Services, Mellon Institutional
Asset Management Asset Management since 2001;
One Boston Place Shareholder Representative,
Boston, MA 02108 Standish Mellon Asset Management
1/19/71
Jan F. Jumet Chief Since 2004 Senior Vice President and Chief Compliance Officer
Standish Mellon Assest Compliance for Standish Mellon Asset Management Company LLC;
Management Company LLC Officer formerly Director of Compliance and Administration
One Boston Place and Chief Administration Officer for Standish Mellon
Boston, MA 02108 Asset Management Company LLC, Senior
8/9/66 Vice President and Chief Administration Officer
for Mellon Bond Associates, LLP, and
First Vice President and Senior Sales Associate
for Mellon Institutional Asset Management
26
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[Logo] Mellon
--------------------------
Mellon Institutional Funds
One Boston Place
Boston, MA 02108-4408
800.221.4795
www.melloninstitutionalfunds.com
0941SA0305
Item 2. Code of Ethics.
Not applicable to this semi-annual filing.
Item 3. Audit Committee Financial Expert.
Not applicable to this semi-annual filing.
Item 4. Principal Accountant Fees and Services.
Not applicable to this semi-annual filing.
Item 5. Audit Committee of Listed Registrants.
Not applicable to the Registrant.
Item 6. Schedule of Investments
Included as part of the Semi-Annual Report to Shareholders filed under
Item 1 of this Form N-CSR.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable to the Registrant.
Item 8. Portfolio Managers Of Closed-End Management Companies
Not applicable to the Registrant.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to the Registrant.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes.
Item 11. 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" as defined in Rule 30a-3(c) under the Investment
Company Act of 1940).
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940 that occurred during the
Registrant's first fiscal half-year that has materially affected,
or is reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable to this semi-annual 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 are attached hereto as
Exhibit 99CERT.302
(a)(3) Not applicable to the Registrant.
(b) Certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940 and 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: June 6, 2005
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: June 6, 2005
By (Signature and Title): /s/ STEVEN M. ANDERSON
----------------------
Steven M. Anderson, Vice President and Treasurer
Date: June 6, 2005